Army to End Expansive, Exclusive Halliburton Deal
Wednesday, July 12, 2006
The Army is discontinuing a controversial multibillion-dollar deal with oil services giant Halliburton Co. to provide logistical support to U.S. troops worldwide, a decision that could cut deeply into the firm's dominance of government contracting in Iraq.
The choice comes after several years of attacks from critics who saw the contract as a symbol of politically connected corporations profiteering on the war.
Under the deal, Halliburton had exclusive rights to provide the military with a wide range of work that included keeping soldiers around the world fed, sheltered and in communication with friends and family back home. Government audits turned up more than $1 billion in questionable costs. Whistle-blowers told how the company charged $45 per case of soda, double-billed on meals and allowed troops to bathe in contaminated water.
Halliburton officials have denied the allegations strenuously. Army officials yesterday defended the company's performance but also acknowledged that reliance on a single contractor left the government vulnerable. The Pentagon's new plan will split the work among three companies, to be chosen this fall, with a fourth firm hired to help monitor the performance of the other three. Halliburton will be eligible to bid on the work.
The decision on Halliburton comes as the U.S. contribution to Iraq's reconstruction begins to wane, reducing opportunities for U.S. companies after nearly four years of massive payouts to the private sector.
Of the more than $18 billion Congress allocated for reconstruction in late 2003, more than two-thirds has been spent and more than 90 percent has been contractually obligated, according to the inspector general's office overseeing reconstruction work. The rest of the money, which is collectively known as the Iraq Relief and Reconstruction Fund, needs to be obligated by the end of September.
Army spokesman Dave Foster said in a written response to questions that funding for 11 contracts covering various aspects of reconstruction -- including transportation, communications, water distribution and the electric grid -- will expire this fall. While the contractors will be allowed to finish any work previously requested, no new work can be ordered after September.
Among those contracts is another Halliburton deal, for up to $1.2 billion to restore oil services in southern Iraq. As with the others, it will not be extended.
"The Iraq reconstruction is winding down . . . so there is no need for new contracts to replace the existing," Foster said.
Instead, the Iraqi government will have to find its own contractors to do the work, which includes tackling a large number of projects left undone by the United States.
"This is the year of transition for Iraqi reconstruction. The U.S.-funded projects are being completed and transferred to Iraqi management and control," said James Mitchell, spokesman for the inspector general's office.
That office has repeatedly warned of a "reconstruction gap" between what the United States promised in rebuilding the country after the spring 2003 invasion and what it has delivered. For instance, a contract aimed at building 142 new health centers across Iraq instead produced 20 before the program ran out of money.