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Politics : I Will Continue to Continue, to Pretend.... -- Ignore unavailable to you. Want to Upgrade?


To: Sully- who wrote (447)12/13/2003 5:18:51 AM
From: Sully-  Respond to of 35834
 
Bush Tells Halliburton to Pay Back Overcharges

Friday, December 12, 2003

WASHINGTON — <font size=4>President Bush, trying to calm a political storm, said Friday that Vice President Dick Cheney's former company should repay the government if it overcharged for gasoline delivered in Iraq under a controversial prewar contract.

"If there's an overcharge, like we think there is, we expect that money be repaid," the president told reporters when asked about the Halliburton contract controversy.
<font size=3>
Pentagon auditors say the company charged up to $61 million too much for delivering gasoline to Iraqi citizens under a no-bid contract to rebuild Iraq's dilapidated oil industry. Halliburton denies overcharging.

Meanwhile, an Army spokesman disclosed that companies from France, Germany, Russia and Canada won't be eligible to replace Halliburton as the recipient of the oil reconstruction contract.

The Army Corps of Engineers is reviewing bids and hopes to decide this month who will get the oil reconstruction deals worth up to $800 million in northern Iraq and $1.2 billion in the south.

The decision means an additional $2 billion in contracts in Iraq — not disclosed before — would be forbidden to countries that opposed the war, along with the $18.6 billion in Iraq work the Bush administration declared off limits earlier this week.

The countries that have been left out see the rules as payback, but Bush says limiting contracts to countries that sent troops and money to Iraq makes sense and will encourage more nations to join the U.S.-led coalition.

Democrats have joined the fray, saying Bush is needlessly alienating allies and rewarding political supporters. Cheney headed Halliburton from 1995 until he became Bush's running mate in 2000, and other executives from the company gave generously to the Bush campaign.

"George W. Bush is preventing entire nations from bidding on contracts in Iraq so his campaign contributors can continue to overcharge the American taxpayers," Democratic presidential candidate Howard Dean said while campaigning in Iowa Friday.

The political impact is still unclear. As long ago as last May, in a CBS-New York Times poll, about half the respondents said they thought the Bush administration gave contracts to companies because they had close GOP ties.
<font size=4>
Pentagon officials say they gave Halliburton the prewar oil reconstruction contract because it was essential to start rebuilding quickly after the U.S.-led invasion. Halliburton already had a competitively bid contract to provide short-notice logistical help for the Army.
<font size=3>
Separately under that contract, Halliburton has been paid about $3 billion for supporting the military with cafeterias, mail delivery and other services.

The oil contract, which started as a relatively small order for fighting oil well fires, has grown into the largest reconstruction contract in Iraq. Halliburton has gotten more than $2.2 billion so far on that contract — $989 million from U.S. taxpayers, $1.3 billion from the United Nations' oil for food program and $90 million from seized Iraqi assets.

Together, the 11 other Iraq reconstruction projects awarded to other companies have paid out $1.7 billion. The largest, to construction giant Bechtel for rebuilding infrastructure such as highways and bridges, has delivered more than $1 billion so far.

The largest part of Halliburton's oil reconstruction contract is providing gasoline and other fuel to Iraqis while the country's oil industry is rebuilt. A Pentagon audit found Halliburton was charging $1.09 more per gallon for gasoline it trucked into Iraq from Kuwait than for the same fuel it imported from Turkey.
<font size=4>
Pentagon officials said Thursday Halliburton's Kuwaiti subcontractor apparently charged too much for the gasoline. Halliburton's president, Dave Lesar, said the Kuwaiti firm was the only one that met the contract's requirements. Lesar said Halliburton earned "a few cents on the dollar" for delivering the fuel.

Under the contract, Halliburton gets a guaranteed profit calculated as part of the company's costs. In other words, the higher the costs, the more money Halliburton gets.

Halliburton is guaranteed a profit equal to at least two percent of its costs. Depending on performance, Halliburton can earn a profit of up to 7 percent of costs.

If the subcontractor did overcharge by $61 million, Halliburton would be guaranteed $1.2 million in profit from that amount. If Halliburton earned the entire 7 percent, its profit on the overcharge would be about $4.3 million.

