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Army Corps Says It Minimized Halliburton's Role in Contract

Agency officials say they thought rebuilding would be under separate pact to be awarded.

May 08, 2003|David Streitfeld | Times Staff Writer

The Army Corps of Engineers, under fire for an Iraqi oil contract it awarded to Halliburton Co., acknowledged Wednesday that it had downplayed the range of the work to Congress.

What was initially billed as an emergency contract to extinguish potentially hundreds of oil well fires -- a contingency that never came to pass -- is now being used to restart Iraq's oil industry. The contract, which was awarded in a no-bid, secret process, has a cap of $7 billion.

"We didn't think the initial contract would be involved with operating facilities and distribution of the product, so we didn't play that up in the beginning in correspondence to Capitol Hill and in speaking to the news media," Army Corps of Engineers spokesman Scott Saunders told Associated Press.

The Army Corps believed the work would be covered under a separate contract still to be awarded, Saunders told AP, but the need to get the oil industry back on its feet quickly forced the corps to begin the task under the Halliburton pact.

Rep. Henry A. Waxman (D-Los Angeles), criticized the way the Pentagon has been releasing information about the no-bid contract. "They're not being forthright," Waxman said. "When people act this way, it's as if they have something to hide."

Waxman had complained that the $7-billion ceiling on the contract was not disclosed until he pressured the corps to release that information.

Under the contract, Halliburton's KBR subsidiary, formerly Kellogg Brown & Root, initially received $52 million to put out oil well fires, assess damages and do crucial emergency repairs. It received another $24 million from the Pentagon last week to jump-start the Iraqi oil industry, including repairing distribution systems, and to buy emergency oil supplies.

Steven Schooner, co-director of the Government Procurement Law Program at George Washington University, said the episode was a good illustration of why being first on the ground is "everything" for contractors.

"First" has a way of turning into "only," Schooner said.

While the Pentagon says the long-term contract to rebuild Iraq's oil industry would be put out to open, competitive bidding, "they don't seem to be in any rush," Schooner said.

Vice President Dick Cheney was chief executive of Houston-based Halliburton until August 2000. Cheney's office has repeatedly said that it played no role in the firm's government contracts. White House spokesman Ari Fleischer suggested Wednesday that politics was driving the controversy.

"Congressman Waxman has never met a Republican he didn't want to investigate," Fleischer told reporters.

Waxman called Fleischer's comment "ludicrous."

Fleischer directed further questions to the Army Corps, but Lt. Col. Gene Pawlik, the agency's chief spokesman, didn't return a call for comment. As for spokesman Saunders, by late afternoon his voicemail box was refusing to accept more messages.

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