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US: Pentagon Makes Deal with Halliburton on Billing Dispute

Halliburton Co. and the U.S. Army have resolved a lengthy billing dispute over meals served to U.S. troops in Iraq and Kuwait, with the Pentagon ultimately refusing to reimburse $55 million worth of bills. At stake was $200 million in disputed costs incurred during the first nine months of the war and occupation, first in Kuwait and then in Iraq.

by David Ivanovich The Houston Chronicle
April 6th, 2005

WASHINGTON - Halliburton Co. and the U.S. Army have resolved a lengthy billing dispute over meals served to U.S. troops in Iraq and Kuwait, with the Pentagon ultimately refusing to reimburse $55 million worth of bills.

The Houston-based contractor and the Army Field Support Command have been wrestling since December 2003 over a fair way to reimburse Halliburton subsidiary KBR for dishing up food for troops, when the military could never say exactly how many soldiers might show up for a given meal.

At stake was $200 million in disputed costs incurred during the first nine months of the war and occupation, first in Kuwait and then in Iraq.

The deal announced Tuesday means the Army has agreed to reimburse the company for about $145 million of those disputed bills. Overall, the Army will pay KBR $1.18 billion for running the dining halls during the nine-month period.

"This is clearly good news for the company," said Bruce Stanski, KBR's senior vice president for government and infrastructure division.

The company has been withholding reimbursements to its subcontractors while the billings were in dispute. As a result, "we do not expect any negative financial impact from this settlement as a result."

The controversy began after Pentagon auditors uncovered questionable charges racked up by a Saudi subcontractor, Tamimi Global Co., at Camp Arifjan, a U.S. base outside Kuwait City.

In July 2003, Tamimi had billed the government for 42,042 meals a day, while serving only 14,053 meals a day.

Auditors from the Defense Contract Audit Agency then began poring over the billings from mess halls across Iraq and Kuwait.

Company officials say the Army specified the minimum number of troops a facility should be prepared to feed on a given day. KBR's subcontractors then submitted bills based on those minimums.

The Pentagon auditors argued the billings should be based on the actual number of troops fed.

Eventually, the Army accepted the bulk of the disputed billings, an agreement Rep. Henry Waxman, D-Calif., called "a lousy deal for the taxpayer.

"It recognizes that Halliburton has overcharged by tens of millions of dollars, yet it allows Halliburton to keep almost $150 million in disputed costs," said Waxman, the ranking Democrat on the House Government Reform Committee and a persistent critic of Vice President Dick Cheney's former employer.

Investigators are still examining possible overcharges stemming from a separate assignment from the U.S. Army Corps of Engineers to truck fuel into Iraq. Army officials were desperate to get fuel into Iraq, fearing that the lack of such basic necessities as cooking and heating fuel would lead to greater unrest and support for the insurgency.

But that led to anomalies. A Pentagon audit last month, for example, revealed that Halliburton had charged the Pentagon $27.5 million to ship in $82,100 worth of cooking and heating fuel.

Last month, an Illinois grand jury accused a former company procurement manager working in Kuwait and a Saudi businessman of defrauding the government. Prosecutors contend the one-time manager received a $1 million kickback from a subcontractor he had helped select for millions of dollars' worth of business.

Despite such problems, much of the company's performance in Iraq has drawn praise from the military. On Tuesday, the Army Field Support Command announced it had awarded KBR a $7 million performance bonus for transporting fuel for military use, with the company eligible for another $7 million award once all paperwork has been completed.

Assignments to serve up chow or truck fuel are just some of the services Halliburton provides under a huge 10-year logistical support contract.

For more than a year, company and military contracting officials have been combing through the company's billings to ensure the necessary paperwork has been completed to adequately justify its costs.

On Tuesday, the company announced it had completed the paperwork for 27 assignments involving $10.5 billion worth of work in Iraq, Kuwait and Afghanistan.





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