Panel to Hear of Halliburton Waste

Under a wide-ranging contract called LogCAP, Halliburton furnished the Army with logistical support throughout the Middle East. It was guaranteed a certain level of profit and allowed to pass on all costs to the government, with the assumption that it would operate efficiently. Halliburton has been awarded work in Iraq worth about $5.6 billion through May, according to a report by the Government Accountability Office.

One issue to be explored at the hearing is whether the Houston-based Halliburton, its subsidiary KBR and their subcontractors overcharged the government for food, oil, housing and other services, while failing to properly oversee spending.

Scheduled to testify are several former employees interviewed earlier by Waxman's staff. One told of filling out time cards saying he worked 12-hour days, seven days a week, even though he put in no more than a week's worth of labor. Another said the company removed spare tires from new Mercedes and Volvo trucks and then abandoned one that had a flat tire.

Marie deYoung, who began working on LogCAP in December 2003, said she will tell the committee that the company tried to mislead government auditors by limiting the amount of information entered into computers -- a practice that "contributed to cost overruns and poor management."

The committee will also hear about two new studies about contracting in Iraq, one from the GAO and one from Waxman's staff.

The GAO report said its investigators found "a pattern of contractor management problems," including poor financial reporting and an inability to schedule work in a timely way. The report said the Army did not plan how to use LogCAP effectively until after the fall of Baghdad. The Army also did not limit spending on the contract until this spring, after Halliburton's cost estimates increased from $5.8 billion to $8.6 billion.

The report said "the contractor's managers at individual sites have no knowledge of the costs associated with their task orders." Hall said the company worked with oversight teams from the Pentagon "and have refined systems and improved our processes and performance."

A separate report prepared for Waxman by staff Democrats says that a no-bid contract with Halliburton to import gasoline and other fuel into Iraq resulted in $167 million in extra charges before the government began using in-house experts to handle the task. A Defense Department audit last year said the company overcharged by about $61 million. Hall said the Army was aware of the prices it paid to buy and deliver fuel from Kuwait to Iraq and that KBR believes the terms of the new contract are significantly different.

Waxman dismissed Davis's contention that only politics is at play in the examination of Halliburton contracts. "It's inexcusable that taxpayer money should be squandered in overpayments," he said. "We have an obligation to see whether billions of dollars are being wasted."