Monday, February 27, 2006

Army to Pay Halliburton Unit Most Costs Disputed by Audit

Hooray, the corruption never ends. And check out this contract!:

Under the type of contract awarded to the company, "the contractor is not required to perform perfectly to be entitled to reimbursement,"

Man, I need one of those. I seem to remember, during my time as a contractor, work was expected to be pretty damn flawless, or there were all kinds of different contract vehicles that could be used to smack us down. That doesn’t apply, of course, if the VP owns the company. Hah, oh, yeah, and how about this one:

…questionable business practices by the subsidiary, Kellogg Brown & Root, had in some cases driven up the company's costs. But in the haste and peril of war, it had largely done as well as could be expected

Nice! Really, really nice. Forget about accountability.

Army to Pay Halliburton Unit Most Costs Disputed by Audit
By JAMES GLANZ

The Army has decided to reimburse a Halliburton subsidiary for nearly all of its disputed costs on a $2.41 billion no-bid contract to deliver fuel and repair oil equipment in Iraq, even though the Pentagon's own auditors had identified more than $250 million in charges as potentially excessive or unjustified.

The Army said in response to questions on Friday that questionable business practices by the subsidiary, Kellogg Brown & Root, had in some cases driven up the company's costs. But in the haste and peril of war, it had largely done as well as could be expected, the Army said, and aside from a few penalties, the government was compelled to reimburse the company for its costs.

Under the type of contract awarded to the company, "the contractor is not required to perform perfectly to be entitled to reimbursement," said Rhonda James, a spokeswoman for the southwestern division of the United States Army Corps of Engineers, based in Dallas, where the contract is administered.

The contract has been the subject of intense scrutiny after disclosures in 2003 that it had been awarded without competitive bidding. That produced criticism from Congressional Democrats and others that the company had benefited from its connection with Dick Cheney, who was Halliburton's chief executive before becoming vice president.

Later that year auditors began focusing on the fuel deliveries under the contract, finding that the fuel transportation costs that the company was charging the Army were in some cases nearly triple what others were charging to do the same job. But Kellogg Brown & Root, which has consistently maintained that its costs were justified, characterized the Army's decision as an official repudiation of those criticisms.

"Once all the facts were fully examined, it is clear, and now confirmed, that KBR performed this work appropriately per the client's direction and within the contract terms," said Cathy Mann, a company spokeswoman, in a written statement on the decision. The company's charges, she said, "were deemed properly incurred."

The Pentagon's Defense Contract Audit Agency had questioned $263 million in costs for fuel deliveries, pipeline repairs and other tasks that auditors said were potentially inflated or unsupported by documentation. But the Army decided to pay all but $10.1 million of those contested costs, which were mostly for trucking fuel from Kuwait and Turkey.

That means the Army is withholding payment on just 3.8 percent of the charges questioned by the Pentagon audit agency, which is far below the rate at which the agency's recommendation is usually followed or sustained by the military — the so-called "sustention rate."

Figures provided by the Pentagon audit agency on thousands of military contracts over the past three years show how far the Halliburton decision lies outside the norm.

In 2003, the agency's figures show, the military withheld an average of 66.4 percent of what the auditors had recommended, while in 2004 the figure was 75.2 percent and in 2005 it was 56.4 percent.

Rick Barton, co-director of the postconflict reconstruction project at the Center for Strategic and International Studies in Washington, said despite the difficulties of doing business in a war zone, the low rate of recovery on such huge and widely disputed charges was hard to understand. "To think that it's near zero is ridiculous when you're talking these kinds of numbers," he said.

The Halliburton contract is referred to as a "cost-plus" agreement, meaning that after the company recovers its costs, it also receives various markups and award fees. Although the markups and fees are difficult to calculate exactly using the Army figures, they appear to be about $100 million.

Posted by crimnos @ 9:10 AM