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

.