BAGHDAD — The Pentagon has paid nearly $90 million to a subsidiary of the well-connected Halliburton Co. to cater to the Americans who are working to rebuild Iraq, U.S. officials said -- while the reconstruction effort has yet to show significant results for ordinary Iraqis.
The Defense Department gave Halliburton's KBR exclusive rights to the job -- which has included fixing up an extravagant presidential palace being used by the Americans -- under a broad U.S. Army logistics contract that pays the company a fee based on a percentage of everything it spends, according to Pentagon documents and Halliburton's corporate filings.
KBR, whose parent firm has had strong ties to Vice President Dick Cheney, has drawn scrutiny for an emergency oil contract in Iraq that is becoming increasingly lucrative.
Under a "task order" from the lesser-known logistics contract, the Defense Department has rung up KBR's multimillion-dollar bill -- which is expected to nearly double -- as the number of U.S. officials and Iraqi exiles working for the Pentagon-created reconstruction agency balloons. In blocks-long convoys from Kuwait, the firm is hauling in everything from prefabricated offices, showers, generators and latrines the size of trailer homes to food and bottled water.
As supplies for the Americans continue to arrive by the ton, little of the millions KBR is spending have gone into the Iraqi economy that Washington has pledged to restore. KBR's logistics job gives it no direct role in the rebuilding of this shattered country; that falls to the Bush administration's ambitious $2.4-billion reconstruction program, which is being overseen by the State Department.
The company's most lucrative subcontracts are with trucking, catering and security companies based in neighboring Kuwait and Saudi Arabia, oil-rich nations with the best land routes into Iraq.
KBR and Pentagon officials say hiring Iraqis and buying local goods are a top priority. Although the company subcontracted with one Iraqi-owned firm that has bought local goods and recruited more than 350 Iraqis to work for the Americans, the firm estimates that the move has put just $100,000 into the local economy so far.
Fodder for Critics
Antiwar activists have asserted that U.S. corporate profits were among the motives in waging the campaign in Iraq, which has the second-largest oil reserves on the globe. Other critics have charged that the Dallas-based Halliburton has received preferential treatment from the Bush administration.
Cheney was Halliburton's chief executive officer for five years until he resigned in August 2000 to be George W. Bush's running mate. Cheney no longer owns stock in the company, and spokesmen for both the Pentagon and KBR deny favoritism; both said the Army logistics contract sanctioning the company's work for the Iraq reconstruction agency was competitively bid before it was awarded in 2001.
But another contract that KBR won to repair Iraq's oil fields and put out postwar oil and gas fires was not competitively bid. And it has been a lightning rod for criticism.
The Army Corps of Engineers, citing urgency and the need for secrecy, awarded KBR the exclusive, classified oil contract March 8, after KBR had done a similarly classified study on how to solve Iraq's postwar oil problems.
Rep. Henry A. Waxman (D-Los Angeles) is spearheading an effort to expose details of the KBR oil contract, and his latest exchange of letters with Army Corps commander Lt. Gen. Robert Flowers this week disclosed that the scope of work for Halliburton's subsidiary in Iraq's oil industry goes well beyond firefighting and emergency repairs.
In a May 2 letter, Flowers wrote that the Halliburton contract also includes "operation of facilities and distribution of products" for the Iraqi oil industry.
Flowers added that the contract, which has a ceiling of $7 billion but is expected to cost much less, will continue at least until August, when the corps is planning to issue a competitively bid contract to repair Iraq's oil infrastructure that could run through 2004.
Far lesser known is the contract that the Pentagon used to deploy KBR to set up, cater to and care for the Iraq-based officials of the postwar reconstruction agency here. That contract has no cost ceiling.
Dubbed the Logistics Civil Augmentation Program, the contract was awarded in December 2001 and can remain in place for up to 10 years. Specifically, it requires KBR "to deploy within 72 hours of notification and to deliver combat support and combat service support for 25,000 troops within 15 days," according to Halliburton's corporate documents on file with the U.S. Securities and Exchange Commission.
The logistics program "provides the war fighter with additional capabilities to rapidly support and augment the logistical requirements of its deployed forces through the use of a civilian contractor," the company stated in the press release that announced the contract award, which was dated Dec. 14, 2001.