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Auditors question billions in contractor bills Print
Halliburton costs in Iraq among those under scrutiny

By DAVID IVANOVICH - Feb. 15, 2007

WASHINGTON — Pentagon auditors have challenged $10 billion worth of contractors' costs racked up since the start of the war in Iraq, including $2.7 billion from Houston's Halliburton Co.

William Reed, director of the Defense Contract Audit Agency, told a House panel Thursday his agency had overseen $52 billion worth of Iraq-related contracts from March 2003 through Sept. 30, 2006.

And after reviewing those costs, Reed's auditors had urged the Pentagon, State Department and other agencies to reject $4.9 billion in costs and identified another $5.1 billion that lacked adequate documentation.

Many of these billing disputes were ultimately resolved. But they indicate the amount of difficulty the Pentagon is having controlling the sprawling network of contractors operating in Iraq.

"There's no accountability," said David Walker, the Government Accountability Office's comptroller general.

Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, noted that Pentagon auditors had reviewed only a fraction of the $350 billion the United States has spent in Iraq.

Halliburton subsidiary KBR is the military's largest contractor in Iraq. The company's three contracts have a potential value of up to $25.7 billion, according to a report issued by the committee's Democratic staff.

The Defense Contract Audit Agency has audited $19.8 billion worth of costs connected with KBR's contracts and has identified $2.7 billion in questionable or unsupported billings, the report said.

But that's not to say the Pentagon will ultimately deny that many KBR charges. Auditors act only in an advisory capacity. And in most billing disputes, the Defense Department ultimately sides with the contractor, once the necessary paperwork is provided and costs are explained.

"The majority of these issues have since been resolved with our customer, the Army," company spokeswoman Melissa Norcross said.

"Audits are a part of the normal contracting process, and when an auditor finds a 'questioned' or 'unsupported' cost, it means that the auditor requires additional information or documentation to answer questions they have," Norcross said. "It is important to note that the auditors have raised questions about the support and documentation of costs rather than questioning the fact that we have actually incurred the costs. If auditors question one item, then all similar, related items are questioned."

Under a contract with the Army, some 50,000 KBR employees and subcontractors serve up food, build bases, drive trucks and provide a host of other logistical support services for U.S. troops.

That contract alone is valued at up to $22.1 billion, with $20 billion worth of funds already obligated to be spent. KBR has submitted billings on that contract totaling $17.8 billion.

Just last week, the Army announced it would dock Halliburton $19.6 million for billing the Pentagon for costs its subcontractors incurred to hire private security firms. The company's contract does not permit reimbursement for security.

The Army has announced plans to split up the logistics contract among three players.

Besides the logistics contract, KBR was awarded a contract by the U.S. Army Corps of Engineers to help restore Iraq's oil infrastructure. That contract became highly controversial, because the corps handed KBR the contract without seeking bids from other parties. Eventually, the corps divided up the contract, and KBR was to rebuild the energy sector in the southern part of the country.

On Thursday, Sen. Byron Dorgan, D-N.D., who as head of the Democratic Policy Committee convened a number of Democrats-only hearings to examine Halliburton, introduced legislation that would ban large sole-source contracts.

Targeting "war profiteers," Dorgan's legislation also would would hit a contractor found guilty of trying to defraud the government with a prison term of up to 20 years and a fine of at least $1 million. 

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