The Army Corps of Engineers paid profits and bonuses to Halliburton
for oil transport and repair in Iraq even though the Pentagon's own auditors
declared $169 million in costs for the work to be "unreasonable" and
"unsupported," a congressman disclosed today.
In a letter
to the chairman of the House Government Reform Committee, Rep. Henry Waxman
(D-CA) requested hearings on how Halliburton could have been awarded $38 million
in bonus payments for contract work plagued by overcharges.
The disputed costs were paid to Halliburton's KBR subsidiary under its no-bid
Iraqi oil contract, known as Restore Iraqi Oil (RIO), awarded in March 2003.
Typically, between 60 percent and 70 percent of costs challenged by Pentagon
auditors are ultimately denied to contractors by the contracting authority.
But under six of 10 task orders of the RIO contract, only 27 percent of the
costs challenged by auditors was ultimately denied to Halliburton by the Corps
Specifically, Pentagon auditors said Halliburton overcharged the military by
$169 million, but the Corps of Engineers repaid $124 million of the cost to
the company anyway. The Corps denied repayment of $45 million, or 27 percent
of the overcharges.
"The [Bush] administration has offered no explanation for this decision
to pay three-quarters of Halliburton's challenged costs," Waxman said.
Auditors from the Pentagon's Defense Contract Audit Agency had asked the Corps
of Engineers to refuse repayment for all of the $169 million.
Waxman said "the Corps of Engineers appears to have ignored auditor findings
in three ways: by reimbursing Halliburton for costs determined to be unreasonable
or unsupported, by permitting Halliburton to collect profits on these challenged
costs, and by giving Halliburton unwarranted bonuses."
The congressman also requested the Corps disclose the documentation on how
it came to the conclusion that Halliburton deserved to be paid profits and bonuses
on the disputed costs.
Under the RIO contract, the Corps of Engineers assigned Halliburton 10 task
orders involving oil transport and infrastructure repair in Iraq. It was paid
$2.5 billion for the work, which was completed
in early 2005.
The $169 million in disputed costs occurred under six of those 10 task orders.
"With reimbursement and fee decisions still pending on four other RIO
task orders, it is important that we receive prompt answers," Waxman said
in calling for a congressional hearing.
For a summary of auditor reports on Halliburton, click here.
For a summary of the Pentagon's favoritism toward Halliburton, click here.