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KBR wins praise despite disputes Print
By DAVID IVANOVICH - April 19, 2007

WASHINGTON ó The Pentagon has refused to pay $600 million worth of bills submitted by Houston-based KBR for providing logistical support for U.S. troops and is still haggling with the company over another $800 million. But such billing disputes did not keep KBR from receiving high marks for its performance.

William Reed, director of the Defense Contract Audit Agency, told the Senate Armed Services Committee on Thursday that auditors had examined $16.2 billion worth of charges KBR had racked up for building bases, running mess halls and providing a host of other support services for U.S. troops in Iraq, Afghanistan and elsewhere. And after combing through the company's billings, auditors challenged $1.9 billion worth of them.

Eventually, the Pentagon agreed KBR, the largest private contractor working in Iraq, should be reimbursed some $500 million. But Reed said the auditors rejected another $600 million in costs, concluding those billings constituted overcharges or lacked adequate documentation to merit reimbursement. The parties are still negotiating over the remaining $800 million.

KBR spokeswoman Heather Browne said that in "instances where there have been questions raised regarding charges related to our work, we have routinely provided information requested of us and have fully cooperated with the agencies requesting information, recognizing that audits are a routine process of any government-related work."

Fraction of contract

The costs in question represent a fraction of a contract valued at more than $22 billion.

But Senate Democrats, pointing to a litany of military audits alleging possible overcharges ó from overstated labor costs to unnecessary vehicle purchases ó decried what they describe as a pattern of waste, fraud and abuse.

"As an auditor I'm stunned, as a senator I'm sick to my stomach, and as an American I'm angry," said Sen. Claire McCaskill, D-Mo., a former state auditor.

Committee Chairman Carl Levin, D-Mich., wondered how, after all the billing disputes, the vast majority of the company's ratings from July 2005 through December 2006 were "excellent" or "very good.

Claude Bolton Jr., assistant secretary of the Army for acquisition, logistics and technology, said the company's performance is not out of line with other government contractors.

"I think they're doing ... a pretty good job," Bolton said.

While the company said it's providing the information requested by auditors, Democrats pointed to reports suggesting KBR officials weren't always cooperative.

A September 2005 auditor's report, for instance, complained about "significant problems in obtaining supporting cost or pricing data. ... In some cases, the procurement files were not provided for review and in other cases, key information was not included in the procurement files," according to an excerpt provided by the committee.

Bolton said he once had to threaten to withhold $55 million in reimbursements to force the company to turn over requested documents.

Asked about that standoff, Browne said: "We recognize that while there have been some issues with various auditors, KBR has fully cooperated with the Army, DCAA and other relative agencies in providing information and documentation requested of us and we continue to do so."

When Army officials raised concern with the contractor about its responsiveness, Bruce Stanski ó currently executive vice president of KBR's Government and Infrastructure Business Unit ó replaced a group of midlevel managers, said Maj. Gen. Jerome Johnson, commanding general of the U.S. Army Sustainment Command.

Asked about Stanski's decision, KBR spokeswoman Browne said the company's commitment to the contract has been "unwavering."

"Every employee involved with the contract recognizes both the enormity and significance of the work involved," Browne said. "Whether it has related to executing our work on the contract or providing information requested of us by various agencies through the routine audit process that involves all government contractors, KBR has delivered."

Pentagon auditors note the company's business systems are "adequate overall," and KBR is working to correct deficiencies that had been pointed out.

Despite the controversy here in Washington over the company's performance, KBR remains popular among troops on the ground, thanks to the quality of its food and housing.

"Obviously, people are satisfied with the product," Levin noted after the hearing. "That's just no excuse for what went on here."
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