WASHINGTON, Aug. 11 (HalliburtonWatch.org) -- Halliburton cannot justify why it
billed the Pentagon for $1.8 billion of work in Iraq and Kuwait, the Wall
Street Journal reported today, citing a new Pentagon report. Pentagon accountants
said they are uncertain as to why Halliburton's KBR unit billed the Pentagon $1.8
billion for the expenses, which represent 43 percent of the $4.18 billion the
company billed the Pentagon for logistics work in the Middle East, the Journal
said. The Pentagon's audit report obtained by the Journal, dated Aug. 4, has not
officially been released to the public. It found KBR's "internal control
policies" are "inadequate for providing verifiable, supportable, and
documented cost estimates that are acceptable for negotiating a fair and reasonable
price." Pentagon officials told the Journal that no defense contractor has
had its estimating system ruled "inadequate" in years.
The billings involve more than $900 million in payments by KBR for dozens of
dining facilities in the Middle East where it is responsible for feeding the
troops. KBR feeds the troops under its LOGCAP contract awarded by the U.S. Army
and is reimbursed by the government for all expenses, then paid a fee of 2 or
3 percent of those expenses. As Halliburton's expenses in Iraq go higher, its
fee paid by the Pentagon goes higher, too. Critics say the company artificially
inflates expenses in order to obtain a higher fee. One former employee said
the company's motto in government contracting is "Don't worry about price.
It's cost-plus," referring to the fact that Halliburton is paid a higher
fee if it can find a way to inflate its expenses paid by the Pentagon.
Pentagon auditors said more than a third of the dining expenses may be unjustified,
the Journal reported.
Auditors also are examining $180 million in KBR expenses incurred for importing
fuel from Kuwait to Iraq.
These new allegations are likely to increase pressure on the federal government
to withhold hundreds of millions of dollars of payments to Halliburton, but
the Journal said government officials believe differences can be resolved without
the withholding of large payments. Halliburton has until Aug. 15 to justify
its expenses to Army officials. If the company fails to provide a justification
for the $1.8 billion in expenses, it could lead to the withholding of as much
as $600 million of payments from the Pentagon.
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