HOUSTON – Halliburton Co. (HAL) may decide not to submit new bids for the logistics contracts it holds in Iraq if the U.S. military divides up the work too deeply, Chief Executive Officer Dave Lesar said on Tuesday.
Earlier in the day, the Wall Street Journal (search) reported the U.S. Army plans to break up the multibillion-dollar logistics contract and seek competitive bids for the work it awarded to Halliburton to feed, house and operate services for U.S. troops.
"I'm not sure we're going to rebid if it's hacked into too many pieces in Iraq. If we do choose to rebid, we're going to jack the margins up significantly," said Lesar, whose comments to an analysts' conference in New York were broadcast on the Internet.
Halliburton's engineering and construction unit KBR (search), formerly called Kellogg Brown & Root, currently handles the contract, but has come under criticism from the Pentagon for possible overcharges.
Last month, Pentagon auditors urged the Army to withhold 15 percent of the more than $4 billion in logistical work done by Halliburton because of problems with the company's cost estimates.
The planned breakup of the contract into six or more separate contracts was laid out in an internal Army memo, which put the total value of the work at $13 billion, the Wall Street Journal said.
Halliburton, which was headed by Dick Cheney (search) from 1995-2000 before he became U.S. vice president, has denied any wrongdoing in its billing.
Lesar said he viewed the possible rebidding as positive for Halliburton, which can earn a profit margin of about 2 percent on the logistics contract.
"At this point in time I don't see that we could lose whatever the outcome, because if we keep some of it, it would be higher margins. If we're out, we'll get our liquidity and we'll move on with our business," Lesar said.
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