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Saturday, October 28, 2006

Halliburton arm accused of ‘abuse’ in Iraq

Halliburton arm accused of ‘abuse’ in Iraq
By Stephanie Kirchgaessner in Washington
Copyright The Financial Times Limited 2006
Published: October 27 2006 19:08 | Last updated: October 27 2006 19:08

A Halliburton subsidiary that has been awarded billions of dollars in federal contracts in Iraq has been accused by an independent watchdog of “abuse” of government regulations that protect US taxpayers.

Stuart Bowen, the special inspector-general for Iraq reconstruction, said in an interim audit released on Thursday that Halliburton subsidiary Kellogg, Brown and Root (KBR) had, in effect, routinely inappropriately hidden data about one of its contracts from public scrutiny by marking the information as “proprietary”.

As a result of the investigation, army officials said they would prepare a modification to a multi-billion dollar Halliburton contract – known as Logcap – to “provide guidance” to KBR on the marking of proprietary data.

It is unclear how much the US military has paid for the contract, but one estimate put the figure at $7bn (€5.5bn, £3.7bn) last year. The contract gives the company the exclusive right to provide logistics support to the US military.

KBR said on Thursday it had used proprietary marking on the majority of its data in support of US army contracts for “at least the last decade” and that the practice was required under the US Trade Secrets Act. The company said the use of proprietary markings were appropriate because, as announced earlier this year, the Logcap contract is expected to be resubmitted for a competitive bid and divided among several contractors.

Questions about the transparency of data KBR provides the government were raised in July, after Mr Bowen announced his office would investigate whether services the US government was receiving under one KBR contract were “reasonable, efficient, and cost-effective”.

In his probe of a KBR contract that provides support to the US embassy in Iraq – a contract that falls under the larger Logcap contract – Mr Bowen found that the company wrongly shielded from public consumption data including: daily dining facility headcount; and the number of litres of fuel issued to generators maintained by foreign embassies in Iraq.

The company also initially refused to provide Mr Bowen, a former attorney for President George W. Bush who has emerged as a tough critic of the reconstruction effort, with cost data in a format that was acceptable to his office.

By illegitimately using privacy provisions, which are in place to protect companies competing for federal contract work by allowing them to keep some data secret, the special inspector-general said KBR had prevented the government from releasing “normally transparent information, thus potentially hindering competition and oversight”.

The critical audit comes on the heels of a separate report released this week that found that overhead costs had consumed between 11 per cent and 55 per cent of the cost of a handful of reconstruction projects.

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