The Army Corps of Engineers currently is reviewing bids for the $2 billion in contracts that will replace Halliburton's no-bid award. At least 69 companies — including Halliburton — were sent solicitations, according to a Corps Web site.
<font size=3>
Those companies included ones based in Canada, India, Great Britain, Jordan, Kuwait, Oman and Saudi Arabia. Bids from Canadian and Indian companies would be barred under the Bush administration's restrictions.

foxnews.com



To: Sully- who wrote (447)12/13/2003 6:04:37 AM
From: Sully-  Respond to of 35834
 
Comment: Experts say flap over no-bid contracts has no merit

news.mysanantonio.com

.....<font size=4>During the Clinton administration, the Pentagon issued a temporary no-bid contract to KBR<font size=3> to continue its work in the Balkans. In the months leading up to the Iraq war, Defense officials realized they needed plans in case Saddam Hussein once again set his oil wells ablaze. <font size=4>KBR<font size=3> did the study under Logcap. Then in February, with the war looming, Pentagon planners issued an additional bridge contract to <font size=4>KBR<font size=3> to put out any fires that were set. <font size=4>KBR<font size=3> had the experience. Its personnel were in place. It would have been crazy to open up a three-to-five-month bidding process at that time......
<font size=4>
KBR = Halliburton subsidiary, Kellogg, Brown & Root



To: Sully- who wrote (447)12/13/2003 6:05:41 AM
From: Sully-  Respond to of 35834
 
Experts say flap over no-bid contracts has no merit

By David Brooks

Web Posted : 11/22/2003 12:00 AM

Over the past few months, the Democratic presidential candidates have been peddling a story. The story is that the Bush administration is circumventing the competitive bidding process to funnel sweetheart Iraq reconstruction contracts to major campaign contributors, especially Dick Cheney's old firm, Halliburton.

The riff was laid down by Dennis Kucinich, but now all the candidates are playing along. Howard Dean says the Halliburton contracts show that the Bush administration "has sold this country down the river." John Kerry says the administration has broken faith with the people with its no-bid contracts with Halliburton.

In the parade of Democratic bogeymen, the word "Halliburton" elicits almost as many hisses as the chart-topping "Ashcroft."

The problem with the story is that it's almost entirely untrue. As Daniel Drezner recently established in Slate, there is no statistically significant correlation between the companies that made big campaign contributions and the companies that won reconstruction contracts.

The most persuasive rebuttals have come from people who know something about the government procurement process. For example, Steven Kelman was an administrator in the Office of Federal Procurement Policy under Bill Clinton and now is a professor of public management at Harvard.

Last week, Kelman wrote an op-ed article in the Washington Post on the alleged links between contributions and reconstruction contracts. "One would be hard-pressed to discover anyone with a working knowledge of how federal contracts are awarded — whether a career civil servant working on procurement or an independent academic expert — who doesn't regard these allegations as being somewhere between highly improbable and utterly absurd," he observed.

The fact is that unlike the congressional pork barrel machine, the federal procurement system is a highly structured process, which is largely insulated from crass political pressures. The idea that a Bush political appointee can parachute down and persuade a large group of civil servants to risk their careers by steering business to a big donor is the stuff of fantasy novels, not reality.

The real story is that the Halliburton subsidiary, Kellogg, Brown & Root, won an open competition to provide the service support for overseas troops. This contract is called the Logcap and is awarded every few years. KBR won the competition in 1992. It lost to DynCorp in 1997 and won it again in 2001.

Under the deal, KBR builds bases, supplies water, operates laundries and performs thousands of other tasks. Though the GAO has found that KBR sometimes overcharges, in general the company has an outstanding reputation.

But some circumstances are not covered under Logcap. During the Clinton administration, the Pentagon issued a temporary no-bid contract to KBR to continue its work in the Balkans. In the months leading up to the Iraq war, Defense officials realized they needed plans in case Saddam Hussein once again set his oil wells ablaze. KBR did the study under Logcap. Then in February, with the war looming, Pentagon planners issued an additional bridge contract to KBR to put out any fires that were set. KBR had the experience. Its personnel were in place. It would have been crazy to open up a three-to-five-month bidding process at that time.

There are a number of legitimate questions Democratic candidates could be asking about our procurement system. Are we so overreliant on private contractors that the line between combat personnel and support personnel is getting blurred? Should we beef up the Pentagon procurement staff to give us the ability to manage contracts from a wider cast of companies? What do we do if the private contractors decide to pack up and leave Iraq?

But answering these questions would mean coming up with a positive vision of how to better proceed with our reconstruction efforts. Instead, the Democratic presidential candidates are content simply to repeat demagogic and misleading applause lines.

The lesson of this Halliburton business is that some parts of our government really do make their decisions on the merits. And just because a story makes you popular doesn't make it true.

