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U.K.: Halliburton Expected to Win Mulitbillion-Dollar Project for Britainís Biggest Warships

Acceptance of KBR into the project will provoke political controversy. Halliburton, previously led by the U.S. vice-president Dick Cheney, attracted criticism when it won a series of contracts to support U.S. military operations in Iraq, and took a central role in the reconstruction effort after the fall of Saddam Hussein.

by Brian BradyThe Scotsman
January 23rd, 2005

Key points
ē Announcement to have far-reaching implications for Scottish shipbuilding
ē Controversial firm closely linked to US VP Dick Cheney
ē Demand could guarantee future of 1,000 jobs at Rosyth yard

Key quote
"This group appear to have the finger of suspicion pointing at them over bribery and corruption in their own country and elsewhere in the world." - Gordon MP

Story in full THE MULTIBILLION-pound project to build Britainís biggest ever warships will be placed under the control of controversial American military firm Halliburton, under an extraordinary deal to be announced this week.

The Ministry of Defence is expected to confirm that the controversial firm, closely linked to US vice-president Dick Cheney, will be installed to manage the construction of the two "super-carriers", in a move that will have far-reaching implications for Scottish shipbuilding.

But Scotland on Sunday understands that, in an unprecedented move, ministers will retain a "veto" over major decisions relating to the £4bn construction contract - in particular where the massive vessels will be assembled.

The unique demand effectively guarantees the future of up to 1,000 jobs at the Rosyth yard, which had been hoping to clinch the lucrative work of fitting the component parts of the ships together, after the modules have been produced at yards across the UK.

Kellogg, Brown & Root (KBR), a subsidiary of Halliburton, had been planning to assemble the 60,000-tonne ships at Nigg, on the north-east coast of Scotland, where it has an offshore oil platform yard.

But after a huge lobbying campaign from unions and MPs, and representations from Chancellor Gordon Brown - whose Dunfermline East constituency is next door to the Rosyth yard - Defence Secretary Geoff Hoon has ordered that the government must have the final say on where the finishing touches are made to the vessels, due to enter service in 2012 and 2015.

The veto will be written into the "physical integrator" contract - believed to be worth up to £15m - which KBR won after a contest with rivals including the UK firm AMEC. It will oversee the entire process of building the separate modules that will make up the massive carriers and then the assembly operation. BAE Systems and French group Thales have already won the contracts to build the ships.

MoD insiders said the decision to bring in another company to supervise a project that is already attracting concerns over whether it can be delivered on time and on budget is a reflection of the unprecedented scale and complexity of the contract as well as the "bickering" that has marred relations between partners on recent government contracts.

KBR will also take its place alongside the government and the construction companies as part of the "alliance" that is co-operating to produce the vessels that will be the Royal Navyís flagships for decades to come. The MoD last night claimed the governmentís official position in the partnership would justify the veto over major decisions, which virtually guarantees that Rosyth will get the vital assembly work.

But the acceptance of KBR into the project will provoke political controversy. Halliburton, previously led by the US vice-president Dick Cheney, attracted criticism when it won a series of contracts to support US military operations in Iraq, and took a central role in the reconstruction effort after the fall of Saddam Hussein.

Opposition parties, and Labour MPs, have warned that giving a huge American organisation a central role in the most important defence contract issued by Tony Blairís government will renew complaints about his close links with the US and the Bush administration. But Halliburton has also attracted criticism over its business dealings, particularly relating to other contracts it has won around the world.

The FBI is already investigating whether the US armyís handling of a large Iraq contract with Halliburton violated procurement rules. The bureau has expanded a criminal probe into allegations that the company overcharged the US government for fuel, adding questions about whether the Bush administration improperly awarded business in Iraq and the Balkans to Halliburton without bidding.

Swiss investigators have frozen bank accounts as part of an investigation into alleged bribery involving the company in Nigeria.

It emerged last week that Halliburton has disclosed that improper payments to Nigerian officials might have been made in order to win a £2bn-plus liquefied natural gas contract in 1995.

Liberal Democrat trade and industry spokesman Malcolm Bruce warned against the MoD entering any deals with Halliburton or its subsidiaries.

"This group appear to have the finger of suspicion pointing at them over bribery and corruption in their own country and elsewhere in the world," the Gordon MP said. "The British government does not seem to have investigated whether the British subsidiary [KBR] is operating to the same standards. We should be investigating thoroughly before entering into arrangements like this."

Halliburtonís record in the UK has also provoked concerns. The group has only been awarded one major UK defence contract, to construct earthquake-proof docks for refitting Trident nuclear submarines at Devonport shipyard in Plymouth, but the costs eventually soared beyond £900m, almost double the estimate.




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