Details Given on Contract Halliburton Was Awarded

Brussels EU to investigate US contracts in Iraq
Brussels to investigate US contracts in Iraq
By Tobias Buck in Brussels
Financial Times (London) Apr 10 2003 19:19

The European Commission is examining contracts awarded by the US for reconstruction work in Iraq to find out whether they breach World Trade Organisation rules and discriminate unfairly against European companies.

The move could throw up a new irritant at a time when relations between Washington and Brussels are already severely strained by the highly critical stance adopted by many European Union members towards the war in Iraq.

It also comes as trade negotiators on both sides of the Atlantic struggle to overcome their differences over further trade liberalisation in the current WTO round as well as a growing number of bilateral trade disputes.

The EU insists that the US abide by the WTO Agreement on Government Procurement, which states that, in principle, contracts awarded by national governments or their agencies must be open to businesses from abroad.

However, a spokeswoman for Pascal Lamy, the EU trade commissioner, conceded that this rule did not apply to vast bulk of contracts signed by the US Agency for International Development, the State Department organisation that oversees US humanitarian aid projects, and which so far has been largely responsible for reconstruction contracts in Iraq. Contracts that touch upon issues related to "national security" or "national defence" are also not covered by the agreement.

This is because WTO members were given significant leeway in deciding what sectors and government agencies they would open to foreign competition.

"We will be examining [the contracts] on a case-by-case basis. We have to examine whether each of them falls under the exceptions the WTO rules provide for," the spokeswoman said.

However, the Commission stressed that it was keen to avoid formal proceedings against the US in front of the WTO: "The last thing we need now is a row at the WTO," she added.

Officials also said that they were not aware of any complaints from European companies regarding the current tenders for reconstruction work. "We have not yet identified any particular problems. We hope that they respect the rules. But if they don't, there is the WTO," a Commission official said.

Critics: contracts open to cronyism;Cheney's ex-firm example
Critics say contracts open to cronyism
Cheney's ex-firm cited as example
By William Neikirk, Chicago Tribune senior correspondent
April 13, 2003

WASHINGTON -- The United States' plan to rebuild Iraq, which will cost billions of dollars, already is facing criticism for being a closed process vulnerable to cronyism.

Several members of Congress have denounced the administration's method of handpicking the contractors--many with strong Republican ties--who will be responsible for major reconstruction projects involving roads, oil wells and other infrastructure.

The disclosure that a subsidiary of Halliburton Co., a Dallas-based firm once headed by Vice President Dick Cheney, was awarded a contract for up to $7 billion for repairing oil wells in Iraq has begun to focus attention on the entire reconstruction effort.

"It troubles me that Halliburton is around every corner when it comes to major spending by this administration," said Sen. Dick Durbin (D-Ill.), who contends that Chicago contractors interested in bidding have been unfairly left out. "It does smack of an old boys' network."

Halliburton was a central figure in a political drama over allegations that it unduly influenced a Cheney-led task force that wrote President Bush's energy policy in 2001. The vice president has blocked efforts to make public the deliberations of his panel.

The State Department quietly has selected a group of high-powered construction companies--including Bechtel Corp., Parsons Corp. and Fluor Corp--to make private bids for the projects under a process a spokesman called "limited competition." They will serve as prime contractors and then subcontract work to other businesses, including foreign companies.

Critics said the closed process could wind up wasting billions of dollars. Peter Singer, a Brookings Institution scholar who has written a book on federal contracting, said the "cost-plus" contracts being awarded by the government could result in overstaffing and overbilling.

Such contracts allow companies to cover their costs and then get a profit on top of that. This creates an incentive for increasing costs, Singer said.

"A lot of money is going to be wasted, and a lot of money is going to be made," Singer said, especially since there was no fully competitive bidding process. According to some estimates, Iraq reconstruction could cost $20 billion a year over the next three years with U.S. taxpayers footing much of the bill.