--------------------------------------------------------------------------------
David Brooks writes for the New York Times.

news.mysanantonio.com



To: Sully- who wrote (447)12/20/2003 4:47:48 AM
From: Sully-  Respond to of 35834
 
Halliburton’s “Gouging”: What Really Happened
There's a good explanation — if anyone is interested.
December 19, 2003, 8:59 a.m.

New details are emerging that suggest the energy giant Halliburton did not overcharge the Defense Department for fuel in Iraq — contrary to the claims of critics in Congress and in the field of Democratic presidential candidates.

The Pentagon is investigating allegations that Halliburton overcharged it by $61 billion for gasoline and other fuels delivered to Iraq. Halliburton delivered gasoline to Iraq from Kuwait at a price of $2.27 per gallon, while it delivered gas from Turkey for $1.18 per gallon.

The obvious question raised by the discrepancy was: Why would Halliburton deliver high-priced fuel from Kuwait when it could be obtained at a much lower price from Turkey?

The company says it did so because the Army demanded that it deliver fuel from Kuwait. "The U.S. Army Corps of Engineers said to find a fuel source in Kuwait," Halliburton said in a press release yesterday. "[Halliburton] sought and received bids from four suppliers in Kuwait. One met the Corps' specification, and that is the one the Corps approved."

But why did the Corps specify that fuel be delivered from Kuwait? The answer appears to lie with the nature of fuel shortages that swept Iraq in the late spring. After the war, the country's oil refineries were operating far below capacity. Both gasoline and liquefied petroleum gas, which millions of Iraqis use for cooking, were in very short supply.

American officials feared that the shortages might spark civil unrest. Of particular concern was Basra, the city in southern Iraq that had seen increasingly violent expressions of popular anger against coalition forces. According to a source in the Corps of Engineers, in May, Lt. General Ricardo Sanchez, leader of American forces in Iraq, demanded that fuel be supplied to Basra — fast.

"The initial import of fuel was in response to a request from General Sanchez to do this because there was an uprising in Basra over the lack of gas and cooking fuel," says the Corps source. "Basra is near the Kuwaiti border. The fastest way to get it there is Kuwait. So we directed them [Halliburton] to do that."

"Basra was a flash point; we were close to civil unrest," the source continues. "Probably at the time we didn't care what it cost, because we were trying to stop a riot. Cost was probably not an issue."

But the rest of Iraq was suffering from fuel shortages as well. On May 8, in an article headlined, "Angry Iraqis Blame U.S. for Fuel Shortage," the Washington Post reported on a "ubiquitous scene" in Iraq: "lines that stretch toward dusty horizons as people wait for gasoline, a problem that confronts U.S. authorities with both a complex engineering challenge and a continuing threat to their prestige."

Soon the U.S. military was ordering fuel shipments to the rest of Iraq as well. While the Kuwaiti source is relatively close to Basra, it is a great distance from northern Iraq, which made for very long shipping lines. And the violent insurgency then beginning inside Iraq made the work not only expensive but also dangerous for the crews hired by Halliburton to deliver the fuel.

"Not many people want to drive eight to fifteen days through a war zone with a truck full of flammable materials," the company says. "Three drivers have been killed and many others injured while performing this mission, and 60 vehicles have been damaged."

As a result, Halliburton officials say they came up with the idea of arranging for another fuel source in Turkey. "[Halliburton] initiated the idea to source fuel from Turkey," the company says. [Halliburton] presented this idea to its customer, and because of this, saved taxpayers well over $100 million."

Since that time, fuel has come into Iraq from both sources. According to both the Corps and Halliburton, neither country can, on its own, provide the amount of fuel needed inside Iraq.

So far, Halliburton says, about two-thirds of the fuel delivered to Iraq has come from Turkey, at the lower price, and about one-third has come from Kuwait, at the higher price. Given those proportions, Halliburton says the average fuel cost from both Turkey and Kuwait has been $1.60 per gallon, "well within what auditors think it should be."

Although Halliburton's actions have been intensely criticized by the administration's opponents, the Pentagon says it has not found any wrongdoing. Said Defense Department comptroller Dov Zakheim on Tuesday, "From what I've seen so far...I have no basis whatsoever to see anything nefarious."

nationalreview.com



To: Sully- who wrote (447)12/30/2003 1:29:50 AM
From: Sully-  Respond to of 35834
 
NY Times: No Evidence of Halliburton Profiteering
Monday Dec. 29, 2003; 4:13 p.m. EST

A comprehensive investigation into Halliburton's multibillion-dollar contract to restore Iraq's oil infrastructure shows "no evidence of profiteering" by the Houston-based oil services company.

