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Iraq: Contract Extended for Halliburton

by Larry MargasakThe Associated Press
October 29th, 2003

WASHINGTON -- Vice President Dick Cheney's former company will retain a no-bid contract in Iraq longer than expected, the Bush administration said Wednesday, blaming sabotage of oil facilities for delays in replacement contracts.

Halliburton's contract, worth $1.59 billion so far, will be extended until December or January while the government receives and evaluates revised bids for replacement work that could total $2 billion. The U.S. Army Corps of Engineers, which administers the oil industry rehabilitation, already has received competitive bids for replacement contracts, and hoped to announce the winners this month. The Corps said it was forced to revise the workload requirements because of continued sabotage and a need to provide additional security.

Halliburton's contract will be split into two -- with a maximum cost of $800 million for work on the northern oil fields and up to $1.2 billion to restore the southern facilities. The contracts are for two years with up to three one-year renewals.

Halliburton's KBR subsidiary has been performing the restoration work under a contract that evolved from emergency firefighting at Iraq's oil wells after Saddam Hussein was toppled, to restoration of Iraq's petroleum production.

Democratic members of Congress have said the no-bid contract showed favoritism to the Houston company that Cheney led before he ran for vice president. They also accused Halliburton of gouging U.S. taxpayers by paying too much for emergency imports of oil from Iraq's neighbors.

Cheney's office has said the vice president has no current ties to Halliburton and had nothing to do with the contract. He still receives deferred payments for services performed while he was employed by the company. Separately, Halliburton reported Wednesday that its third-quarter revenue rose to $4.14 billion from $2.98 billion a year earlier, in part because of KBR's government work. However, the company reported that its net income declined because of legal costs and lower-than-expected results from joint ventures.

In a conference call on the earnings report, the company's top executive, Dave Lesar, said he was offended by criticism concerning the Iraq work but believed it was "less about Halliburton and more about external political issues."

"Most importantly, we are committed to staying the course," he said. "As a company uniquely qualified to take on this difficult assignment, we will continue to bring all of our global resources to bear at this critical time in the Middle East. We have served the military for over 50 years and have no intention of backing down at this point."

Lesar's comments did little to stop the Democratic critics.

Reps. Henry Waxman, D-Calif., and John Dingell, D-Mich., wrote National Security Adviser Condoleeza Rice that Halliburton was importing gasoline from Kuwait into Iraq at a "grossly excessive" average price of $2.65 per gallon.

The two have made similar claims before, prompting an angry denial from the company.

"To allege that KBR is overcharging for this needed service insults the KBR employees who are performing this dangerous mission to help bring fuel to the people of Iraq. The drivers transporting the fuel face the real risk of being killed or wounded, and vehicles and contents being destroyed," Halliburton said.

Sen. Frank Lautenberg, D-N.J., added: "Halliburton is looting the U.S. Treasury and this administration seems to be happy to help them."





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