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KBR in line for big Army payday Print
By DAVID IVANOVICH -  June 28, 2007
Copyright 2007 Houston Chronicle Washington Bureau

WASHINGTON — Houston-based KBR will share in a new, 10-year military contract valued at up to $150 billion, the U.S. Army said Wednesday.

The Army Sustainment Command has selected the former Halliburton Co. subsidiary, along with Fort Worth-based DynCorp International and Fluor Intercontinental of Greenville, S.C., to provide an array of support services for U.S. troops.
Under the new contract, each of the three will have an opportunity to bid for work as the Army assigns various tasks. Each company will be limited to $5 billion in a given year and $50 billion over the life of the contract.

For the last five years, KBR has had sole responsibility for building bases, serving up chow and providing a host of other support services for U.S. troops stationed in Iraq, Afghanistan and other countries.

But rather than rely on just one company to perform all those services, the Army said it hoped to stimulate competition by splitting up the work among three different players.

Bruce Stanski, executive vice president of KBR's Government and Infrastructure business segment, said his company was honored to be selected. "We view this award as a recognition of the quality services we have already provided our troops," he said.

KBR, DynCorp and Fluor were chosen among a field of six bidders.

Virginia-based Serco will plan the work, under a much smaller contract awarded earlier this year.

Jim Loehrl, the Army Sustainment Command's executive director for acquisition, said the new contracting approach should not be interpreted as a criticism of KBR's performance under its current logistics contract but as an effort to infuse competition into the program and reduce risk.

Army officials hope to begin the transition to the new contract approach within 90 days.

KBR has come under fire repeatedly regarding possible overcharges and sloppy paperwork. The company has said it is cooperating with the government in trying to address those concerns.

Rep. Henry Waxman, D-Calif., chairman of the House Oversight and Government Reform Committee, called it a "good step that the wasteful monopoly contract with KBR is being broken up."

Waxman and other critics have long been skeptical about KBR's military contracts, in no small part because before he was vice president, Dick Cheney served as chief executive officer of Halliburton — KBR's parent company until the two were separated earlier this year.

The Army came under fire in the earliest days of the war for handing Halliburton a different, multibillion dollar contract to repair Iraq's oil fields without seeking bids from other players.

The Pentagon eventually managed to defuse that criticism by splitting that contract between Halliburton and Parsons Group.

While welcoming the announcement Wednesday, Waxman said he has "serious concerns about the track record of some of the companies that have been given the new contract."

A spokesman for Fluor did not immediately respond to questions about the award. A DynCorp spokesman could not be reached for comment.

Under its current Logistics Civil Augmentation Program (LOGCAP) contract valued at nearly $23 billion, KBR has marshaled 50,000 employees and subcontractors to cook 500 million meals, deliver 272 million pounds of mail, wash 32 million bundles of laundry and log nearly 3.7 million miles transporting supplies and equipment for the military.

The LOGCAP contract was inaugurated as part of a Pentagon strategy to downsize the military at the end of the Cold War. The idea was to contract with the private sector for support functions, so military personnel could focus on combat missions.

KBR landed the first, $2 billion LOGCAP contract in 1992. Five years later, DynCorp won the second contract for $50 million, according to Defense Contract Audit Agency figures.

KBR was supporting U.S. troops in the Balkans when the contract changed hands, so the Pentagon carved out that work for KBR.

In 2002, KBR won what is now called LOGCAP III.

Only a portion of the nearly $23 billion contract has translated into revenues for KBR, since subcontractors carry out many tasks assigned to KBR as the prime contractor.

Still, KBR's work in Iraq accounted for about $1 billion in the first quarter, nearly half the company's revenues for the period, according to a filing with the U.S. Securities and Exchange Commission.

But operating in a war zone has come at a painful cost.

In all, 105 KBR workers and contractors have been killed and another 655 injured in Iraq, Afghanistan and other countries where the company operates.

And earlier this week, Stuart Bowen Jr., the special inspector general for Iraq reconstruction, rapped KBR for incorrectly accounting for the amount of fuel it used, exceeding its food service budget and making "numerous errors" with lodging assignments.

But these troubles, nagging as they may have been for the company, have often masked what one analyst characterized as a KBR's good reputation within the military — where troops benefited, among other things, from higher food expenditures that provided better fare than the old-style, C-rations.

"KBR won the hearts and minds and stomachs of the military," said Steven Schooner, co-director of the Government Procurement Law Program at George Washington University.

KBR did a better job, Schooner said, treating the troops in Iraq "like human beings, even though they're in hell."
 
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