That's the verdict by the New York Times, which assigned its Whitewater sleuth Jeff Gerth and investigative ace Don Van Atta to lay bare all the tawdry details of how Vice President Dick Cheney's former company was reaping big-bucks profits from sweetheart deals imagined by Democrats.

One problem: Gerth and Van Atta found almost nothing for Dems to hang their hats on. In fact, not only couldn't the Times find any evidence that Halliburton was stuffing its pockets under-the-table - even the aboveboard revenue collected by the company hasn't been much to write home about.

"So far this year, Halliburton's profits from Iraq have been minimal," the Times admitted. "The company's latest report to the Securities and Exchange Commission shows $1.3 billion in revenues from work in Iraq and $46 million in pretax profits for the first nine months of 2003."

That's a slender 3.5 percent margin, hardly enough to make any self-respecting war profiteer look twice. No wonder this story hasn't been leading TV and radio news reports all day.

Too be sure, Times editors did their best to make it sound as if something fishy was going on. The report's front-page headline - "Halliburton Contracts in Iraq: The Struggle to Manage Costs" - gave no clue to the exoneration that followed.

And subheadlines like "Little Public Disclosure" and "An Absence of Competition" hinted darkly of shady deals where Cheney's friends were lining their pockets with blood money.

But even the Times had to admit that Halliburton's original Iraq contract was won "in a bidding process in December 2001."

What about that widely cited report last month claiming the company had overpaid by as much as 100 percent for Kuwaiti gasoline? Turns out that news is pretty much a political bust, too.

Company spokeswoman Wendy Hall explained that the Army Corps of Engineers needed the fuel imported to Iraq within 24-hours - not much time to launch a competitive bidding process.

"There's a premium for getting it done fast," explained Gordon Adams, a military procurement expert at George Washington University.

Anyone who disagrees ought to try sending all their mail by next-day-air and see what happens to their postage budget.

Another factor that sent job cost estimates through the roof: sabotage by terrorists.

"As the war wound down, more work came [Halliburton subsidiary] KBR's way, mostly because of acts of sabotage on pipelines and Iraq's oil facilities," the Times noted. "When security problems made the production of fuel inside Iraq even more difficult -- leading to shortages -- the government asked Halliburton to import fuel."

If the Times' report on Cheney's old company is the best the Democrats can do, it's time for Terry McAuliffe to begin searching for a new campaign boogeyman
ASAP.http://www.newsmax.com/archives/ic/2003/12/29/165459.shtml



To: Sully- who wrote (447)1/6/2004 8:08:21 PM
From: Sully-  Respond to of 35834
 
US Army Clears Halliburton of Wrongdoing in Iraq Fuel Shipments

Alex Belida
Pentagon
06 Jan 2004, 22:21 UTC

The U.S. Army has apparently cleared a firm once run by Vice President Dick Cheney of wrongdoing in connection with fuel deliveries to Iraq.

Pentagon auditors say the Army Corps of Engineers has concluded a subsidiary of the Halliburton company charged what are considered fair and reasonable prices for fuel deliveries it made to Iraq.

The auditors say that as soon as they receive a formal certification to this effect, their probe into alleged overcharges by the firm will be concluded.

Pentagon officials last month indicated Halliburton's Kellogg Brown and Root subsidiary may have overcharged the U.S. government $61 million for fuel.

But the firm denied any wrongdoing. It said it delivered fuel to Iraq at the best possible price from Kuwait. It also noted it had recommended purchasing cheaper fuel from Turkey but asserted the Army Corps of Engineers insisted on a fuel source in Kuwait.

Halliburton has won billions of dollars in contracts in connection with the U.S. intervention in Iraq.

But these deals have been criticized by some Democratic Party officials and others who have questioned whether they were a political reward to a firm once run by Vice President Dick Cheney.

