Shipping was extra — a lot extra
KBR spent millions getting $82,100 worth of LPG into Iraq
By DAVID IVANOVICH Houston Chronicle


March 15, 2005
WASHINGTON - Iraq needed fuel. Halliburton Co. was ordered to get it there — quick. So the Houston-based contractor charged the Pentagon $27.5 million to ship $82,100 worth of cooking and heating fuel.

In the latest revelation about the company's oft-criticized performance in Iraq, a Pentagon audit report disclosed Monday showed Halliburton subsidiary KBR spent $82,100 to buy liquefied petroleum gas, better-known as LPG, in Kuwait and then 335 times that number to transport the fuel into violence-ridden Iraq.

Pentagon auditors combing through the company's books were mystified by this charge.

"It is illogical that it would cost $27,514,833 to deliver $82,100 in LPG fuel," officials from the Defense Contract Audit Agency noted in the report.

The portions of the audit report released Monday did not specify exactly how much fuel was involved in this billing.

The portions of audit report were released by Rep. Henry Waxman, D-Calif., and Rep. John Dingell, D-Mich., both dogged critics of Halliburton and its wartime contracts.

Halliburton spokeswoman Wendy Hall said the figures were taken out of context.

"The implication is definitely misleading," Hall said. "Transporting fuel into Iraq was a mission fraught with danger, which increased the prices that firms were willing to offer for transportation."

Halliburton has seen 61 of its workers and subcontractors die in Iraq and Kuwait, many while delivering fuel.

Army officials were desperate to get fuel into Iraq, fearing the lack of such basic necessities as cooking and heating fuel would lead to greater unrest and support for the insurgency.

But efforts to truck in fuel were hampered by repeated attacks on fuel convoys, delays organizing military escorts, supply route closures and changing delivery points, company officials said. Security was so dicey, in fact, that tanker trucks were lucky to make two round trips per month.

And because neighboring Kuwait had few trucks available to transport fuel, Halliburton had to bring in trucks from neighboring countries and contract for a barge, Hall said.

No comment from corps

Company officials say they transported about 3.5 million barrels of LPG from Kuwait to Iraq via truck and barge.

The U.S. Army Corps of Engineers, which had assigned Halliburton the job of getting fuel into Iraq, declined to comment on the substance of the audit report, noting that it contained confidential commercial information that had not been authorized for release outside government channels.

Corps officials said a subsequent audit report was completed in February, which they are now studying.

"The major issues in this audit report have not been resolved," a Pentagon spokesperson said. The corps "is currently working to finalize negotiations for a price on this and all outstanding task orders."

The lawmakers would not say how they had obtained the audit report for the fuel transportation.

Support from agency

Company officials point out the firm's estimating and purchasing systems have recently received a nod of approval from the Pentagon's Defense Contract Management Agency.

In all, Halliburton submitted bills to the U.S. Army Corps of Engineers totaling $875 million for supplying Iraq with fuel from May 2003 through March 2004.

Pentagon auditors questioned $108 million or about 12 percent of those costs.

That's substantially higher than the $61 million in possible fuel overcharges Pentagon auditors had previously identified. But that figure only covered the first five months of Halliburton's fuel supply assignment.

In March 2004, the Defense Energy Support Center, the military's own fuel supply arm, took over the job.

In a letter to President Bush Monday, Waxman and Dingell complained that Pentagon officials had repeatedly ignored their requests to see copies of the Pentagon audits.

"Indeed, when Government Reform Committee staff indicated that they were considering issuing a subpoena for the audit reports, a Defense Department official replied that issuing a subpoena will not get the material released any faster," the lawmakers wrote.