WASHINGTON – A Pentagon audit has found Vice President Dick Cheney’s former company may have overcharged the Army by $1.09 per gallon for nearly 57 million gallons of gasoline delivered to citizens in Iraq, senior defense officials say.
Auditors found potential overcharges of up to $61 million for gasoline that a Halliburton subsidiary delivered as part of its no-bid contract to help rebuild Iraq’s oil industry.
But the company apparently didn’t profit from the discrepancy, according to officials who briefed reporters Thursday on condition of anonymity. The problem, the officials said, was that Halliburton may have paid a Kuwaiti subcontractor too much for the gasoline in the first place.
A Halliburton statement released Thursday said the Kuwaiti company was the only one that met the Army Corps of Engineers’ specifications. “Halliburton only makes a few cents on the dollar when fuel is delivered from Kuwait to Iraq,” the statement read.
Democratic presidential candidates said the audit demonstrated the Bush administration’s commitment to special and corporate interests.
“We’ve recently learned what many Americans have suspected for a long time — special interest contributor Halliburton is overcharging the American taxpayers,” said Howard Dean. “For the safety of our troops, we need to make sure every penny in Iraq is spent wisely and efficiently.”
Rep. Dick Gephardt, also a Democratic presidential candidate, said the Bush administration’s “policy in Iraq of putting the corporate special interests first is unacceptable.” And retired Gen. Wesley Clark said Bush is “more concerned about the success of Halliburton than having a success strategy in Iraq.”
At the White House on Friday, presidential spokesman Scott McClellan said, “There are oversight measures and procedures in place to make sure that tax dollars are spent appropriately. And we expect those measures to be followed and we expect those procedures to be followed.”
The Pentagon officials said Halliburton’s Kellogg, Brown & Root subsidiary also submitted a proposal for cafeteria services that was $67 million too high. The officials said the Pentagon rejected it.
The defense officials said they had no reason to believe the problems were anything other than “stupid mistakes” by Halliburton. They said the company and the Pentagon were negotiating a possible settlement of the matter, which could include repayment by Halliburton.
In the statement Thursday, Halliburton chairman, president and CEO Dave Lesar said, “We welcome a thorough review of any and all of our government contracts.”
News of the problems came as President Bush worked to justify his decision to limit $18.6 billion in Iraq reconstruction contracts to companies from the United States or countries that supported the war. The move angered governments whose firms were cut out of the bidding process, including Canada, France, Germany and Russia.
Many Democrats also have criticized the Halliburton contracts, suggesting they were a political payoff for a company with strong ties to the GOP and whose executives gave generously to the Bush campaign.
Sen. Frank Lautenberg, D-N.J., called Thursday for Senate hearings on the Pentagon’s findings.
“I have long been troubled by the continued growth of the Pentagon’s no-bid contract with Halliburton, and the delay in the Pentagon’s promise to compete this contract competitively,” Lautenberg wrote to Senate Government Affairs Committee Chairwoman Susan Collins, R-Maine.
Cheney and Pentagon officials deny any political motive for awarding the no-bid contracts to KBR, which has a long-standing relationship with the military as a major Pentagon contractor.
Routine audits by the Defense Contract Audit Agency uncovered the problems.
Pentagon officials said they were concerned about problems with KBR’s contracts, which were awarded without competitive bidding for up to $15.6 billion for rebuilding Iraq’s oil infrastructure and assisting U.S. troops there. About $5 billion has been spent or is obligated to be spent on those contracts so far.
“Contractor improprieties and/or contract mischarging on department contracts will neither be condoned nor allowed to continue,” said Dov Zakheim, the Pentagon’s budget chief.
The defense officials, who are involved in the audit of the contracts, said the Pentagon was negotiating with KBR over how to resolve the fuel-pricing issue. They declined to name the Kuwaiti subcontractor that provided the fuel, saying that company may not have been notified of the inquiry’s findings.
The possible overcharging involved 56.6 million gallons of gasoline KBR supplied in Iraq from the end of the war until Sept. 30, the Pentagon officials said. The officials said KBR was charging $2.27 a gallon for gasoline while another contract for gas delivered from Turkey was for $1.18 a gallon.
The United States subsidized the price of the gasoline, meaning Iraqis only paid the prewar price of 4 cents per gallon.
The Army is to open its KBR contracts to competitive bidding next month. The contracts evolved from work to put out oilfield fires into overseeing reconstruction of Iraq’s oil infrastructure and providing fuel for the country. KBR also provides support services to U.S. troops in Iraq, such as serving hot meals.
Halliburton has said it needs to charge a high price for fuel because it must be delivered in a combat zone. Several KBR workers have been killed or wounded in attacks by Iraqi insurgents.