NY Times: No Evidence of Halliburton Profiteering

Newsmax ^ | MOnday Dec 29, 2003 | Carl Limbacher and NewsMax.com Staff

[mware]

NY Times: No Evidence of Halliburton Profiteering

A comprehensive investigation into Halliburton's multibillion-dollar contract to restore Iraq's oil infrastructure shows "no evidence of profiteering" by the Houston-based oil services company.

That's the verdict by the New York Times, which assigned its Whitewater sleuth Jeff Gerth and investigative ace Don Van Atta to lay bare all the tawdry details of how Vice President Dick Cheney's former company was reaping big-bucks profits from sweetheart deals imagined by Democrats.

One problem: Gerth and Van Atta found almost nothing for Dems to hang their hats on. In fact, not only couldn't the Times find any evidence that Halliburton was stuffing its pockets under-the-table - even the aboveboard revenue collected by the company hasn't been much to write home about.

"So far this year, Halliburton's profits from Iraq have been minimal," the Times admitted. "The company's latest report to the Securities and Exchange Commission shows $1.3 billion in revenues from work in Iraq and $46 million in pretax profits for the first nine months of 2003."

That's a slender 3.5 percent margin, hardly enough to make any self-respecting war profiteer look twice. No wonder this story hasn't been leading TV and radio news reports all day.

Too be sure, Times editors did their best to make it sound as if something fishy was going on. The report's front-page headline - "Halliburton Contracts in Iraq: The Struggle to Manage Costs" - gave no clue to the exoneration that followed.

And subheadlines like "Little Public Disclosure" and "An Absence of Competition" hinted darkly of shady deals where Cheney's friends were lining their pockets with blood money.

But even the Times had to admit that Halliburton's original Iraq contract was won "in a bidding process in December 2001."

What about that widely cited report last month claiming the company had overpaid by as much as 100 percent for Kuwaiti gasoline? Turns out that news is pretty much a political bust, too.

Company spokeswoman Wendy Hall explained that the Army Corps of Engineers needed the fuel imported to Iraq within 24-hours - not much time to launch a competitive bidding process.

"There's a premium for getting it done fast," explained Gordon Adams, a military procurement expert at George Washington University.

Anyone who disagrees ought to try sending all their mail by next-day-air and see what happens to their postage budget.

Another factor that sent job cost estimates through the roof: sabotage by terrorists.

"As the war wound down, more work came [Halliburton subsidiary] KBR's way, mostly because of acts of sabotage on pipelines and Iraq's oil facilities," the Times noted. "When security problems made the production of fuel inside Iraq even more difficult -- leading to shortages -- the government asked Halliburton to import fuel."

If the Times' report on Cheney's old company is the best the Democrats can do, it's time for Terry McAuliffe to begin searching for a new campaign boogeyman ASAP.

[At _War_With_Liberals]

WASHINGTON, Dec. 28 — The Qarmat Ali water treatment plant in southern Iraq is crucial to keeping the oil flowing from the region's petroleum-rich fields. So when American engineers found the antiquated plant barely operating earlier this year, there was no question that repairing it was important to the rebuilding of Iraq. Setting the price for the repairs was another matter.

In July, the Halliburton Company estimated that the overhaul would cost $75.7 million, according to confidential documents that the company submitted to the Army Corps of Engineers. But in early September, the Bush administration asked Congress for $125 million to do the job — a 40 percent price increase in just six weeks.

The initial price was based on "drive-by estimating," said Richard V. Dowling, a spokesman for the corps, which oversees the contract. The second was a result of a more complete assessment. "The best I can lamely fall back on is to say that estimates change," said Mr. Dowling, who is based in Baghdad. "This is not business as usual."

The rebuilding of Iraq's oil industry has been characterized in the months since by increasing costs and scant public explanation. An examination of what has grown into a multibillion-dollar contract to restore Iraq's oil infrastructure shows no evidence of profiteering by Halliburton, the Houston-based oil services company, but it does demonstrate a struggle between price controls and the uncertainties of war, with price controls frequently losing.

