WASHINGTON – After a week of flip-flops by the Army, Halliburton (search) is waiting for a final decision on whether the military will withhold 15 percent of payments for some of its work in Iraq (search).
The confusion over payments — which could cost the company around $60 million — is the latest hitch for Halliburton's multibillion-dollar work in Iraq. Various government agencies are investigating several aspects of that work, including allegations of kickbacks by Kuwaiti subcontractors and improper charges totaling hundreds of millions of dollars.
Some Democrats in Congress also are questioning whether Vice President Dick Cheney (search), who headed Halliburton from 1995 to 2000, helped clear the way for the company's extensive work in Iraq. Cheney and Halliburton deny any political influence.
At issue in the latest development is Halliburton subsidiary KBR's work in Iraq under an Army logistics contract. Under that umbrella deal, awarded years before the war, KBR provides food, sanitation, transportation and other logistical help for U.S. troops in Iraq as well as elsewhere around the world.
KBR has a separate contract to repair and manage oil facilities in southern Iraq.
The Army Materiel Command (search) and KBR are disputing whether the company has provided enough information to justify its billing for some of the work done in Iraq. Under federal regulations, the Army can withhold 15 percent of a contractor's payments until such disputes are resolved.
Halliburton says there's no legal basis to withhold payments and has threatened to ask for a "judicial determination" on the issue. Company spokeswoman Wendy Hall has said the company has not decided what form that legal challenge would take.
Army officials estimate the withholding could amount to around $60 million, though the exact amount is difficult to pin down because the withholding would be on bills that Halliburton has yet to submit.
Halliburton has said it would withhold 15 percent of payments to its subcontractors if the Army cuts its payments.
Halliburton's chief financial officer, Cris Gaut, said this week that the dispute would not hurt the company's bottom line. The company's stock closed Friday at $28.75, up 55 cents.
KBR sent the Army documents late Thursday about the impact that withholding the money would have on its operations in Iraq, Army Materiel Command spokeswoman Linda Theis said Friday. Army officials will use that information in making the decision, which could come at any time, she said from an AMC office in Rock Island, Ill.
The Army had announced plans to begin withholding 15 percent of KBR's payments last spring, but delayed the action for "equitable business reasons," Theis said. The Army was giving Halliburton so many new and changed work orders that keeping up with them was difficult, she said.
On Monday, Halliburton announced it expected the Army to give KBR (search) another extension before withholding money. Then on Tuesday, the Army said it would start withholding, only to reverse itself again later that day.
Halliburton blamed that first reversal on a "politically charged environment and leaks to the news media." Company executives have repeatedly said they believe Halliburton is under scrutiny because of its ties to Cheney.
Theis said the situation is "on hold" while Army officials make a final determination.
Halliburton also faces a similar threat to withhold 15 percent of its payments on the oilfield contract, which is managed by the Army Corps of Engineers (search). That situation remains in limbo as well.