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Halliburton Milks British Nuclear Submarines for Millions

by Solomon HughesSpecial to CorpWatch
July 25th, 2003

DML submarine
Submarine at Devonport dockyard. DML

Just outside of Plymouth on Britain's south coast are the Devonport royal dockyards, which have maintained ships for the British navy for hundreds of years. For the last three decades these docks have been the home for four nuclear powered "Trident" submarines, each carrying 48 atomic warheads that roam the world's oceans.

In 1997 Tony Blair's Labour government sold the docks to Devonport Management Ltd. (DML) -- a consortium led by Brown and Root, a division of Halliburton, the Texas-based energy services, engineering and construction multinational -- and contracted the new owners to refuel and refit the nuclear engines, which involves stripping and replacing their radioactive parts once a decade.

Halliburton chief executive officer Dick Cheney took a tour of the dockyards in April 2000, following which he met up with Labour ministers and military officials at a conference on military privatisation in Oxford.

"My general impression is that our British colleagues are far ahead of us in the US in the extent to which they have adopted changes in culture, attitude and style of operation that are required for successful privatization efforts," said Cheney, just months before he quit his job at the company to launch a successful bid to become vice-president of the United States.

Not surprisingly Cheney's new job as vice-president has coincided with a major increase in military privatization in the United States with Halliburton profiting handsomely from contracts to supply US troops around the world from Bosnia to Uzbekistan.

Meanwhile Halliburton has allegedly been milking their British colleagues for as much money as they can get. The National Audit Office (NAO) was called in to investigate when Devonport project costs budgeted at $904 million in 1997 increased by over 50% by 2002.

Halliburton claims the British government caused the price-hike, by demanding better safety standards than those in the firm's original tender, stating that "cost increases have been driven by the need to meet nuclear regulatory requirements and the work required being greater than previously experienced."

For example Britain's Nuclear Installations Inspectorate refused to license the dockyard until it was made earthquake-proof by building stronger walls for the docks and by redesigning and strengthening both the cradles that hold the submarines as well as the cranes that lift nuclear flasks out of the submarines. The inspectors also wanted better training for staff and better inspection of work.

The Ministry of Defence demanded that a crash barrier be built around the "central pool" where the submarines were dismantled. Naval official John Coles said the barrier was needed to stop "ships crashing into that building" and releasing radiation.

The British government, on the other hand, argue Halliburton was sloppy with both safety and pricing from the very beginning. The NAO stated it was "clear to the (Naval) Department that the nuclear safety requirement on this project would, from the outset, be stringent."

"The Department considers that DML was slow in putting in place the management processes needed to demonstrate its compliance with those principles and in producing good quality safety cases for the Inspectorate, resulting in less time for the consideration and resolution of the issues raised."

The company vehemently disagrees with the report. A short statement issued by the company states: "DML disagrees that poor performance by itself or its sub-contractors was a major cause of the cost increases as it estimates that such poor performance only increased costs by $30 million."

But the report bears out British Navy worries prior to the privatization that Halliburton was not properly qualified to work on sensitive nuclear projects, stating that "the Department had concerns about DML's ability to manage the project. Initially DML had no experience of managing a major construction project that was subject to civil nuclear safety standards."

When the costs overruns became apparent, lawyers for the Ministry of Defence told them if they took the company to court, "the argument was very much in the Departments favour, and the Department had very good prospects for defeating DML's claim."

But while the Navy were confident of victory in the courts, Halliburton was still able to blackmail millions out of the contract because, in the words of the NAO, the government had "little room for manoeuvre" because they "had nowhere else to go": The Navy could not face "further delays" caused by a court case or finding a replacement.

Court action was rejected "because of the importance of these facilities to the maintenance of the effectiveness of the United Kingdom's strategic nuclear deterrent, the Department could not accept the contracts failure and the resulting late delivery of the facilities". A Parliamentary Committee examining the report said Halliburton had the navy "over a barrel" when it came to asking for more money.

As part of the original 1997 contract Halliburton lawyers negotiated a maximum $55 million maximum liability on the contract, while cost overruns have since risen by five times that amount. Colin Breed, Devonport's member of parliament, who is also the Liberal Democrat party's defence spokesman says: "Both the MoD and the contractor have shown their incompetence in this project. How can the MoD claim it was unaware that it bore the risk when DML had negotiated a get-out clause?"

Halliburton's Devonport has hit controversy in the past. In October 2001 they were fined $94,000 by the Health & Safety Executive (HSE) for exposing 24 workers to asbestos.

Plymouth Magistrates were told that some of the men affected "already think their days are numbered." The HSE representative said "at the end of the day up to 24 young men must now agonize for 40 years whether at some stage they are going to suffer symptoms of mesothelioma, asbestosis or cancer."

Plymouth residents are also alarmed about plans to allow Halliburton to discharge radioactive tritium into the Tamar river.

Reports from the Nuclear Installation Inspectorate shows that safety problems continue on the refitting of the nuclear submarines. The moving crane which pulls nuclear flasks out of Trident submarines recently crashed into the HMS Vanguard, and "a few liters of slightly radioactive liquid were spilled onto the floor" of the dock.

Despite these cost and safety problems, Britain's Ministry of Defence continues awarding contracts to Halliburton. The firm won a $470 million contract to transport Army tanks right onto the battlefield. The deal even includes a provision to hire and train soldiers for the British army.

This deal had early difficulties when one of the "all terrain" vehicles tipped a $3 million Challenger tank onto its side while performing a 10 mile per hour turn in a carpark before going through its paces for eager defence correspondents. Twenty of these tank transporters went into service at the beginning of July, so that Halliburton-trained soldiers could see service in Iraq.

Halliburton is also leading the consortia which are the government's "preferred bidder" for two major barrack contracts: "Project Aquatrine", a $1.5 billion scheme to look after the army's sewage for 25 years, and a $5 billion scheme to rebuild and run British barracks for 30 years.

[Figures originally given in Pounds Sterling have been adjusted to US Dollars in this report].

Solomon Hughes is an investigative journalist based in the UK.