Nothing But Politics

[Rick Faurot]

Halliburton's Good Fortune Never Ends
by Christopher Brauchli
My Cup Runneth Over
- 23rd Psalm

Good things keep happening to Halliburton.

It all started when the company's former chief executive, Dick Cheney, became vice president of the United States, although he's too modest to admit his election had anything to do with it. Had he and George W. Bush not been elected, it is unlikely that Iraq would have needed the repairs to its oil pipe lines that Halliburton has been working on and even more unlikely that there would have been American troops stationed in Iraq needing the kinds of services Halliburton has been providing. For that, at least, Mr. Cheney deserves full credit.

We must also give Mr. Cheney credit for the fact that Halliburton got its initial contract for work in Iraq without having to go through the annoying bidding process. The most recent developments mean Halliburton won't be punished for poor accounting and has the opportunity to make back the money it had to repay or forfeit because of corruption or poor accounting, depending on one's perspective. But it's not all been roses for the company and critics should keep that in mind.

In 2003 it was disclosed that Kellogg Brown & Root had overbilled the U.S. government by $27.4 million for meals served to American troops. That, the company explained, was not KBR's problem. KBR subcontracted the food service to an Iraqi company which billed for roughly three times more meals than it actually served its customers. KBR couldn't have anticipated the overbilling even though it sent a memorandum to the subcontractor telling it to charge for "the projected number of meals or the actual head count — whichever is greater."

In early August a Pentagon internal report disclosed that KBR had failed to fully account for a portion of the $4.2 billion it received for work done in Iraq and Kuwait. Explaining the failure, a company spokesman said that the government's shifting needs and the complexity of providing logistical support made accounting difficult. The Pentagon's report proved his point and was not without potential consequences.

Under government contracting rules, when an accounting is found wanting 15 percent of the amount owed must be withheld until accounting issues have been resolved. During 2004 Halliburton received two extensions to give it additional time to resolve accounting issues. The last extension expired on Aug. 11 and for a very short time it looked as though there would not be another extension. A company spokesman said the report was only advisory and the agency making it has "no authority to determine the adequacy of our systems." She added that the Pentagon report is part of a routine process that is "amicably resolved." She got the amicable part right although there were some anxious moments.

On Aug. 17 it was reported that the government planned to withhold about $60 million a month from KBR until accounting issues were resolved. That was distressing news to Halliburton, more especially since on Aug. 16 the army and the company had jointly announced that it had been agreed no money would be withheld and KBR would be given additional time to prove its costs. Explaining the decision to give Halliburton extra time, Linda Theis, a spokeswoman for the Army Materiel Command, said the army was trying to be "fair and equitable." Shortly after the announcement was made the army changed its mind about what was fair and equitable and announced it would withhold payments after all.

For a while it looked as though Halliburton's string of good fortune had come to an end. Then one of those strange but serendipitous events occurred that seems to constantly befall Halliburton. Late in the day on Aug. 17, the army announced it had changed its mind yet again and would give KBR a third extension. That was not the end of Halliburton's August good fortune.

A few days after the extension was granted the army announced that it planned to divide the $12 billion of work previously given to Halliburton among several companies and require Halliburton to bid on the contracts. Although forcing Halliburton to bid on contracts it had received without bidding might seem like an unfavorable turn of events, it is not. David Lesar, Halliburton's chief executive explained: "If we do choose to rebid, we're going to jack the margins up significantly, " thus suggesting that contracts Halliburton enters into with higher profit margins will make up for the money the company lost after it quit cheating the taxpayer. Give Mr. Cheney at least some of the credit for Halliburton's good fortune.

Christopher Brauchli is a Boulder lawyer and and writes a weekly column for the Knight Ridder news service. He can be reached at [e-mail]

http://www.commondreams.org/views04/0911-24.htm