In the House, Reps. Henry Waxman (D-Calif.) and John Dingell (D-Mich.) have asked the General Accounting Office to investigate whether Halliburton received special treatment in getting the oil-well contract and whether the administration acted properly in restricting competition on other reconstruction projects to a handful of companies.

Letter to GAO

In their letter to the GAO regarding Halliburton, the two congressmen said a Halliburton subsidiary, Kellogg Brown & Root, had received "a string of lucrative contracts over the last two years." Under the contract Halliburton signed with the Army Corps of Engineers, the company would receive a profit of up to 7 percent or a maximum of $490 million if the full $7 billion is needed for Halliburton's work.

Whether the entire $7 billion will be required is not clear because oil field damage has been limited during the war. But many experts believe that Iraq's oil infrastructure is badly out of date and in need of rehabilitation to allow the country to increase production.

Wendy Hall, a spokeswoman for Halliburton, said that "the vice president has absolutely nothing to do with the awarding of defense contracts, the bidding process or current work orders." She added that Kellogg Brown & Root has a 60-year "proven track record on military contracts" and was the only company that could handle the contingency plan for the Iraqi oil fields on short notice.

She said the $7 billion figure is misleading because it covers a worst-case scenario of widespread damage to Iraq's oil fields and includes other oil field work that may be awarded to subcontractors. So far the government has spent $50.3 million under the contract, most of that before the war started.

Waxman and Dingell also cited a report by the Center on Responsive Politics that the corporations reportedly chosen to participate in the reconstruction projects had contributed $2.8 million to political parties between 1999 and 2002, with more than two-thirds going to Republicans.

The Bush administration has defended its handling of the contracts, saying it had to resort to an expedited procedure because speed was crucial. Alfonso Aguilar, a spokesman for the State Department's Agency for International Development, which is handling most of the contracts but not Halliburton's, said the agency acted within the law and that charges of cronyism were irresponsible.

"The administrator of the agency [Andrew Natsios] is not involved in the process," Aguilar said. "The decisions are made exclusively on the [procurement] criteria. The administrator has informed the director of procurement that if he receives any type of influence, that should be reported to him immediately to take action."

National security is also an issue, Aguilar added, because contractors probably will have to view classified procurement information on Iraq before doing their work. He did not elaborate.

Critics said the lack of openness creates the perception of favoritism, which they said could undermine support for the administration's reconstruction program.

Bruce Kuniholm, a history professor at Duke University and a former official in the State Department's Bureau of Intelligence and Policy Planning, said he favors openness to fend off charges of cronyism but added that "there are a lot of security issues, which is one reason why you want to go with American outfits."

"This becomes in the eyes of the world one more target for anti-American sentiments," said John Dower, a Massachusetts Institute of Technology professor and expert on the reconstruction of Japan after World War II. "It is going to be seen as all profiteering, and profiteering by the same people and defense contractors who promoted the war itself."

At the White House, spokesman Ari Fleischer said Congress approved the criteria for the limited-competition contracts, adding, "The White House does not get involved or dictate to agencies on how to award contracts."

Senators want answers

A group of senators is sponsoring a bill to force the administration to provide details of the contracts and justify why they were being awarded. Sen. Susan Collins (R-Maine) said she was concerned that the AID office was limiting competition.

Collins, who is chairwoman of the Senate's Governmental Affairs Committee, is the only Republican sponsor of the legislation. But Sen. Ron Wyden (D-Ore.) said the measure stands a good chance of passing.

So far, the AID office has awarded four reconstruction contracts, two of them on Friday, and it has five more to go. More lucrative contracts, dealing with major capital construction, such as roads, bridges, public buildings and public health needs, are to be announced later.

- - -

U.S. selecting companies for Iraq reconstruction

The U.S. Agency for International Development has already awarded four contracts for rebuilding Iraq's infrastructure. A fifth contract from the Army Corps of Engineers to cap oil wells has been awarded to Halliburton Co., an energy company formerly run by Vice President Dick Cheney. Several major companies are vying for additional contracts.

