Army Corps ignored warning on Halliburton

WASHINGTON, March 11 (UPI) -- The Army Corps of Engineers disregarded the Pentagon's contract audit agency's request in January that it be consulted before a company with close ties to Vice President Dick Cheney was given any more work in Iraq, documents and government officials revealed Thursday.

Just three days after the corps was warned about significant systemic pricing problems with the Halliburton subsidiary, the corps gave it a $1.2 billion dollar contract.

The contracting official had the memo but did not contact the Defense Contract Audit Agency before he made his award, a top corps official confirmed Thursday.

"I know the contracting officer did have the 13 January memo in his hands when he made this ... decision," said Maj. Gen. Carl Strock, director of civil works in the Army Corps of Engineers, at a hearing of the House Government Reform Committee.

In question is the ability of Brown & Root Services, a subsidiary of Halliburton, to back up its estimated costs to perform work in Iraq with realistic data. This is critical to negotiations with the company because the Defense Department pays the company its cost plus a percentage of the costs as a profit.

According to the DCAA, Brown & Root doesn't do a very good job of it.

"We consider BRS's estimates ... to be inadequate," DCAA wrote Jan. 13. After reviewing more than $3 billion in proposals, the agency said: "Collectively, the deficiencies described above bring into question BRS's ability to consistently produce well-supported proposals that are acceptable as a basis for negotiations of fair and reasonable prices.

"We recommend you contact us to ascertain the status of BRS' estimating system prior to enter into future negotiations."

According to the DCAA, Brown a& Root failed to submit cost and pricing data; failed to provide data showing the degree of competition and reasonableness of price for subcontracts and procurements; and failed to analyze the prices and costs of subcontractors.

Three days later, on Jan. 16, the Army Corps of Engineers awarded Brown & Root a new $1.2 billion contract for work in Iraq.

The Pentagon released the Jan. 13 memorandum Thursday.

California Rep. Henry Waxman, the committee's highest ranking Democrat, spearheaded the assault. He laid out well-known but questionable facets of the deals Brown & Root Services entered into on behalf of the Defense Department in Iraq: a $61 million overcharge for fuel in Iraq; $6 million in kickbacks received by Brown & Root employees to do business with certain Kuwaiti contractors; a $700 million overcharge on a bill that was subsequently withdrawn; and an attempt to charge the Pentagon for thousands of meals to troops that were never served. The Pentagon's inspector general is investigating criminal charges on the $2.4 billion in oil contracts.

"It seems to me in the larger context of what's going on ... it seems to be that they are not doing a great job, but they are not doing a terrible job," said Dov Zakheim, the Defense Department's comptroller. "We believe the financial and internal control problems will solve themselves ... (but) DOD has enforced and will continue to enforce the highest standards for Iraq."

Brown & Root has two separate contracts for Iraq which, if all the options are exercised, are worth a combined $18 billion to Halliburton, Zakheim told the committee Thursday. One is for the provision of fuel to Iraqi gas stations for sale to Iraqi civilians. The second is for logistical services to American forces. Both of the contracts were awarded on a sole-source basis. The oil contract was made in secret in March. The logistics contract pre-existed the war, and tasks in Iraq were added to it Iraq reconstruction for reasons of speed and convenience.

Also Thursday, the Pentagon awarded two major construction contracts for work in Iraq worth $1.1 billion, the leading edge of about $5 billion in construction contracts that have been set aside for companies in the United States and other coalition countries.

FluorAMEC, LLC, of Greenville, S.C, won a contract of up to $500 million for design-build services for construction, rehabilitation, operation and maintenance of electrical power generation facilities.

Washington International, Inc./Black & Veatch Joint Venture, of Boise, Idaho, won a contract with a ceiling of $600 million to provide design-build services for national water-resource projects, including repair and/or construction of water resources supplies and transmission networks nationwide.