The Bush administration and Halliburton have denied politics played a role in the awarding of the contracts.

voanews.com



To: Sully- who wrote (447)1/11/2004 3:16:12 PM
From: Sully-  Respond to of 35834
 
The Halliburton huff
The oil services firm did nothing wrong in Iraq


Sunday, January 11, 2004

By Jack Kelly, Columnist, Pittsburgh Post-Gazette
<font size=4>
Web logger John Cole noted a fascinating difference between the news accounts accusing Halliburton of overcharging on a contract to deliver oil in Iraq, and the accounts of Halliburton's subsequent exoneration.
<font size=3>
Jack Kelly is national security writer for the Post-Gazette and The Blade of Toledo, Ohio (jkelly@post-gazette.com, 412-263-1476).
<font size=4>
Here's the AP's Matt Kelley on the original charge: "A Pentagon audit has found Vice President Dick Cheney's former company may have overcharged the Army by $1.09 a gallon for nearly 57 million gallons of gasoline delivered to citizens in Iraq, senior defense officials say."

Here's Reuters: "A Pentagon audit of Halliburton, the oil services firm once run by Vice President Dick Cheney, has found evidence the company may have overcharged for fuel it brought into Iraq from Kuwait, military sources said on Thursday.

And now the AP on Halliburton's exoneration: "The Army apparently has sided with Halliburton in a dispute over the company's charges for fuel in Iraq."

And here's Reuters again: "The U.S. Army said on Tuesday it had granted Halliburton a special waiver to bring fuel into Iraq under a no-bid deal with a Kuwaiti supplier despite a draft Pentagon audit that found evidence of overcharging for fuel."
<font size=5>
When Halliburton was exonerated, Cheney -- prominently
featured in the accusation stories -- apparently was back
in his bunker at an undisclosed location.

There is no Halliburton scandal. But Democrats and their
allies in the news media think that if they blow enough
smoke, people will think there must be a fire somewhere.

They imply that Halliburton has been getting government
contracts it does not deserve because of the influence of
Cheney. They imply further that he has been putting the
interests of his former firm ahead of the interests of the
United States.

This is absurd. Cheney's only possible motivation for
doing so would be greed. But if greed were his primary
motivation, why would he give up a job that paid him
nearly $1 million a year in salary -- and much more than
that in annual bonuses and stock options -- for a job that
pays less than $200,000 a year?

Cheney served in Congress for 12 years and as secretary of
defense for four years before becoming Halliburton's CEO,
and did so without a hint of scandal. Unless there is
powerful evidence to the contrary, we should assume that
his primary motivation for public service is public
service, even if we disagree with his views.
<font size=4>
There is not a shred of evidence to indicate that Cheney has intervened to obtain contracts for his former firm, or that the contracting officers in the Department of Defense -- who are career civil servants -- have been awarding contracts in response to political pressure. The smear of Cheney is also a smear of them.

Nor is there evidence to indicate that Halliburton is undeserving of the contracts it has won, has performed poorly on them or profited excessively from them. Halliburton's Kellogg, Brown & Root (KBR) subsidiary has decades of experience in major construction projects in the Middle East. It is thus ostensibly better qualified for rebuilding Iraq than, say, the Marin County Marijuana Growers Association. The Army said KBR got the Iraqi oil field contract because it was the only firm that possessed the skills, resources and security clearances necessary to do the job.
<font size=5>
The great growth in KBR's government work took place
during the Clinton administration. By the end of Clinton's
second term, one of every seven Pentagon dollars passed
through KBR, according to Dan Baum in The New York Times
magazine. Those harping about Halliburton now saw nothing
untoward about Halliburton then.

Those in high dudgeon about Halliburton also had little to
say when former Clinton Treasury Secretary Robert Rubin
sought favors for Enron, a client of his firm. (Bush
turned him down.) But then, Rubin is a Democrat.

It's not so much that there is a double standard. When the
truth clashes with their political ambitions, the fever-
swamp left has no standards at all.



To: Sully- who wrote (447)1/18/2004 4:33:54 PM
From: Sully-  Respond to of 35834
 
I'm proud of Halliburton
By KEVIN WILSON
Houston Chronicle

I am a Halliburton general manager in Baghdad, and I work as part of the Restore Iraqi Oil, or RIO, team. In the execution of this mission, I have been constantly astounded and disturbed by the inaccuracies and, what seems to be, blatant media sensationalism about my company's work.

As someone who has been in the petroleum industry for 20 years, I have a common bond, a family relationship, with others in the business. The oil and gas business is much like playing a team sport, and we have a real sense of camaraderie. Our roles vary. We can be on the same team or we might be direct competitors.

Other times, we are on different squads but working side by side for the same client. Because Halliburton and KBR employees work with so many people in the industry worldwide, many of us have received dozens of questions regarding the profits we are generating, quality of our work and other issues related to our integrity.

Halliburton is trusted by our clients and the communities we serve, and I am here to defend that reputation.

