In a departure from normal policy, the Army said yesterday it will not withhold future payments to Halliburton Co., despite audit reports last summer that said the giant logistical contractor had not properly accounted for a wide variety of work in Iraq and Kuwait.
The decision comes months after Army auditors recommended withholding 15 percent of payments, about $60 million a month, from Halliburton subsidiary Kellogg, Brown & Root Inc., the largest government contractor in Iraq.
Acquisition regulations require the withholding in cases where work has not been "definitized" -- the process in which companies negotiate the final terms, conditions and costs of work orders with the government.
Army officials sought a waiver of the requirement to "ensure we're continuing our contract operations in the theater . . . and to maintain our responsibility to the taxpayers," said Dan Carlson, a spokesman for the Army Field Support Command. Contracting officials can still withhold up to 15 percent in payments case-by-case, he said.
The decision was praised by Halliburton and derided by critics of the Bush administration, who said it supports claims that the company has received special treatment. Halliburton became a political lightning rod during the presidential campaign last year because Vice President Cheney was the company's chief executive from 1995 to 2000 and KBR received no-bid contracts during the war.
The government has set aside $9.3 billion to pay KBR for troop support in the Middle East, Carlson said. KBR won the contract through competitive bidding. It has been paid almost $6.4 billion for work that includes base camp operations, supply convoys, sanitation and fitness centers, the spokesman said. KBR also received a no-bid contract to repair Iraq's oil fields.
Democrats said senior Pentagon officials have ignored audit reports documenting allegations that Halliburton overcharged the government and mismanaged tax dollars. Critics complained the Pentagon has given the company special treatment by twice waiving deadlines for imposing the 15 percent withholding.
Yesterday, Rep. Henry A. Waxman (D-Calif.) amplified those complaints, saying, "This action is incomprehensible."
"Once again, the Bush Administration is putting Halliburton's interests above those of the taxpayers," Waxman said in a written statement. "Halliburton is busting the Army's budget, yet Administration officials continue to ignore rampant overcharging and the recommendations of their own auditors."
Halliburton spokeswoman Beverly Scippa said the Army's decision "means that KBR will be able to continue working closely with the Army Field Support Command . . . while still providing the same great level of support to the soldiers in the field."