Halliburton,
the company formerly headed by Vice President
Cheney, has won contracts worth more than $1.7
billion under Operation Iraqi Freedom and stands
to make hundreds of millions more dollars under
a no-bid contract awarded by the U.S. Army Corps
of Engineers, according to newly available documents.
The
size and scope of the government contracts awarded
to Halliburton in connection with the war in
Iraq (news - web sites) are significantly greater
than was previously disclosed and demonstrate
the U.S. military's increasing reliance on for-profit
corporations to run its logistical operations.
Independent experts estimate that as much as
one-third of the monthly $3.9 billion cost of
keeping U.S. troops in Iraq is going to independent
contractors.
Services
performed by Halliburton, through its Brown
and Root subsidiary, include building and managing
military bases, logistical support for the 1,200
intelligence officers hunting Iraqi weapons
of mass destruction, delivering mail and producing
millions of hot meals. Often dressed in Army
fatigues with civilian patches on their shoulders,
Halliburton employees and contract personnel
have become an integral part of Army life in
Iraq.
Spreadsheets
drawn up by the Army Joint Munitions Command
show that about $1 billion had been allocated
to Brown and Root Services through mid-August
for contracts associated with Operation Iraqi
Freedom, the Pentagon (news - web sites)'s name
for the U.S.-led war and occupation. In addition,
the company has earned about $705 million for
an initial round of oil field rehabilitation
work for the Army Corps of Engineers, a corps
spokesman said.
Specific
work orders assigned to the subsidiary under
Operation Iraqi Freedom include $142 million
for base camp operations in Kuwait, $170 million
for logistical support for the Iraqi reconstruction
effort and $28 million for the construction
of prisoner of war camps, the Army spreadsheet
shows. The company was also allocated $39 million
for building and operating U.S. base camps in
Jordan, the existence of which the Pentagon
has not previously publicly acknowledged.
Over
the past decade, Halliburton, a Houston-based
company that made its name servicing pipelines
and oil wells, has positioned itself to take
advantage of an increasing trend by the federal
government to contract out many support operations
overseas. It has emerged as the biggest single
government contractor in Iraq, followed by such
companies as Bechtel, a California-based engineering
firm that has won hundreds of millions of dollars
in U.S. Agency for International Development
reconstruction contracts, and Virginia-based
DynCorp, which is training the new Iraqi police
force.
The
government said the practice has been spurred
by cutbacks in the military budget and a string
of wars since the end of the Cold War that have
placed enormous demand on the armed forces.
But,
according to Rep. Henry A. Waxman (D-Calif.)
and other critics, the Iraq war and occupation
have provided a handful of companies with good
political connections, particularly Halliburton,
with unprecedented money-making opportunities.
"The amount of money [earned by Halliburton]
is quite staggering, far more than we were originally
led to believe," Waxman said. "This is clearly
a trend under this administration, and it concerns
me because often the privatization of government
services ends up costing the taxpayers more
money rather than less."
Wendy
Hall, a Halliburton spokeswoman, declined to
discuss the details of the company's operations
in Iraq, or confirm or deny estimates of the
amounts the company has earned from its contracting
work on behalf of the military. In an e-mail
message, however, she said that suggestions
of war profiteering were "an affront to all
hard-working, honorable Halliburton employees."
Hall
added that military contracts were awarded "not
by politicians but by government civil servants,
under strict guidelines."
Daniel
Carlson, a spokesman for the Army's Joint Munitions
Command, said Brown and Root had won a competitive
bidding process in 2001 to provide a wide range
of "contingency" services to the military in
the event of the deployment of U.S. troops overseas.
He said the contract, known as the Logistics
Civil Augmentation Program, or LOGCAP, was designed
to free uniformed personnel for combat duties
and did not preclude deals with other contractors.
Carlson
said the money earmarked for Brown and Root
was an estimate, and could go "up or down" depending
on the work performed.
The
Joint Munitions Command provided The Washington
Post with an updated version of a spreadsheet
the Army released to Waxman earlier this month,
giving detailed estimates of money obligated
to Brown and Root under Operation Iraqi Freedom.
Estimates of the company's revenue from Iraq
have been increasing steadily since February,
when the Corps of Engineers announced the company
had won a $37.5 million contract for pre-positioning
fire equipment in the region.
