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Pentagon Denounces Halliburton's 'Overwhelmingly Negative' Performance in Iraq
in Iraq
WASHINGTON, March 28 (HalliburtonWatch.org) -- A new report released
today reveals that Pentagon officials and investigators have harshly
criticized Halliburton's oil reconstruction work in Iraq, citing
"profound systemic problems," "exorbitant indirect costs," "misleading"
and "distorted" cost reports, a "lack of cost control," an
"overwhelmingly negative" evaluation, and an "obstructive" corporate
attitude toward oversight.
The findings were released by Rep. Henry Waxman (D-CA) and pertain to
Halliburton's Restore Iraqi Oil 2 (or, RIO 2) contract, awarded to the
company in 2003.
To evaluate Halliburton's performance under RIO 2, Waxman's report
analyzed hundreds of pages of previously undisclosed correspondence,
evaluations, and audits. The documents reviewed in preparation of the
report include correspondence from the Project and Contracting Office
(PCO), the Defense Department agency charged with overseeing RIO 2;
evaluations by a private contractor, Foster-Wheeler, hired to help the
PCO oversee the contract; documentation related to award-fee
determinations; and audits by the Defense Contract Audit Agency (DCAA).
Pentagon investigators made the following conclusions:
. Intentional Overcharging: The PCO board evaluating Halliburton's
request for award fees found that Halliburton repeatedly overcharged the
taxpayer, apparently intentionally. In one case, "[c]ost estimates had
hidden rate factors to increase cost of project without informing the
Government." In another instance, Halliburton "tried to inflate cost
estimate by $26M." In yet a third example, Halliburton claimed costs for
laying concrete pads and footings that the Iraqi Oil Ministry had
"already put in place."
. Exorbitant Costs: The PCO reported that Halliburton was "accruing
exorbitant indirect costs at a rapid rate" and that Halliburton's "lack
of cost containment and funds management is the single biggest detriment
to this program." The oversight contractor found a "lack of cost control
... in Houston, Kuwait, and Iraq." In a partial review of the RIO 2
contract, DCAA auditors challenged $45 million in costs as unreasonable
or unsupported.
. Inadequate Cost Reporting: The PCO found that Halliburton "universally
failed to provide adequate cost information," had "profound systemic
problems," provided "substandard" cost reports that did "not meet
minimum standards," and submitted reports that had been "vetted of any
information that would allow tracking of details." The oversight
contractor complained about "unacceptable unchecked cost reports."
. Schedule Delays: Halliburton's work under RIO 2 was continually
plagued by delays. According to the PCO, Halliburton had a "50% late
completion" rate for RIO 2 projects. Evaluations by the award fee board
noted "untimely work" and "schedule slippage."
. Refusal to Cooperate: PCO evaluations described Halliburton as
"obstructive" with oversight officials. Despite the billions in taxpayer
funds Halliburton has been paid, the company's "leadership demonstrated
minimal cooperative attitude resolving problems."
The decision to award Halliburton the RIO 2 contract was controversial.
Before the award of the contract, DCAA auditors warned the Defense
Department not to enter into additional contracts with Halliburton
because of "significant deficiencies" in the company's cost estimating
system, but the Department ignored this advice. It now appears that
problems that led to the unusual DCAA warning have been realized in RIO
2, with serious implications for the reconstruction effort in Iraq and
federal taxpayers.
Halliburton is the largest private contractor in Iraq. The company has
operated there under three mega-contracts: the "LOGCAP" contract to
provide support to U.S. troops; the original "Restore Iraqi Oil" (RIO)
contract, which Halliburton received in secret without competitive
bidding in March 2003; and the RIO 2 contract, which was awarded to
Halliburton in January 2004.
Previous reports by government auditors and congressional investigators
have evaluated the LOGCAP and RIO contracts. The report released today,
however, is the first to examine the RIO 2 contract.
According to the report, "The RIO 2 contract is critically important to
the successful reconstruction of Iraq. The mammoth $1.2 billion contract
gave Halliburton the responsibility for restoring the oil fields in
southern Iraq, which historically have been Iraq's largest and most
productive. Three years ago, Bush Administration officials promised that
Iraq would be able to fund its own reconstruction out of its oil
revenues. The successful restoration of the southern oil fields, which
the Administration entrusted to Halliburton under RIO 2, was supposed to
pay for the rebuilding of much of the rest of Iraq's infrastructure. But
these promises have not been fulfilled."
Read Waxman's full report by clicking this link