The Pentagon's contract with a Halliburton subsidiary, Kellogg Brown & Root, conceived in secrecy before the war and signed in March, was meant as a stopgap deal to last no more than a few months. But it has been in effect since then and has grown to more than $2 billion.

The scope of the contract includes myriad tasks from importing fuels to repairing pipelines, and the costs have increased through task orders and subcontracts, some of which are carried out with limited documentation or disclosure.

The reconstruction of Iraq has taken on "a Wild West atmosphere," said Gordon Adams, a military procurement expert at George Washington University. "Wartime creates an urgent need, and under an urgent need, contractors will deliver and take a price. There's a premium for getting it done fast."

Earlier this month, Pentagon auditors questioned the $2.64 per gallon that Halliburton was charging to truck fuel from Kuwait to Iraq, and sought to recover $61 million. In response, company officials said they had actually saved the government money and had put the fuel supply subcontract up for competitive bidding. But there was little paperwork to show that any bidding had taken place, according to government officials familiar with the audit.

"Most of it was done on an emergency basis, very quickly, over the phone, and Halliburton has struggled to prove this was competitively bid," said one government official.

Wendy Hall, a spokeswoman for Halliburton, said bids were solicited by telephone in May because the corps needed fuel imported into Iraq within 24 hours. But she said a more formal bidding process was done several days later, and that KBR has provided Pentagon auditors with documentation on the bids.

"KBR followed government-approved procedures in responding to this significant, challenging and dangerous mission," she said.

Minimal Halliburton Profits

The estimated price of another KBR project, the replacement of damaged pipelines over the Tigris River, also grew significantly over the course of a few weeks. In July, KBR estimated that the cost would be $29.8 million for the job, included in a list of 220 tasks to be completed in Iraq. But by fall, the cost had more than doubled, to $70 million.

Both Mr. Dowling, the spokesman for the corps, and Ms. Hall said the price grew because the scope of the project and the method of repair had changed. Ms. Hall said the company had tried to get the lowest price from its subcontractors. In addition, Halliburton and government officials note that the violence in Iraq increases the cost of security and adds to the cost of all reconstruction contracts.

SNIP- reg required

http://www.nytimes.com/2003/12/29/international/middleeast/29CONT.html

[At _War_With_Liberals]

(Page 2 of 3)



So far this year, Halliburton's profits from Iraq have been minimal. The company's latest report to the Securities and Exchange Commission shows $1.3 billion in revenues from work in Iraq and $46 million in pretax profits for the first nine months of 2003. But its profit may grow once the Pentagon completes a formal evaluation of the work. If the government is satisfied, Halliburton is entitled to a performance fee of up to 5 percent of the contract's entire value, which could mean additional payments of $100 million or more.

The nonpublic way in which KBR was selected for the job in Iraq remains a political flashpoint, especially among Democratic presidential contenders, in part because Vice President Dick Cheney served as Halliburton's chief executive officer from 1995 to 2000.

The contract to fix Iraq's oil industry was granted to KBR by a secret Bush administration task force formed in September 2002 to plan for Iraq's oil industry in the event of war. The task force, led by an aide to Douglas J. Feith, the under secretary of defense for policy, quickly concluded that the government alone could not meet the oil needs, members of the group said. "There were only a handful of companies, and KBR was always one of those mentioned," said one Pentagon official.

Almost immediately, an alarm went off among members of the group. "I immediately understood there would be an issue raised about the vice president's former relationship with KBR," the official said, "so we took it up to the highest levels of the administration, and the answer we got was, `Do what was best for the mission and we'll worry about the political' " fallout.

An Absence of Competition

Halliburton, a large energy services, engineering and construction firm, works for governments all over the world. A crucial factor in KBR's selection, members of the planning group said, was an existing Army contract it secured to provide logistical support around the world. It won that contract in a bidding process in December 2001. The Pentagon has cited that competition to deflect criticism about KBR's no-bid contract in Iraq.

In awarding the logistics contract, the Army acknowledged last year, it failed to consider that the company was under criminal investigation for a previous Pentagon contract, even though that inquiry was disclosed in Halliburton's annual report.

The absence of competition in the selection of KBR for Iraqi oil work was meant to be remedied shortly after the war ended. "Everyone realized the selection of KBR was going to look bad, so the idea was to compete it out as quickly as possible," said another task force member.

