WASHINGTON
-- Halliburton, the company awarded nearly $6
billion in government contracts to rebuild Iraq,
significantly and systematically violated federal
contracting rules by providing inaccurate and
incomplete information about its costs, according
to a special report by Defense Department auditors.
Yet
16 days after that Dec. 31 report and after
a second warning by Pentagon auditors, the Army
Corps of Engineers gave Halliburton, formerly
headed by Vice President Dick Cheney, a new
$1.2-billion contract.
In
a memo to congressional colleagues, U.S. Rep.
Henry Waxman, D-Calif., said the auditors found
that a Halliburton subsidiary gave unreliable
figures in a $2.7-billion proposal to provide
logistics for troops in Iraq. Specific problems
cited by the Defense Contract Audit Agency include
Halliburton's failure to reveal it fired two
subcontractors responsible for $1 billion worth
of food service to U.S. forces, Waxman's memo
said.
The
eight-page memo summarizing the auditors' report
was prepared before a congressional hearing
today on $9 billion in federal contracts in
Iraq. Waxman is the senior Democrat on the House
Government Reform Committee, which oversees
government contracting.
The
suggestion that a company with ties to the Bush
administration may have profited excessively
from the war in Iraq could compound the administration's
growing difficulties over the war. Critics have
accused Cheney and other top administration
officials of exaggerating the threat that Iraq
posed to gain support for the war.
Administration
officials say Cheney -- who resigned as head
of Halliburton to become George W. Bush's running
mate in 2000 -- has no role in awarding Pentagon
contracts.
The
Pentagon audit "depicts a situation where costs
are virtually uncontrolled and Halliburton can
overcharge the taxpayer by phenomenal sums,"
Waxman wrote. "Given our nation's mounting debt
and the escalating costs in Iraq, all members
of Congress should be extraordinarily concerned
about this new evidence of waste, fraud and
abuse in contracting in Iraq."
Halliburton,
which has received $5.8 billion in Iraq contracts,
has repeatedly denied any wrongdoing. Company
spokeswoman Wendy Hall said Wednesday, "We are
disappointed, once again, that selective portions
of audit reports have been released publicly.
. . . Releases of partial reports are inappropriate
because the true and complete story cannot be
conveyed. In fact, the release of these reports
could violate established federal policy."
In
its internal investigation, released earlier
this year, the Houston-based oil-and-engineering
conglomerate found significant problems with
its cost estimates.
Halliburton
told federal securities regulators Monday it
expects a formal Pentagon inquiry into alleged
deficiencies in its procurement procedures in
Iraq and Kuwait. The company told the Securities
and Exchange Commission it has credited $36
million to the Defense Department and delayed
billing the Pentagon for an additional $141
million because of the problems.
Senior
Defense Department officials declined to comment
on Waxman's memo Wednesday.
At
today's hearing, House Democrats will try to
make public the so-called flash report of Dec.
31 by the Pentagon auditors, but that requires
a majority of votes on the oversight committee,
which is controlled by Republicans.
In
the memo, Waxman quotes the report as saying
there were "significant deficiencies" in the
way Halliburton estimated costs. The $2.7-billion
proposal from Halliburton "did not contain current,
accurate and complete data regarding subcontractor
costs," according to Waxman's excerpt of the
report.
Halliburton,
according to Waxman's summary, told the government
it would cost $1 billion to provide food for
U.S. troops but based that figure on two subcontracts
it already had canceled. Hall, the company spokeswoman,
said Halliburton had told the government of
the cancellations.
When
the auditors gave Halliburton a chance to respond,
the company told the agency the problem wasn't
systemic but was a unique situation, according
to Waxman's memo. However, Waxman wrote that
the audit agency dismissed that explanation,
saying it was "not a onetime occurrence; it
is systemic."
According
to the memo, less than two weeks after the agency's
flash report, the auditors wrote to the Army
Corps of Engineers, saying that Halliburton's
systemic problems "bring into question" the
company's "ability to consistently produce well-supported
proposals that are acceptable as a basis for
negotiation of fair and reasonable prices."
The
auditors asked the corps to consult with them
before giving Halliburton another contract,
but the corps ignored the request. On Jan. 16,
it gave Halliburton a $1.2-billion contract
to restore oil services to southern Iraq, according
to Waxman.
Halliburton
is also under investigation by the Defense Department
for overcharging the government for supplying
gasoline to U.S. military personnel and others
in Iraq.
Contact
SETH BORENSTEIN at sborenstein@krwashington.com.
The Associated Press contributed to this report.