Awarded contracts

SEAPORT ADMINISTRATION

Provide materials and expertise to restore, maintain and operate the seaport of Umm Qasr.

Award: $4.8 million to Stevedoring Services of America, a Seattle based shipping and cargo company.

PERSONNEL ASSISTANCE

Provide expert personnel to plan and rehabilitate infrastructure in several social sectors.

Award: $7 million to International Resources Group, a Washington-based consulting firm specializing in providing expertise on developing resources for economic growth.

EDUCATION

Provide materials, training and an upgraded curriculum.

Award: $2 million to Creative Associates International, a Washington-based group that provides assistance to governments and non-governmental organizations for education needs.

LOCAL GOVERNANCE

Provide materials, services and consulting to strengthen Iraq's civil institutions.

Award: $7.9 million to Research Triangle Institute, a North Carolina-based non-profit group that provides a variety of research services.

OIL WELLS

Provide materials, expertise and logisitics for capping fires.

Award: Up to $7 billion to Halliburton Co., a Houston-based oil and gas services company.

Contracts to be awarded

Contracted company would provide logistical support for the following redevelopment projects:

Aid logistics, airport administration, capital construction, community action plan and public health

Sources: Agency for International Development, Army Corps of Engineers

Chicago Tribune

Senior House Dems request GAO investigation of Halliburton
The Corporate Reform Weekly
April 14, 2003

In Washington - Congress

Senior House Dems request GAO investigation of Halliburton

Reps. Henry Waxman (D-Calif.) and John Dingell (D-Mich.) have requested that the General Accounting Office investigate whether Halliburton, Dick Cheney's former company, has received any special treatment from the Bush Administration in the awarding of post-war reconstruction contracts.

The senior Democrats note that Halliburton subsidiary Kellogg, Brown and Root (KBR) recently won a no-bid contract to put out oil well fires in Iraq, a contract that has no time limits, no cost limits (though the Army Corps of Engineers has estimated it to be worth up to $7 billion), and was not announced until two weeks after it was awarded. The Congressmen's letter also notes that KBR was awarded a 5-year $300 million contract to provide logistical support to the Navy in May 2001 and a 10-year contract with no cost limits to provide support services to the Army in December 2001. KBR has done $624 million of government contract work from October 2000 to March 2002.

Of particular concern is that KBR has a "questionable track record of prior performance." The Congressmen cite: 1) a 1997 GAO report documenting questionable expenses for work in the Balkans - for example, charging $85.98 per sheet of plywood that cost $14.06; 2) a 2000 GAO report that documented more overcharging for Balkans work, including charges for cleaning offices four times a day; 3) $2 million that the company paid in fines in February 2002, to resolve fraud claims involving work at Ford Ord. Calif; and 4) an ongoing Securities and Exchange Commission investigation into accounting practices at Halliburton that began in 1998 when Cheney was CEO.

In the Senate, Sens. Ron Wyden (D-Ore.), Susan Collins (R-Maine) and Hillary Rodham Clinton (D-N.Y.) sponsored a bill that would require federal agencies to make a public justification for any Iraq rebuilding contracts awarded with a closed bid.

"The pattern of closed-door bargaining for massive contracts is a distinct departure from the way that government contracts have traditionally been awarded," Wyden said


To read more of Waxman's concerns about how the Bush administration is handling contracts, see http://www.house.gov/reform/min/inves_admin/admin_contracts.htm

To read more about Halliburton's deals, see "Cheney, Halliburton and the Spoils of War" http://www.corpwatch.org/issues/PID.jsp?articleid=6288

Also see: "More Flak on Halliburton Deal" by Mark Fineman of the LA Times http://www.latimes.com/business/la-war-halliburton11apr11,1,4376124.story