Salon: Halliburton's Iraq gravy train

[kskiska]

A former procurement specialist for the giant, White House-connected company charges that it failed to seek out competitive bids -- enriching itself and costing taxpayers tens of millions of dollars extra.

Halliburton Corp.'s latest image-rehabilitating television commercial begins with a narrator wistfully declaring, "When I joined Halliburton, I knew I was going to work on some big things." At Halliburton, the narrator explains, people are constantly trying to improve the lives of others. They fight oil-well fires, they bring supplies to stranded troops. "We built bridges, schools, all over the world." And that's not even the best part. "The biggest thing?" the narrator asks as the screen flashes to a group of smiling Halliburton employees dishing up hot meals to American GIs. "Serving our troops good ol' American food, so they'd feel just a little closer to home. Yeah."

It's a nice image. But to Henry Bunting, a veteran procurement specialist who worked for Halliburton's subsidiary Kellogg Brown & Root in Kuwait last summer, this saccharine picture of Halliburton as a beneficent do-gooder doesn't ring true. According to Bunting, Halliburton's personnel in the Middle East weren't looking out for the government as much as they were looking out for the company. Bunting, who has recently been telling his story to congressional Democrats, says that Halliburton, which has been awarded billions of dollars of contracts for work in Iraq, routinely purchased the most expensive equipment and services on the government's tab. Bunting claims that Halliburton managers frowned on any attempts to save the military any money. They had no incentive to do so: taxpayers would pick up the cost. In fact, they had an incentive to bill high: the more they spent, the more money their company would make.

Bunting worked as a buyer for Halliburton's "Logcap" contract with the U.S. Army, a $3.7 billion deal under which Halliburton provides the military with logistics support -- it builds bases, runs mess halls, does the laundry, supplies water and performs dozens of other tasks necessary to keep the Army running. The contract is a "cost-plus" contract, meaning that the military reimburses Halliburton for all of its expenses, and then gives it an extra percentage as a profit. Experts have long criticized cost-plus contracts as being economically inefficient; companies that work under cost-plus deals have no reason to reduce their expenses, meaning that the government may end up paying more than it should for services.

To keep costs down, firms that have been awarded cost-plus contracts pledge to open their processes to competitive bidding, making sure that they're getting low prices on equipment they use. Halliburton says that it complies with all federal requirements regarding competitive bidding. But according to Bunting, this is where Halliburton fell short; it constantly failed to seek low prices in its operations, violating the spirit, if not the letter, of its contract with the government. Bunting says that even though his job was ostensibly to get the best deals on equipment for the Army -- everything from office chairs to medical supplies -- his managers often told him, "Don't worry about the price, it's cost-plus." Supervisors urged buyers like him to keep their orders under $2,500, Bunting says, because orders for more than that amount would need to be submitted to multiple vendors for competitive bidding -- a process that would potentially reduce Halliburton's take.

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http://salon.com/tech/feature/2004/02/27/halliburton_whistleblower/index.html

[chester2003]

1. You are right, But...

I sure as heck don't want to go over there and work! It is either lump sum or cost plus contracting, both have their positives and negatives. Iraq is too much of an unknown for a company to bid a lump sum contract. Even if someone bids a lump sum contract they will come back and request extra funding for unforseen problems, and it will show up on next years budget.