Only hours after deciding to withhold some payments to Halliburton Co. because of questions about billing for its work in Iraq, the Army reversed itself yesterday and said it would give the giant contractor more time to justify its claims.
The decision capped two days of confusion over whether the Pentagon would withhold 15 percent of payments to Halliburton subsidiary Kellogg, Brown & Root Inc. under federal procurement rules that require contractors to provide clear justification for their bills.
On Monday, Halliburton announced that the Army would give KBR a third extension to provide the needed documentation, meaning it would continue to be paid in full. Early yesterday, the company said in a statement that the Army called and apparently reversed itself, saying that withholding on new invoices would begin today. Halliburton estimated that $60 million a month could be withheld, pending negotiations about the bills.
Then in the afternoon, officials at the Army Materiel Command -- which oversees the logistical services contract with KBR -- did another turnabout and decided not to withhold any payments.
Spokeswoman Linda Theis said senior Army officials had decided to review the contract more closely for the next five days, but she said no one told her why.
"I'll ask, but I'm not sure anybody will tell me," Theis said, adding that she's not sure who made the decision. "Let's just say it's breathing space."
Theis said Halliburton has received extensions because there are not enough people in the government or at Halliburton to review the many bills the company has submitted, in part because no one anticipated how much work they would need to account for.
"It was the pace. It was the magnitude of this contract," she said, adding that the Army is trying to be "fair and equitable."
Early in the day, Halliburton spokeswoman Wendy Hall challenged the legality of the decision to withhold payments and said in a written statement that the company would file papers in court seeking to have it overturned. "Halliburton is confident that the government action is not justified and expects that its legal arguments will be upheld in litigation," Hall's statement said.
The company later received a letter from the Army Materiel Command, requesting "additional information from KBR," Hall said.