I want to communicate one message to all of the people I've personally known in the oil field. Let me unequivocally state the following:
<font size=4>
The statements you have been hearing about supposed wrongdoing or questionable integrity are false.
<font size=3>
When we arrived, the Iraqis were on the verge of a full-scale, countrywide riot because looting had destroyed the infrastructure necessary to supply gas for cooking, fuel for heating, and gasoline for transportation. Also, it is important to remember there was limited electricity.

The Defense Department asked Halliburton to begin purchasing, truck rental, route transportation and distribution of fuel for all of Iraq. All fuels must be treated with TEL (leaded gasoline component), and this must be procured from the few places around the world where it is still used. Then, it is shipped to distribution points.

This was a critical mission, and it was dangerous because of the violence throughout the country. We received the assignment, and were instructed to begin imports immediately. Regular fuel delivery did begin very shortly thereafter, and I believe it prevented or alleviated a national crisis. Our people performed impressively under extraordinary and extreme conditions. This fuel importation has grown in scale and it continues now.

KBR did not ask to be in the fuel shipping business. In fact, we have tried to facilitate local suppliers taking over the mission. However, we have had to keep control of the mission until others prove they are capable of performing the task. Therefore, there have been many delays.

KBR works on a cost-plus basis. There is no mechanism or capacity to price-gouge, as we have read in the newspapers. We have to complete voluminous paperwork, including permissions and proof of a subcontractors' process and delivery. That is all the company makes, a few cents on the dollar. I simply do not understand the people who have accused us of unethical practices.

The Defense Department approved that the fuel be delivered from Kuwait, even though it was at a higher cost than Turkey. It's unfair to accuse Halliburton of paying too much for Kuwaiti fuel when we were told where to buy the fuel and given approval to purchase it from a specific supplier. Those who have made those statements don't have a full knowledge of the facts.

Working for the government means that the process and paperwork must be followed perfectly even under urgent conditions.

The pressure, spotlight, security events and constant changes make this mission daunting.

Halliburton has assisted and facilitated many subcontractors, even some direct competitors, so they could work in Iraq. Many companies have declined to work on current projects in Iraq because of the security risks to people and equipment.

We see high turnover rates, and it is difficult to attract replacement employees. The offer of employee bonuses doesn't work for those who don't want to join our volunteer army. That truly is our role. Like our soldiers, we go to the same hostile places, at the same times, but we do not have tanks or guns. We are grateful to the troops who protect us while we work.

Physically, this is demanding work with long hours. We wear body armor and helmets but you would be amazed how quickly, and without complaint, our employees adapt. This is also true of the "NBC" (nuclear, bio, chem) suits, equipment, nerve gas injectors and training that all of us had to learn, wear and endure.

We try to sleep in the midst of security threats. We worry about our people who are in the field, and we have patched our injured workers. Worst of all, we have escorted bodies back to families, a difficult but honorable duty.

We are the right company to do this work in Iraq supporting our troops and helping rebuild the country.

I am personally proud of the coalition, our nation, our president and our military. I am especially honored to work for Halliburton and to work alongside the many employees who have had many accomplishments against incredible odds.

This article is: chron.com



To: Sully- who wrote (447)1/18/2004 5:34:23 PM
From: Sully-  Respond to of 35834
 
Why Halliburton Isn't Cleaning Up

FORTUNE
Monday, January 12, 2004
By Nelson D. Schwartz

Over the past few months Halliburton has been called a war profiteer, a beneficiary of crony capitalism, and a no-good Beltway Bandit. Its contracts are being eyeballed by congressional Democrats who claim that Halliburton is cleaning up on its work in Iraq, and the possibility that the company overcharged Washington for gasoline has only reinforced suspicions that any company once run by Dick Cheney must have something to hide. And with Halliburton almost certain to win a slice of the $5 billion in fresh Iraq contracts to be awarded by the Pentagon shortly, the political heat is only going to intensify.

It has all the makings of a delicious election-year scandal—Howard Dean has already weighed in—but there's just one problem: Halliburton doesn't stand to make very much money on its Iraq contracts. In fact, despite the allegations of cost overruns and overpriced fuel (you try moving trucks full of flammable liquid hundreds of miles through a war zone), Wall Street analysts like Morgan Stanley's Ole Slorer estimate that KBR—the division of Halliburton that's handling the work in Iraq—lost $63 million worldwide in 2003. "It's an insignificant part of the business," says Slorer. "While the contracts might be worth billions, that doesn't mean Halliburton is earning billions. The margins are very, very skinny."

