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US: Halliburton Resolves Billing Dispute with Pentagon

Halliburton has struck a deal with the U.S. Army on food service provided to U.S. troops in Iraq, resolving a 14-month long billing dispute.

April 5th, 2005

NEW YORK (Reuters) - Halliburton Co. (HAL.N: Quote, Profile, Research) has struck a deal with the U.S. Army on food service provided to U.S. troops in Iraq, resolving a 14-month-long billing dispute, the oilfield services company said on Tuesday.

The company also said it finalized 27 outstanding task orders valued at more than $10.5 billion related to services its KBR unit provided the U.S. military during the war in Iraq.

KBR provides a broad swath of support services to the U.S. military in Iraq, ranging from delivering mail and cooking meals to setting up bases.

Under the terms of the deal, the U.S. Army Field Support Command will pay KBR $1.176 billion and retain $55.1 million of about $200 million in payments that had been withheld while those issues were being resolved. KBR said as a result it would negotiate payment adjustments with its subcontractors.

Portions of 14 task orders will also be paid on the basis of a firm fixed price rather than a "cost plus award" fee.

The company said it does not expect the settlement to hurt its financial results.

KBR has been bogged down since February 2004 in a fight over cost estimates with the Army, which had threatened to withhold payment of up to 15 percent of the Texas company's bills.

The company, which was run by Vice President Dick Cheney from 1995 to 2000, is also being probed by several U.S. government departments over its work in Iraq, including whether it overcharged to supply fuel to Iraqi civilians.

The company has said its prices were fair and it has denied any wrongdoing.

The dispute that has been resolved stems from dining services provided during the first nine months of the war, which started in March 2003.

KBR says that its subcontractors billed for the minimum number of troops that each dining facility was told to be prepared to serve on any given day, but that the Defense Contract Audit Agency wanted the bills based on the actual number of troops served.

(Additional reporting by Tim Dobbyn in Washington)

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