Saturday, November 27, 2004


Halliburton losing its ass—Oh sorry, that was our ass

Stuart Bowen, Inspector General for the Coalition Provisional Authority (CPA), has found that KBR, a Halliburton subsidiary, was not keeping track of CPA property as it was being paid to do. The CPA apparently needed some real CPAs.

John Solomon of the AP reports,

A third or more of the government property Halliburton Co. was paid to manage for the U.S.-led Coalition Provisional Authority in Iraq could not be located by auditors, investigative reports to Congress show.

... [A]n audit earlier this summer found KBR had lost track of more than $18 million worth of equipment in Iraq. Investigators could not track down 52 of 164 randomly selected items in an inventory of more than 20,000 items overseen by KBR, including two electric generators worth nearly $1 million, 18 trucks or SUVs and six laptop computers.

But Halliburton would be hard-pressed to find a way to offend the Pentagon—

Bowen's report said the Pentagon agency that managed KBR in Iraq did not agree with all of the findings, and the agency declined to force KBR to change its inventory tracking system.

The Pentagon "stated that the contractor has put an accurate property control system in place that is effective, and an analysis of the system does not need to be performed at this time,'' Bowen's report said.

Bowen told lawmakers the Pentagon didn't provide any information to back its conclusions. However, he said the government did agree to "conduct a thorough review of CPA property and seek to recover the cost of missing equipment from the responsible party."

Of course, what the Pentagon would know about inventory-control systems is as much a mystery as the whereabouts of its own inventory.

Early leaks of the report came out in July, right after Paul Bremer of the CPA officially ended his reign. Back then noted

The disappearance of government property comes on the heels of a new report from Congress which says the war on terror needs an extra $12.3 billion over the amount provided by Congress last year. The Congressional Government Accountability Office said "anticipated costs will exceed the supplemental funding provided for the war by about $12.3 billion for the current fiscal year." The report cites Halliburton's LOGCAP contract with the Army as a primary reason why the military needs an extra $12.3 billion in funding. "LOGCAP costs have grown significantly as contractors replaced soldiers providing complex support functions," said the report.

Evelyn Pringle of Independent Media TV summarized the history and exploitation of the LOGCAP contracting program—

The LOGCAP program (Logistic Civil Augmentation Program), was created by Cheney in the early 1990s when the last Bush was in office. As defense secretary, Cheney hired Halliburton to conduct a classified study to determine whether private companies should handle the military's civil logistics.

The study concluded that military outsourcing would be cost effective. The plan that Halliburton developed covered all services to soldiers, to include the construction of military housing, transporting food and supplies, delivering mail, serving food at military cafeterias, janitorial duties, and just about anything else the military might need. When the military needs a service performed, it issues a task order (mini-contract), that outlines the job that the contractor is to perform.

LOGCAP contracts are often referred to as "cost plus" contracts. The contractor is paid a fee above the cost of the services performed, ranging from 1% to 9%, depending on its job performance.... Simply put, when a company’s profits are based on a percentage of the cost, the more the company spends, the more it makes.

On August 3, 1992, Cheney awarded the first LOGCAP contract to (who else but) Halliburton. The Washington Post noted at the time, "The Pentagon chose [KBR] to carry out the study and subsequently selected the company to implement its own plan." I've also heard it said that Cheney paid Halliburton to create its own market.

And of course the rest is history. Three years after Cheney gave Halliburton the multi-billion dollar contract, the company made him CEO. Over the next 5 years, Cheney reaped employment earnings and stock options worth more than $40 million. Who says it doesn't pay to make friends in high places?

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