WASHINGTON – U.S. military auditors have criticized construction giant Halliburton
for the way it does business in Iraq, concerns amplified by former employees
who are alleging financial abuses in the U.S.-occupied country.
"In our opinion, the contractor's billing system is inadequate in part," said
the Defense Contract Audit Agency (DCAA) in a report
made available Tuesday by California Representative Henry Waxman.
"Our examination disclosed several deficiencies in KBR's billing system, resulting
in billings to the governments that are not prepared in accordance with applicable
laws and regulations and contract terms," added the report, seen by IPS.
KBR is Kellogg Brown and Root, a subsidiary of Houston-based Halliburton,
which has been awarded the most lucrative contracts for the reconstruction of
Iraq after it was invaded by U.S.-led forces in March 2003.
The DCAA report examined the company's billing system, its oversight of subcontractor
billing, the management review and approval process and its training of employees.
It revealed deficiencies that resulted in invoicing mistakes that were not
prevented, detected or corrected in a timely manner. The May 13 report also
found the company "does not monitor the ongoing physical progress of subcontracts
or the related costs and billing."
The report demands that KBR be required to continue to provide all billings
to DCAA for provisional approval prior to submission for payment. The auditors
also recommended the company submit a detailed milestone plan for correcting
the deficiencies cited in the report.
Waxman, from the Democratic Party, expressed concerns Monday that some KBR
contracts would not be discussed in a congressional hearing Tuesday on the company's
performance in Iraq.
He and other members of Congress have been seeking more information on contracts
entered into by the Bush administration for reconstruction and development work
in Iraq, including several billion-dollar contracts with the Halliburton subsidiary.
Members of the Government
Reform Committee said during Tuesday's
hearing they will ask Halliburton Chief Executive Officer David Lesar and
KBR CEO Randy Harl to testify before Congress over the allegations swirling
around their firms.
"DCAA has identified significant deficiencies in KBR's estimating practices
related to the award of subcontract costs," said the agency's director, William
H Reed, in prepared remarks at the hearing.
In an email statement Halliburton said late Tuesday, "KBR strongly believes
DCAA's view is not supported by the contract. The ultimate decision regarding
the payment of these costs will be made by KBR's customer, the Army Material
"While we take no political position on the war in Iraq, we remain a convenient
tool for some of those who oppose it. We expected there would be attempts before
the end of June to deflect attention from the progress being made in Iraq, but
we didn't think so much of it would originate here at home," added the statement,
sent by Wendy Hall, director of public relations.
From no-bid contracts with little supervision, to allegedly manipulating gasoline
prices, Halliburton – formerly led by Vice President Dick Cheney – has largely
come to embody the secretive nature of awarding billions of dollars worth of
contracts in post-war Iraq and hefty profiteering by U.S. firms, many with links
to the Bush administration.
The Defense Department's Inspector General has referred Halliburton's billing
for fuel in Iraq to the department's Defense Criminal Investigative Service
for a possible criminal probe after it was revealed the company upped the price
for gasoline bought in Kuwait by a dollar a gallon.
Waxman says the firm's performance deserves deeper congressional oversight,
after five former employees and one former executive of a Halliburton subcontractor
came forward and described serious examples of waste and fraud in Iraq.
In statements released by Waxman, David Wilson, a convoy commander for Halliburton,
and James Warren, a company truck driver, described instances where brand-new
trucks worth $85,000 were abandoned if they got a flat tire or experienced minor
Marie De young, a Halliburton logistics specialist, also described widespread
overcharging and mismanagement.
For example, she disclosed the company did not comply with the U.S. Army's
request to move its employees from a five-star hotel in Kuwait, which cost U.S.
taxpayers about $10,000 a day, into air-conditioned tent facilities, which would
have cost less than $600 daily.
Michael West, a former Halliburton labor foreman, said he and other employees
spent weeks in Iraq with virtually nothing to do, but were instructed to bill
12-hour days seven days a week on their timesheets.
He told Waxman that has superior directed him to buy unnecessary equipment,
telling him: "Don't worry about it. It's a cost-plus-plus contract."
"These individuals have first-hand knowledge of egregious examples of waste,
fraud and abuse involving Halliburton's Iraq contracts," Waxman said in his
Halliburton has won many lucrative contracts under the growing U.S. defense
budget, which is now is at more than $400 billion a year. The wars in Afghanistan
and Iraq have cost $180 billion to date.
Halliburton alone received $8.2 billion worth of contracts from the Pentagon
to provide support services such as meals, shelter, laundry and Internet connections
for U.S. soldiers in Iraq. It is also helping rebuild the country's oil infrastructure,
according to congressional sources. The value of its contracts is far more than
any other firm doing business in Iraq.
Its employees also allegedly received some $6.3 million in kickbacks on another
deal, charging for three times as many meals as were actually served at a major
army facility in Kuwait.