Firm may have overbilled in Iraq

From Times staff and wire reports

WASHINGTON -- Pentagon investigators have found evidence that Vice President Dick Cheney's former company may have overcharged the Army as much as $61 million for fuel that it trucked into Iraq, senior defense officials said Thursday.

The overcharges by Halliburton Co. subsidiary KBR are among a series of violations uncovered in a Pentagon audit of business practices of companies awarded billions of dollars in no-bid contracts for the reconstruction of Iraq, said the officials, speaking on condition of anonymity.

A second set of violations, in another contract with the Army, involves unacceptable delays by KBR in providing cost estimates to the government for dozens of separate projects already under way in Iraq, the officials said.

In one of those estimates, KBR submitted a proposal for cafeteria services that was $67 million too high. The Pentagon rejected that proposal, the officials said.

The officials said they have no evidence that the problems were anything other than "stupid mistakes" by Halliburton. The problems came to light in routine audits by the Defense Contract Audit Agency.

But Pentagon budget chief Dov Zakheim said Thursday that such behavior by contractors, whether accidental or not, could not be permitted to go on.

"Contractor improprieties and/or contract mischarging on department contracts will neither be condoned nor allowed to continue," Zakheim said.

In an e-mail statement, Halliburton spokeswoman Wendy Hall denied that the company had overcharged.

She said Halliburton was responding to questions from Pentagon auditors and said she was "confident our responses will satisfy" them.

The two contracts with the Halliburton subsidiary, formerly known as Kellogg Brown & Root, are bigger than any others awarded by the Pentagon for work by private companies in Iraq and were awarded without competitive bidding. KBR has a $7 billion contract with the Army Corps of Engineers to restore Iraq's oil sector and an $8.6 billion contract with the Army for logistical support.

Some Democrats, most notably Rep. Henry A. Waxman of Los Angeles, have criticized the awarding of Iraq reconstruction contracts to the company, saying that politics played a role in giving the contracts to a firm with strong connections to the Republican Party and Bush administration officials.

Administration and Halliburton officials have denied any political motivation in awarding the contracts to the company, a longtime defense contractor.

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, which may have involved the purchase of fuel from a subcontractor.

They declined to name the subcontractor, saying that company may not yet have been notified of the inquiry's findings.

The possible overcharging involved 56.6 million gallons of gasoline KBR trucked in from Kuwait during the spring and summer, the Pentagon officials said.

The officials said that KBR was charging $2.27 a gallon for gasoline, while another company, in a separate contract, set the price at $1.18.

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.

Cheney, a former defense secretary, stepped down as chief executive officer of Halliburton when he became Bush's running mate in 2000 and has said he played no role in the awarding of the contracts to his former company.

Cheney became head of the company in 1995.

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