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Pentagon cfo significant problems halliburton cost estimates Original Source Link: (May no longer be active)
http://www.forbes.com/business/newswire/2004/03/11/rtr1295395.htmlhttp://www.forbes.com/business/newswire/2004/03/11/rtr1295395.html
Pentagon comptroller critical of Halliburton
Reuters, 03.11.04, 1:56 PM ET
By Sue Pleming
WASHINGTON (Reuters) - The Pentagon's outgoing chief financial officer criticized U.S. Vice President Dick Cheney's old company Halliburton Thursday and said "significant" problems were found with its cost estimates in Iraq.
Halliburton unit Kellogg Brown and Root is the U.S. military's biggest contractor in Iraq, holding contracts that could eventually total nearly $18 billion.
It also has become a lightning rod of Democratic criticism during this presidential election year because of its former ties to Cheney, who ran the company from 1995-2000.
"DCAA (military auditors) has identified significant deficiencies in KBR's estimating practices related to the award of subcontract costs," said Pentagon Comptroller Dov Zakheim, referring to the Defense Contract Audit Agency.
In prepared testimony to a congressional hearing, Zakheim said on Jan. 13 -- three days before the company was given a new $1.2 billion contract in Iraq to repair its southern oil fields -- auditors told the Army to inform them before the negotiation of any future contract awards.
Zakheim, said that earlier this year military auditors returned two major work order estimates totaling more than $3 billion to KBR because they were "inadequate for the purposes of negotiating a fair and reasonable price."
He said the company later submitted one of the work orders for $700 million less than the original proposal but even this was later withdrawn by KBR due to continuing pricing issues.
DEFICIENCIES
Zakheim said the company's "deficiencies" in estimating sub-contracts was the catalyst for the DCAA's review of potential gasoline overpricing.
The Pentagon's inspector general's office has opened a criminal investigation into whether the Texas-based company overcharged for fuel delivered to Iraqi civilians via a Kuwaiti subcontractor.
Military auditors found in a draft audit last December that KBR may have overcharged by $61 million for fuel through Sept. 2003. On Tuesday, the U.S. military appointed new contractors to bring in fuel to Iraqi civilians.
Halliburton has consistently denied any wrongdoing for its work in Iraq and launched an advertising campaign this year to improve the company's image after a slew of negative reports.
In a statement Thursday, KBR President Randy Harl once again defended his company's work in Iraq and said cost estimates often changed because the scope of work requirements were "dynamic and ever-changing."
Harl said the company had fully cooperated with military auditors and other regulatory agencies overseeing their work and stressed all government procurement procedures had been closely followed.
"Oversight of the public's money is important -- especially during times of war," Harl added.
Under a logistics contract with the U.S. military to support troops in Iraq and other conflict zones, auditors are also looking into the company's pricing for meals to troops.
"In DCAA's opinion, the billed number of meals appears to exceed significantly the actual meals served," said Zakheim.
The company has agreed to withhold $176.5 million in billing for food while KBR prepares a response to issues reported by the DCAA.
California Rep. Henry Waxman, one of the fiercest Democratic critics of Halliburton and its work in Iraq, sent a memorandum Wednesday to his colleagues disclosing additional information from defense auditors, which was set to be discussed at the hearing of the House Government Reform Committee.
The Republican chairman of the committee, Virginia Rep. Tom Davis, said in his prepared opening remarks that oversight of taxpayer money used in Iraq was important but urged members to take politics out of the hearing.
"We are not interested in simply repeating demagogic and disingenuous sound bites," said Davis, adding that many of the disputes indicated contract oversight was working.
Copyright 2004, Reuters News Service
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