But those competitively bid contracts have yet to be awarded, and the amount of Halliburton's work in Iraq has grown steadily.

The process began in November 2002 with a request for the company — then operating under the Army logistical contract — to plan the management of Iraq's postwar oil industry. "In the worst case scenario," said Lt. Gen. Robert B. Flowers, the commander of the Army Corps of Engineers, "there would be massive international oil spills and pollution resulting from the fires, extensive damage to associated infrastructure, including gas-oil separators, pipelines, pumping stations, refineries and import facilities."

KBR designed a plan for such an eventuality, and on March 8, as war loomed, the corps awarded Halliburton a no-bid contract to carry out the plan, officials said.

The contract is labeled IDIQ, meaning indefinite delivery, indefinite quantity.

On March 24, a few days after the American-led invasion, the Pentagon and Halliburton announced the new contract. The Pentagon press release was titled, "Army Named Executive Agent for Combating Iraq Oil Fires." Halliburton's own press release carried this headline: "KBR Implements Plan for Extinguishing Oil Well Fires in Iraq."

Inviting Other Bids

Representative Henry A. Waxman, the California Democrat who is a vocal critic of the Halliburton contract, wrote to Bush administration officials on March 26 asking why the contract was awarded without competition. Administration officials responded that the contract could be worth as much as $7 billion to Halliburton, but General Flowers said the bulk of the work would be open to competition from other contractors "at the earliest opportunity."

In April, Brig. Gen. Robert Crear of the Army Corps of Engineers described it as a "bridging contract, which would tide us over until we could have a fair competition."

"This contract is not going to be the kind of megabillion-dollar deal many have been thinking," General Crear told Bloomberg News.

[At _War_With_Liberals]

(Page 3 of 3)



During the war's first days, soldiers discovered only a few oil fires, but as the war wound down, more work came KBR's way, mostly because of acts of sabotage on pipelines and Iraq's oil facilities. When security problems made the production of fuel inside Iraq even more difficult — leading to shortages — the government asked Halliburton to import fuel. It bought the fuel from Turkey and Kuwait.

Halliburton's subcontractor in Kuwait was paid $2.27 a gallon to import fuel, almost twice what it cost to bring in fuel from Turkey. Halliburton charged an additional 36 cents a gallon. Pentagon auditors have said the price for the fuel from Kuwait was excessive.

Government officials have said the Kuwaiti subcontractor was called Altanmia Commercial Marketing Company, but Halliburton has refused to identify its subcontractors, which is a point of contention with critics of the contract.

Ms. Hall, the Halliburton spokeswoman, said subcontractors were kept confidential "in order to ensure subcontractor safety" in Iraq. By contrast, Bechtel, the other large government contractor involved in the reconstruction effort, lists its subcontractors on its Web site.

Little Public Disclosure

There has been little public disclosure of how prices are set. Mr. Dowling, the spokesman for the Army Corps of Engineers, said it is difficult to figure estimates in Iraq. A KBR task list of 220 reconstruction projects obtained by The New York Times gives some indication of the early estimates and how they quickly increased.

The most expensive project on the list was the repair of the Qarmat Ali water treatment plant, which pumps water into underground oil reservoirs, allowing oil to be extracted. By the time the Bush administration had submitted its budget request for Iraqi reconstruction in early September, the water-plant repair job had grown to $125 million from 75.7 million. The higher amount was what Congress eventually appropriated.

Mr. Dowling said that the first estimate was based on a "rough matrix" of pricing and that the final price was the product of "more refined data."

"There is nothing sinister or underhanded about construction estimates that change as the work is planned," he said. "It's the quality of the work that counts." Halliburton officials referred questions about estimates to corps officials.

Criticism that the contracting is kept secret and favors Halliburton has been leveled not just by Democrats, but also by some business executives. Although the Pentagon and KBR deny any favoritism, some executives cited a closed Pentagon workshop on Iraq's oil infrastructure that was held in August at MacDill Air Force Base near Tampa, Fla.