In
addition to its Iraq contracts, Brown and Root
has also earned $183 million from Operation
Enduring Freedom, the military name for the
war on terrorism and combat operations in Afghanistan
(news - web sites), according to the Army's
numbers.
Waxman's
interest in Halliburton was ignited by a routine
Corps of Engineers announcement in March reporting
that the company had been awarded a no-bid contract,
with a $7 billion limit, for putting out fires
at Iraqi oil wells. Corps spokesmen justified
the lack of competition on the grounds that
the operation was part of a classified war plan
and the Army did not have time to secure competitive
bids for the work.
The
corps said the oil rehabilitation deal was an
offshoot of the LOGCAP contract, a one-year
agreement renewable for 10 years. Individual
work orders assigned under LOGCAP do not have
to be competitively bid. But Waxman and other
critics maintain that the oil work has nothing
to do with the logistics operation.
The
practice of delegating a vast array of logistics
operations to a single contractor dates to the
aftermath of the 1991 Persian Gulf War (news
- web sites) and a study commissioned by Cheney,
then defense secretary, on military outsourcing.
The Pentagon chose Brown and Root to carry out
the study and subsequently selected the company
to implement its own plan. Cheney served as
chief executive of Brown and Root's parent company,
Halliburton, from 1995 to 2000, when he resigned
to run for the vice presidency.
At
the time, said P.W. Singer, a Brookings Institution
scholar and author of "Corporate Warriors,"
it was impossible to predict how lucrative the
military contracting business would become.
He estimates the number of contract workers
in Iraq at 20,000, or about one for every 10
soldiers. During the Gulf War, the proportion
was about one in 100.
Brown
and Root's revenue from Operation Iraqi Freedom
is already rivaling its earnings from its contracts
in the Balkans, and is a major factor in increasing
the value of Halliburton shares by 50 percent
over the past year, according to industry analysts.
The company reported a net profit of $26 million
in the second quarter of this year, in contrast
to a $498 million loss in the same period last
year.
Waxman
aides said they have been told by the General
Accounting Office (news - web sites) that Brown
and Root is likely to earn "several hundred
million more dollars" from the no-bid Corps
of Engineers contract to rehabilitate Iraqi
oil fields. Waxman, the ranking minority member
on the House Government Reform Committee (news
- web sites), had asked the GAO to investigate
the corps' decision not to bid out the contract.
After
a round of unfavorable publicity, the corps
explained that the sole award to Brown and Root
would be replaced by a competitively bid contract.
But the deadline for announcing the results
of the competition has slipped from August to
October, causing rival companies to complain
that little work will be left for anybody else.
Bechtel, one of Halliburton's main competitors,
announced this month that it would not bid for
the corps contract and would instead focus on
securing work from the Iraqi oil ministry. vIn
addition to the Army contracts, Halliburton
has profited from other government-related work
in Iraq and the war on terrorism, and has a
$300 million contract with the Navy structured
along similar lines to LOGCAP.
Pentagon
officials said the increasing reliance on contractors
is inevitable, given the multiple demands on
the military, particularly since Sept. 11, 2001.
Defense Secretary Donald H. Rumsfeld is a champion
of "outsourcing," writing in The Post in May
that "more than 300,000 uniformed personnel"
were doing jobs that civilians could do.
Independent
experts said the trend toward outsourcing logistic
operations has resulted in new problems, such
as a lack of accountability and transparency
on the part of private military firms and sometimes
questionable billing practices.
A
major problem in Iraq, Singer said, has been
the phenomenon of "no-shows" caused by the inhospitable
security environment, including the killing
of contract workers, including a Halliburton
mail delivery employee earlier this month.
"At
the end of the day, neither these companies
nor their employees are bound by military justice,
and it is up to them whether to show up or not,"
Singer said. "The result is that there have
been delays in setting up showers for soldiers,
getting them cooked meals and so on."
A
related concern is the rising cost of hiring
contract workers because of skyrocketing insurance
premiums. Singer estimates that premiums have
increased by 300 percent to 400 percent this
year, costs that are passed on to the taxpayer
under the cost-plus-award fee system that is
the basis for most contracts.
The
LOGCAP contract awarded to Brown and Root in
2001 was the third, and potentially most lucrative,
super-contract awarded by the Army. Brown and
Root won the first five-year contract in 1992,
but lost the second to rival DynCorp in 1997
after the GAO criticized the Army for not adequately
controlling contracting costs in Bosnia.
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