Halliburton's "No-Bid" Contract: Fact or Myth?
What is really meant by the use of the phrase "no-bid" when describing Halliburton's contracts associated with Operation Iraqi Freedom? What is implicit in the statement is a claim that Halliburton was awarded a contract that included a blank-check for the services they provide and that said contract was awarded in contravention of the competitive bidding process. Unfortunately the truth is quite the opposite.
The Pentagon, with few exceptions, has traditionally conducted logistics and reconstruction services through its own forces under the U.S. Army Corp of Engineers. However, in the early 1990's, in an attempt to reduce standing forces and costs, the Pentagon developed the U.S. Army Logistics Civil Augmentation Program (a.k.a. LOGCAP). LOGCAP provides for a multi-year agreement with the Pentagon wherein a company agrees to be on-call to provide any and all services needed as bid. The operative phrase there is "as bid." Companies wishing to do business under a LOGCAP Agreement must submit bids for same. The contract, once awarded, becomes a standing agreement for a pre-determined period thereby alleviating the necessity of obtaining competitive bids each time a need arises.
In 2001 KBR (Kellogg, Brown & Root), a subsidiary of Halliburton, won a LOGCAP Agreement. Under this agreement KBR was called-upon in 2003 to provide post-war oil well fire containment and reconstruction at a maximum cost of $1 billion. The Pentagon reasonably presumed that the Iraqis would torch or otherwise destroy their oil wells as happened in Kuwait during the 1991 Gulf War. While there were some oil well fires, the numbers thereof was nowhere near that which was expected. No competitive bids were solicited as said service fell under the parameters of an existing LOGCAP Agreement. Describing the KBR agreement as a "no-bid contract" is therefore a misnomer.
Many Conservative pundits have argued that the Clinton Administration issued Halliburton a no-bid contract for its efforts in the Balkans. Under the strictest meaning of the terms Halliburton's deal with the Clinton Administration does fit the definition of a no-bid contract. Halliburton's original LOGCAP Agreement issued in 1992 actually expired in 1997. To quote Rich Lowry, editor of National Review, "The Clinton administration nonetheless awarded a no-bid contract to Halliburton to continue its work in the Balkans supporting the U.S. peacekeeping mission there because it made little sense to change midstream." In fact, Al Gore's Reinventing Government Panel praised Halliburton for its work in military logistics in the 1990's.
Additionally, it is noteworthy here that under LOGCAP Agreements, the Pentagon determines the amount of compensation, not the company. The company is under obligation to provide the needed services within the budgetary constraints established by the Pentagon even if its costs exceed the value thereof.
While the use of the expression "no-bid contract" with respect to U.S. efforts in Iraq fails to measure up in most cases, such contracts do exist. Government entities occasionally award contacts to specific companies without obtaining competitive bids for a host of reasons. It is almost impossible to resist the urge to attribute such deals to some form of political favoritism as the recipients are at times, large campaign contributors and/or otherwise associated with government power brokers. Notwithstanding, there are legitimate non-nefarious reasons why a company would be awarded such a "sweet-heart" deal.
Certain companies have experience and capabilities in particular industries which makes them ideal candidates for providing certain services in an efficient and cost-effective manner. In many cases it is the sheer size and reputation of a company that affords it a competitive edge. This is particularly so when a government agency has a limited amount of financial resources and/or a project that must be completed within a short period of time. It is advisable under these circumstances to seek out a company that will agree to provide the needed services within existing budgetary constraints rather than taking the time to shop for competitive bids. Some of these are known simply as ID/IQ Agreements. Both Halliburton and Bechtel have been recipients of same.
ID/IQ Agreements are basically contracts to provide specific products and services at a fixed-price for an indefinite delivery period and in an indefinite quantity. Contrary to Congressman Henry Waxman's assessment this type of agreement is not "bad for taxpayers." In actuality this is a mutually beneficial arrangement for the government and the company involved. The government has established a ceiling above which it will no go and the companies then compete to provide the products and services at or below that level. Real-world costs are dynamic, not static and when costs exceed the agreed-upon maximum, the overrun must be absorbed by the company. On the other hand, when costs fall below the agreed-upon maximum the company can factor in a reasonable markup. The safeguard against unconscionable markups is found in the ability of the government to conduct unannounced audits. As you may recall this procedure is what lead to the finding that Halliburton had overstated its costs on several invoices to the Pentagon. I call this a substantial tax-payer benefit. When a private company overcharges the tax-payer we are able to recoup the costs however when the government is the service provider that tax-payer has little or no recourse.
For these and other reason, Halliburton has been awarded no-bid contracts for work in Iraq.
In a war logistics is of utmost importance and time is of the essence. The idea of the perfect, unalterable plan of war and occupation only exists in the minds of Leftist politicians. Real wars on the other hand, are fluid and unpredictable. Military personnel and their civilian overseers have to ready and willing to make split-second decisions which can sometimes mean the abandonment or reorganization of existing goals and timetables. It has been said that "no plan of battle ever survives the first engagement with the enemy." How true this is. For a plan of battle is only as good as the willingness of your enemy to comply.
