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Context of 'March 12, 2004: Halliburton Subcontractor Breaks its Contract by Hiring Blackwater for Security'

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After the US invades Iraq (see March 19, 2003), the US Department of Defense begins drastically curbing its oversight of private contractors providing logistical support to US troops, while at the same time ramping up its outsourcing of critical troop support jobs. The prime beneficiary of the Defense Department’s decisions is former Halliburton subsidiary KBR. While Army contracts will quadruple from $23.3 billion in 1992 to $100.6 billion in 2006, the Army halves its number of contract supervisors, from 10,000 in 1990 to 5,500 in 2007. As a result, fraud runs rampant (see October 2006 and Beyond). Subcontractor Christopher Cahill, whose company has spent a decade working under the LOGCAP logistics program, will say: “I think we downsized past the point of general competency. The point of a standing army is to have them equipped.” Cahill will serve 30 months in prison for fraud. A KBR spokeswoman will say, “Ethics and integrity are core values for KBR.”
Monitoring - Military auditors claim they closely monitor the various layers of KBR subcontractors who actually perform most of the LOGCAP work, but prosecutors will show that US-based auditors can manage reviews that are limited at best over the plethora of deals constantly being brokered between KBR and a host of multinational subcontractors. One of KBR’s Houston office buildings houses a 25-member team from the Defense Contract Audit Agency; in 2007 they will admit that they cannot perform any oversight because they have “no communications” with any “personnel on the ground” in Iraq or Kuwait.
Consequences - Without oversight, many KBR officials begin openly displaying and bragging about the Rolex watches, leather jackets, prostitutes, and other “perks” provided to them by Middle Eastern businessmen. “[T]he KBR guys weren’t shy about bragging about the fact that they were being treated to all that stuff,” according to Paul Morrell, whose firm the Event Source ran several mess halls as a KBR subcontractor. In return, subcontractors become indispensable to the logistical functioning of the Army, and throw their weight around. Former KBR subcontract manager Harry DeWolf will say that when subcontracts came up for renegotiation, the firms would say: “‘Fine, we’re going to pull out all of our people and equipment.’ They really had KBR and the government over the barrel.” [Chicago Tribune, 2/20/2008; Chicago Tribune, 2/21/2008]

Entity Tags: US Department of Defense, Christopher Cahill, Harry DeWolf, Kellogg, Brown and Root, Paul Morrell

Timeline Tags: Iraq under US Occupation

Halliburton issues a press release declaring that it has won a contract from the US Army Corps of Engineers to extinguish oil well fires and do emergency repairs to Iraq’s oil infrastructure in post-invasion Iraq. The firefighting work will be subcontracted to Houston-based companies Boots & Coots International Well Control, Inc. and Wild Well Control, Inc. [Halliburton, 3/24/2003]

Entity Tags: Halliburton, Inc.

Timeline Tags: Iraq under US Occupation

Compounding effect of multiple tiers of subcontractorsCompounding effect of multiple tiers of subcontractors [Source: News Observer] (click image to enlarge)Despite the fact that the Logistics Civil Augmentation Program (LOGCAP) contract explicitly prohibits Halliburton and its subcontractors from subcontracting security services, Halliburton subcontractor ESS hires the firm Blackwater USA to provide security through Regency Hotel, another subcontractor. Each of the subcontractors involved in this arrangement will charge a substantial mark-up for the security personnel. Blackwater pays its security guards $600 per day and charges Regency $815 per day plus overhead costs, while Regency charges ESS between $1200 and $1500 per day for each security guard. It is not known what ESS charges Halliburton or what the final bill is for the taxpayer. Halliburton refuses to disclose this information to Congress. Congressman Henry Waxman, in a letter to Secretary of Defense Donald Rumsfeld, will suggest that Halliburton’s invoice to the US government for these services was not legal and should not have been paid. [Regency Hotel & Hospital Company, 3/12/2004 pdf file; News & Observer, 10/24/2004; News & Observer, 10/28/2006; US Congress, 12/7/2006 pdf file]

Entity Tags: Regency Hotel, Halliburton, Inc., Blackwater USA, ESS

Timeline Tags: Iraq under US Occupation

Bunnatine H. Greenhouse, the highest ranking contracting official at the US Army Corps of Engineers (USACE), testifies before the Democratic Policy Committee. She criticizes how the Restore Iraqi Oil (RIO) contract was awarded to Halliburton subsidiary Kellogg, Browning, & Root (KBR). “I can unequivocally state that the abuse related to contracts awarded to KBR represents the most blatant and improper contract abuse I have witnessed during the course of my professional career.” She notes that there were several irregularities in the USACE’s contract with KBR to restore Iraqi oil:
bullet The independence of the USACE contracting process was severely compromised. The Office of the Secretary of Defense (OSD) controlled “every aspect of the RIO contract,” even after responsibility for the contract was delegated to the US Army.
bullet She questioned why the Defense Department had delegated executive agency authority for the RIO contract to the Corps when it has no competencies related to oil production. Such work was outside the scope of its congressionally-mandated mission.
bullet The Defense Department paid KBR to prepare for oil production restoration work before the RIO contract was even awarded. The payments were made under the already operational Logistics Civil Augmentation Program (LOGCAP), the scope of which did not include such work. Greenhouse said that the US government should have signed a new contract with KBR for this work. When she questioned the legality of these payments, she was incorrectly told that a new contract was being issued. [Democratic Policy Committee, 6/27/2005 pdf file]

Entity Tags: Bunnatine H. Greenhouse, Democratic Policy Committee, US Army Corps of Engineers, Halliburton, Inc.

Timeline Tags: Iraq under US Occupation

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