Auditors Want Halliburton To Detail $108 Million in Costs

WASHINGTON – Pentagon auditors questioned more than $108 million in costs claimed by Halliburton (search) on its $875 million contract to provide fuel in Iraq in 2003 and 2004, according to records released Monday.

The Defense Contract Audit Agency (search) also faulted Halliburton subsidiary KBR for failing to provide the records necessary to evaluate spending on the contract. The data KBR (search) gave the auditors didn't match the company's internal accounting records, the agency said in a report dated Oct. 8.

The charges auditors questioned included a payment of $27.5 million to transport $82,000 worth of propane.

Halliburton spokeswoman Wendy Hall said Monday the company gave the auditors all of its necessary records. She repeated the company's position that it did not overcharge for fuel delivered to Iraq.

"The facts show that KBR delivered fuel crucial to the Iraqi people when failure was not an option," Hall said in a statement.

Congressional Democrats critical of Halliburton's work in Iraq (search) released the executive summary of the DCAA audit Monday. The audit was advisory and did not require the Pentagon to take any action against Halliburton. The Defense Department has rejected calls for it to cut off its current contracts with Halliburton because of the controversy.

Reps. Henry Waxman, D-Calif., and John Dingell, D-Mich., also wrote to President Bush saying Halliburton got "extraordinary treatment" from the administration.

Vice President Dick Cheney headed Halliburton from 1995 to 2000. Bush, Cheney and other administration officials deny Cheney had any role in Halliburton's government contract work.

KBR got more than $875 million to provide gasoline, kerosene and other fuel in Iraq between May 2003 and January 2004. The Defense Department gave that work to KBR under an existing logistics contract without asking for bids from other firms.

Overall, Halliburton has made more than $2.5 billion under various government contracts in Iraq since the March 2003 invasion.

The auditors questioned $108,409,622 in costs KBR claimed on the fuel contract. The largest part of that, more than $62 million, involved charges for fuel delivered to KBR in Kuwait by a government-approved subcontractor called Altanmia.

Preliminary reports from DCAA auditors in 2003 questioned $61 million of those charges for fuel from Altanmia, saying it may have been too expensive. KBR has said it was forced to use Altanmia by the Kuwaiti government and could not get a better price.

"The report fails to take into account the fact that KBR performed an urgent mission at the Army's request and that the mission took place in a wartime environment," Hall said Monday.

But the October audit faulted KBR for not attempting to get a better deal in the months after the fuel contract began in May 2003.

"It is not reasonable to use prices negotiated in only a few days, under extremely difficult circumstances, for the entire period of performance which extends for almost a year (229 days)," the auditors wrote.

The auditors wrote it was "illogical" for KBR to spend more than $27.5 million to send $82,000 worth of propane from Kuwait into neighboring Iraq.

The price data KBR provided on the fuel it sent to Iraq from Jordan and Turkey didn't match the numbers in KBR's internal accounting system, the auditors wrote.

KBR also agreed to retroactively pay Turkish fuel suppliers after the costs of fuel rose, adding an additional $16.8 million in costs, the auditors found. That's despite having fixed-price contracts with the suppliers which were meant to prevent price increases from affecting the fuel trucked into Iraq, the auditors said.