The Pentagon NOT holding Halliburton accountable

Scott Amey, POGO's General Counsel, is available for interviews concerning the breaking story that the Army has decided NOT to withold payments from Halliburton (here's Halliburton's press release). An unpublished op-ed concerning this issue that Scott wrote follows below. To reach Scott, call the Project On Government Oversight offices at 202-347-1122.

Contractor Responsibility:  Government Ignoring its Own Cries

by Scott Amey, Project On Government Oversight (POGO)

In many ways, the Iraq war and the reconstruction effort have been very kind to Halliburton and its shareholders. Yet, despite its increase in defense contract award dollars, the mammoth U.S. contractor has become a billboard for just about everything wrong with the federal government's system of awarding and overseeing contracts.

No wonder -- Halliburton received billions of dollars in a non-compete, no-bid contract. Vice President Cheney draws compensation from the company and has even been accused of steering contracts to his former employer. The company is being investigated for overcharging fuel shipped from Kuwait and spoiled food provided to American troops, and Halliburton employees have accepted kickbacks in exchange for awarding a Kuwait-based company a supply subcontract.

Although in early 2004 there were many politicized calls for the government to take action against Halliburton, the group I work for, the Project On Government Oversight (POGO), took a wait-and-see position. At the time, we believed it was unclear whether Halliburton's business practices were so flawed as to merit action against the company.  Now it is time to look at Halliburton's track record on the merits.

Normally, stinging criticisms and serious allegations swirling around any contractor, no matter how large and influential, would create enough smoke to light a fire under Uncle Sam's feet. In this case, however, they haven't.

In fact, recent news reports suggest that the government has given its blessing to changes that Halliburton has made to its contracting system. The government's inaction against Halliburton is disturbing -- especially considering that one of the company's largest critics has been the government's own auditors, those who are responsible for protecting the public's interest.

Over the past year, three government audits have documented how Halliburton subsidiary Kellogg Brown & Root is unable to support billions of billing dollars.  Most recently, the Special Inspector General for Iraq Reconstruction issued a memo to the U.S. Army stating that the KBR "did not provide [the government] with sufficiently detailed cost data to evaluate overall project costs or to determine whether specific costs for services performed were reasonable."  In essence, the Special Inspector General described Halliburton as a contractor that can't come close to balancing its checkbook.  Additional audits performed by the Defense Contract Audit Agency (DCAA) and the U.S. Army Materiel Command have yielded similar conclusions.

For example, an August 2004 DCAA's audit revealed that KBR could not account for $1.8 billion in charges to the government out of a total $4.3 billion spent on military support task orders.  Those unexplained charges represent 42% of the total value of the contract's task orders.  "In the case of [one] proposal, each successive update continues to be significantly deficient. It is clear to us KBR will not provide an adequate proposal until there is a consequence," DCAA stated.

What should the government do?  Such egregious cases normally call for the government to suspend or debar Halliburton from future government contracts or, at a minimum, withhold taxpayer money until the company can justify what it costs it is charging to the government.  Those actions are encouraged by federal law.

The government should follow the recommendation of its auditors who have petitioned U.S. Army officials to withhold contract dollars from Halliburton.

Scott Amey is the General Counsel of the Project On Government Oversight a politically-independent, nonprofit watchdog that since 1981 strives topromote a government that is accountable to the citizenry.