Halliburton overcharged for Iraq oil work: report

By Andrea Shalal-Esa Tue Mar 28, 7:30 PM ET

WASHINGTON (Reuters) - Halliburton Co., the world's second largest oil 
services company, repeatedly overcharged taxpayers and provided 
substandard cost reports under a $1.2 billion contract to restore Iraq's 
southern oil fields, according to a new report by U.S. Rep. Henry Waxman.

Waxman, a California Democrat, said Democratic staff members of the House 
Committee on Government Reform examined a series of previously undisclosed 
government audits and correspondence that criticized Halliburton's 
performance under the "Restore Iraqi Oil 2" (RIO2) contract.

The documents, which cover the period from January 2004 to July 2005, 
painted "an absolutely abysmal picture of Halliburton's RIO2 work" and cited 
profound systemic problems, misleading and distorted cost reports, he said.

Halliburton, a Texas-based company formerly run by Vice President
Dick Cheney, dismissed the committee report as partisan and said it focused on 
old issues with the two-year contract that have been resolved.

"After two years and from thousands of miles away, it is easy to criticize 
decisions and actions that were based on urgent mission requirements and 
severe time constraints," the company said in a statement.

Halliburton, the largest private contractor in Iraq, said the contract went through 
"countless changes" and review by at least 15 different government 
contracting officials.

Waxman, who has introduced legislation to limit sole-source contracts in the 
future, said lawmakers did not know much about what had happened with the 
contract since July 2005, adding: "From what we can see, major problems 
remain."

Halliburton said its engineering and construction arm KBR, which is gearing up 
for an initial public stock offering, had received 30 task orders under the 
contract to date, for a total current value of nearly $750 million and work was 
ongoing.

The Democratic report said that, in addition to the RIO 2 contract, Halliburton 
was also paid $13.5 billion for providing troop support under a logistics 
contract with the U.S. Army, and $2.4 billion under the original RIO contract to 
import fuel into Iraq and rebuild Iraq oil infrastructure.

The Pentagon's Project and Contracting Office (PCO) found that Halliburton 
repeatedly overcharged the government, Waxman said, citing the documents.

PCO put KBR on notice in January 2005 that it could cancel the contract for 
cause. It lifted the notice six months later, saying KBR demonstrated 
"adequate" compliance. In January, it exercised one of three one-year options 
to extend the deal.

In one case, the agency said Halliburton tried to inflate cost estimates by $26 
million. In another, it said Halliburton claimed costs for laying concrete pads and 
footings that the Iraqi Oil Ministry had already installed.

The report said the same agency reported Halliburton was "accruing exorbitant 
indirect costs at a rapid rate," while the Defense Contract Audit Agency 
challenged $45 million of $365 million in costs as unreasonable or unsupported.

The PCO also cited "profound systemic problems" with Halliburton's cost 
reporting and said some documents were stripped of information that would 
allow tracking of details.

It said Halliburton's work under RIO 2 was 50 percent late and officials refused 
to cooperate with oversight officials.

Halliburton, run by Cheney from 1995-2000, has been under scrutiny for its 
contracts in Iraq.