Indeed, in the third quarter of 2003, Iraq-related work generated $900 million in revenues but only about $21 million in after-tax profits for KBR. That adds up to a not very scandalous profit margin of 2.3%. On the other hand, in 2004 the Houston-based company's energy services business should earn over $1 billion on revenues of $7.6 billion. That equals a 13% profit margin, and that's why Halliburton's stock tracks the energy sector, not the government services or defense groups. Winning all that government work may have generated headlines, but if anything, says Slorer, the ensuing controversy has depressed Halliburton's shares.

So why is Halliburton in this business at all? Plenty of people are asking that question. On Wall Street there's increasing speculation that Halliburton will spin off KBR later this year. "If KBR were managed as a standalone entity, it could achieve better growth," says Slorer. "It's too small a division to get the kind of management focus or capital it needs."

Halliburton CEO David Lesar is also evaluating how KBR fits into his long-term plan for the company. Although Lesar has his hands full dealing with criticism over the Iraq contracts and a pending plan to settle asbestos-liability claims, he plans to focus on the fate of KBR, as well as Halliburton's overall growth prospects, later this year. Once the asbestos deal is concluded, says Lesar, "I'll take a look at the total business portfolio, and we'll let Wall Street help us make that decision." Lesar admits the PR wars are tiring, adding, "There are days when I get out of bed and I know there are going to be stories out there." But a decision about KBR "can't be made in the heat of battle; it's something I need to reflect on."

Meanwhile, Wall Street is betting on a spinoff, especially if there's more controversy over those new contracts. "Halliburton has already completely separated oil services operations from KBR," says analyst Robin Shoemaker of Bear Stearns. "Within a year after the asbestos settlement is completed, I would expect to see two companies emerge."

fortune.com



To: Sully- who wrote (447)2/5/2004 4:58:10 AM
From: Sully-  Respond to of 35834
 
Testimony of Defense Secretary Donald H. Rumsfeld
Cont'd.....

....PRYOR: ....I also want to look at Halliburton. I know there's been a recent spate of news stories about Halliburton. I think one said it overbilled about $28 million for food service over in the region in and around Iraq.

I believe that was five different facilities, if I have my facts straight.

And then there was the story that we've all read and seen about the overbilling for gasoline.

And then I believe there's another story about $6.3 million in overbilling for, sort of, unspecified services. I'm not quite sure what that is, but I was reading some of the press clips on that.

And as I see these stories, I'm sensing a pattern with Halliburton's billing practices.

Mr. Secretary, I was wondering if you had that same concern that I do about Halliburton's billing practices.

RUMSFELD: I'll just make a brief comment, and then Dov can comment on it -- Dr. Zakheim.

There are -- a prime contractor ends up with subcontractors. The subcontractor ends up then billing the prime and the prime bills the person letting the contract.

We've got hundreds and thousands -- not hundreds of thousands -- but hundreds and probably thousands of auditors. They are constantly looking at all of these things. And these things that they frequently come up with with differences of opinion, those are all making the press. And that's fair enough.

Those are all also things that we're concerned about and the auditors are crawling all over them.

Dov?

ZAKHEIM: Yes, Mr. Secretary.

Senator, let me first tell you that in April of this year, with the secretary's approval, I sent out a team of auditors to Iraq.

And with the exception of the one story about the $6.3 million -- and I'll get back to that -- every single story, in fact every single revelation, came from our auditors in our department. And those auditors are also working with our inspector general and with the General Accounting Office because they're on top of not just the issues you just raised but every single contract out there -- every single contractor.

Now, you're right about the $28 million. That reflects things that our auditors found relative to five of 58 facilities, and they're still working their way through the other 53.

ZAKHEIM: And Kellogg, Brown & Root has agreed that there will be a withhold on that charge, simply because there is a disagreement over how you estimate the number of people being served.

With respect to the gasoline, again, $61 million was identified, but that's gone to the inspector general, so I really can't say very much more about that.
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And with respect to the $6.3 million, that was something that KBR found themselves, and they reported it. And I think that gives you an indication, and it goes back to what the secretary said: The prime contractor is doing their best to do the right thing when they've got literally billions of dollars, not that they've necessarily already received and spent, but in terms of the size of the undertaking. And a good part of that -- the logistics, the LOGCAP, as it's called -- was something they were awarded several years before the Iraq war and was worldwide.