The three-day conference included officials from the Coalition Provisional Authority, the corps and other government agencies as well as executives from KBR. The companies that attended, according to David C. Farlow, a spokesman for the United States Central Command, included only "commercial contractors currently working in Iraq."


Jeff Gerth reported from Washington for this article and Don Van Natta Jr. from London.

[nopardons]

It's what " they " call 'em; not, though, whatr anyone else woould. LOL

[FreePaul]

Be interesting to see if other rags around the country pick up this and run with it. I don't expect to see much coverage in our local paper.

[gatorbait]

Be interesting to see if other rags around the country pick up this and run with it. I don't expect to see much coverage in our local paper.

I am waiting, with breathless anticipation, for the networks and the major media sources to report this to the world..


Wish they'd hurry,anoxia is tough to...... uuhhhhhh

[Joe_October]

Unfortunately, this will mean nothing to the rats. Halliburton is just too good of a buzz word to actually bother with the truth.

Just as long as it's not Gep-ron.

[CGVet58]

true on DNC - though I wonder what page the slimes printed this "retraction" on.

Will it - in reference to the breaking story title-line on the alleged profiteering - say something like this>??? "the company formerly headed by VP Dick Cheney unfairly accused and cleared of any wrongdoing"??? I don't think so.

These leftists are all the same, lower than whale shit in the marianas trench.

CGVet58

[Cincinatus' Wife]

Bump!

[Beck_isright]

"Just damn"

[Qwinn]

"I have lib acquaintances I want to forward the article to, and they won't read Newsmax stuff."

Congratulations being the only one who seems to get how important this is!

People, you have no idea how BEAUTIFUL this is!

I'm -dying-!!! You have to understand that the whole Halliburton issue is CRUCIAL to all their arguments! Every time you beat them on any other issue, they retreat to this!!!!

You want to have a BLAST? You want to make the Left CRINGE? I'm doing it on the Charlie Rose boards right now... over an hour since I posted this without a response, lololol!

Next time you hear about Halliburton, say this:

"(Cheney, in a Dr. Evil voice): "I will destroy the world if you do not give my former company... 46... MILLION dollars! Pretax."

Lolololol... please, people, we have to make sure EVERYONE hears about this one!

Qwinn

[Qwinn]

No WAY am I letting this die! This should be the biggest story for the next 3 weeks!

BUMP!!

Qwinn

[aruanan]

That's a slender 3.5 percent margin, hardly enough to make any self-respecting war profiteer look twice. No wonder this story hasn't been leading TV and radio news reports all day.

I remember that back in the early 1980s only a few percent of each dollar of revenue was profit.

[kayak]

bttt

[Qwinn]

Hey, do you think if we ask Cubans if they'll contribute $1.89 a piece to Halliburton to liberate them from Castro, they'll go for it?

Evil Cheney: I will -not- free 25 million Iraqis from torture under a sadistic tyrannical madman unless you pay my former company 46... MILLION dollars!

LOL!

Qwinn

[PhiKapMom]

Thanks for the ping! I am shocked that this actually appeared in the NY Times -- maybe Raines leaving is making somewhat of a difference. The jury is still out though.

[Qwinn]

Don't be shocked. The NY Times will actually often print the truth in -some- form - they kinda have to, especially when we all know that Halliburton's report to the SEC would have to hit the internet eventually. But the article was outrageously spun as much as humanly possible to give leftists room to manuever, and even at that it's been utterly buried. This is standard operating procedure.

Qwinn

[Qwinn]

Evil Cheney: I will -not- free 25 million Iraqis from torture under a sadistic tyrannical madman unless you pay my former company 46... MILLION dollars!

mhking, I know this isn't the usual category, but this is -such- a big deal, and it's being buried... can I implore you for a "Just Damn" on this one? Cause man, it deserves it! When I saw Halliburton raking in a whole whopping 3.5% profit margin, when I think of how much screeching there has been about this on every lefty website I go to, those were the words that came out of my mouth: JUST DAMN.

Qwinn

[lepton]

Maybe Bush can suggest the theory that the cow caught Mad Cow from Dean - you know, some people might wonder.

[lepton]

If the election were held today, I wouldn't vote for Bush.

...the voting machines aren't set up.