Halliburton defends fuel contract in Iraq

WASHINGTON - United States vice president Dick Cheney's old company Halliburton, which has tallied nearly US$6 billion ($9.04 billion) in US military business in Iraq, defended its record on Thursday after Pentagon auditors asked for an investigation into suspected price gouging for fuel.

Halliburton spokeswoman Wendy Hall welcomed a "thorough review of any and all of our government contracts" and said its unit Kellogg Brown and Root (KBR) had closely followed procurement rules in Iraq, where one of its main jobs has been to deliver fuel to the Iraqi civilian population.

"As the fuel overcharging allegations have surfaced in recent months, the Army Corps of Engineers, which oversees the KBR contract, has said ongoing audits have shown no signs of overcharging or any other impropriety," she told Reuters in an e-mail response to questions.

Military auditors have asked the Pentagon's inspector general (IG) to look into an "irregularity" over fuel brought into Iraq by KBR, suggesting the auditors suspected wrongdoing.

"They have noted the suspected irregularity to the inspector general and the IG will now take and do with it what they see fit," a defence official told Reuters.

The official could not say whether the referral was linked to a draft audit reported earlier that found KBR may have been overcharged by US$61 million to bring fuel into Iraq via Kuwaiti subcontractor Altanmia Commercial Marketing Co.

The fuel pricing issue has dogged Halliburton for months after Democrats raised questions over why the company was charging nearly double the going rate to bring in fuel via Kuwait rather than the cheaper route, Turkey.

Yet Democratic Representative Henry Waxman wrote to national security adviser Condoleezza Rice on Thursday asking her to get to the bottom of why Altanmia was given a sole source contract by KBR to bring fuel into Iraq when there were cheaper options.

"There are many unanswered questions about why Altanmia -- an obscure company with no prior experience in fuel importation or distribution, was awarded an exclusive multi-million dollar contract from Halliburton," wrote the California congressman.

He also said that political pressures had been placed on the Army Corps and Halliburton officials to continue to import fuel via Altanmia even though their prices were twice as high as those from Turkey.

On December 19, the US Army Corps of Engineers granted a waiver to Halliburton, excusing it from providing certified cost and pricing data to the Corps over its sole source contract with Altanmia.

Waxman said the waiver served as a "whitewash" and undermined the job of auditors who were then forced to shift the case to the military's inspector general.

In a bid to reduce costs, the army said last month it would take over Halliburton's job of bringing fuel into Iraq and gave it to the military's own fuel agency, the Defence Energy Support Centre, which is expected to have its contractors in place by April.

News of the inspector general's referral came at an important time for Halliburton, which has bid on two new contracts that replace its no-bid deal handed out last March by the Army Corps of Engineers to rebuild Iraq's oil industry. So far, that deal has amounted to about US$2.3 billion in business.

The new contracts, worth a total of US$2 billion, are due to be announced by Saturday following several delays.

KBR has another contract with the US military that involves providing logistical support to US troops, from doing laundry and delivering mail to building barracks. That contract is worth US$3.7 billion so far, with nearly all of those funds dedicated to Iraq.

Earlier this week, the US military gave another contract to KBR -- a US$1.5 billion construction and engineering deal for work covering 25 countries from Iraq to Afghanistan.

- REUTERS


Herald Feature: Iraq