The basis issue that our auditors are finding is this issue of relationships with subcontractors, and we're working our way through that.....<font size=3>

washingtonpost.com



To: Sully- who wrote (447)4/22/2004 5:34:57 PM
From: Sully-  Respond to of 35834
 
Don't Blame Halliburton

The company and its subsidiaries don't deserve the thrashing they are getting for their wartime work.

Max Boot
Max Boot, a senior fellow at the Council on Foreign Relations, is a weekly columnist for the Los Angeles Times.
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Halliburton surely got lambasted last week by John Kerry. "This war brings billions of dollars to big companies, either to those that manufacture weapons or those who reconstruct Iraq, like Halliburton and its sister companies," he thundered. "And from here it becomes clear who benefits from the outbreak of wars and bloodshed: war traders and vampires who administer world politics from behind the curtain."
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Oops, sorry. That wasn't John Kerry. That was Osama bin
Laden, or at least someone claiming to be him on an
audiotape. When the rhetorical lines blur between the
leader of the Democratic Party and the leader of Al Qaeda,
maybe it's time for the Democrats to reconsider their
demonization of the Houston-based corporation. Especially
when the bodies of three more Halliburton employees have
been found, bringing to 33 the number killed in Iraq.
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The critique of Halliburton comes in two parts. First, the company is said to have unfairly acquired its contracts in Iraq through political influence. Second, it's said to have unfairly taken advantage of those contracts to engage in war profiteering.

The first charge is particularly seductive because Halliburton's former No. 1 man is now the country's No. 2, and there is a long history of companies getting government work through political influence. Kellogg Brown & Root, now a Halliburton subsidiary known as KBR, had close ties with Lyndon Johnson, which helped it to snare lucrative contracts during the Vietnam War. Surely, cynics reason, similar machinations were behind Halliburton establishing itself in Iraq.

Actually, Halliburton is in Iraq primarily because in 2001
it won a competitive bidding process to administer the
Logistics Civil Augmentation Program, a multiyear contract
to supply the Army. Halliburton has also gotten some no-
bid jobs in Iraq, just as it did in Bosnia and Kosovo in
the 1990s, and for the same reason: Not a lot of other
firms have similar expertise in supplying the U.S.
military, and with a war on there's no time to stage a
lengthy bidding process.

Although Halliburton's work in the 1990s was praised by Al
Gore's "Reinventing Government" panel, its current
contracts have led to charges that it's mulcting the
taxpayer. Maybe so, but the proof is hardly in. The
biggest controversies have involved alleged overcharging
by subcontractors for food and fuel. In both cases,
Halliburton argues that its expenses were justified, and
some Army officials back it up. It has, however, suspended
billing for $176 million in meals until this dispute is
resolved. A criminal investigation of the fuel flap is
underway.

Halliburton certainly does not appear to be making a
fortune under its deal with the government. It's
guaranteed only a 1% profit on most of its Iraq work plus
performance bonuses of 2% to 3% — not a whole lot
considering the risks it runs.
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By focusing on Halliburton, critics ignore the real
scandal, which is how inefficient our procurement
bureaucracy is. Remember those stories from the 1980s
about the Pentagon buying $640 toilet seats and $435
hammers? Well, things haven't changed a lot. The same gold-
plated approach is being taken to administer aid to Iraq.
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Maj. Gen. David Petraeus, when he was in charge of northern Iraq, was told by the Army Corps of Engineers that it would cost $15 million to $23 million to rehabilitate a single cement plant. He managed to get it done for just $800,000 by paying local firms.

Why was the original estimate so high? Not because the Army or its contractors are corrupt. It's because they are obligated to build everything to extremely demanding standards and to fill out reams of paperwork justifying every nickel they spend.

This system is bad enough for normal military needs; it's even worse in the case of Iraq. We desperately need to create jobs so young Iraqi men will have something better to do with their time than shooting coalition soldiers. The best way to do that would be to toss the procurement process out the window. If the result is that buildings in Iraq aren't up to the latest in U.S. standards, or a few million dollars goes astray, so what? That's a small price to pay for getting the country back on its feet.

U.S. military commanders have done some informal contracting, but their discretionary funds are limited. Big projects have to go through the bureaucracy — which means they have to be administered by giant firms like Halliburton that have legions of lawyers and accountants to decipher the impenetrable thickets of procurement regulations.

Instead of blaming Halliburton, critics would be better off trying to change the system. But that's not terribly glamorous. It's much more fun to beat up Texas plutocrats.
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Los Angeles Times