Is Treason, During War-time, Still A Hanging Offense

WASHINGTON: U.S. lawmakers on Thursday railed against senior U.S. Army officials and defense contractor KBR Inc. over persistent allegations of fraud and contract abuse on a multibillion-dollar deal to provide food and shelter to American troops in Iraq.

"Profiteering during wartime is inexcusable," said Democratic Sen. Byron Dorgan, testifying at a Senate Armed Services Committee hearing. "This is the most significant waste, fraud and abuse we have ever seen in this country."

Lawmakers and the U.S. inspector general have accused KBR, formerly a division of Halliburton Co., which was once headed by U.S. Vice President Dick Cheney, of abusing federal rules in record-keeping on the current contract. Nearly $2 billion (€1.47 billion) in overpricing on the contract has been identified by Pentagon auditors and government investigators, lawmakers said.

Houston-based KBR is currently the U.S. Army's sole contractor for providing food and shelter to the military in Iraq, Afghanistan and Kuwait under the Logistics Civil Augmentation Program, or Logcap. The Pentagon has awarded more than $20 billion (€14.7 billion) over the last five years for the services contract.

Sen. Carl Levin, D-Mich., chairman of the committee, cited several examples of contract abuse, including KBR allegedly billing the federal government for millions of meals that were never delivered, overstating labor costs by 51 percent, or $30 million (€22.06 million), and purchasing between $40 million (€29.41 million) and $113 million (€83.08 million).

The U.S. Army Audit Agency, the department's internal auditor, has conducted 15 separate audits on Logcap services in Iraq since 2004, Auditor General Patrick Fitzgerald testified at the hearing.

The audits found systemic problems with the government's ability to accurately estimate costs, review contractor orders and define tasks. Fitzgerald blamed most problems on the large volume of work under intense deadlines.

Assistant Secretary of the Army Claude Bolton said steps have been taken to rectify the problems, including withholding performance fees to KBR and competing some tasks that were originally included the contract.

"Improvements have been made, but it's still not perfect," said Bolton.

Democratic senators repeatedly questioned the Army's decision to keep the sole-source pact with KBR even as multiple audits the last three years suggested evidence of widespread fraud and abuse.

Bolton said the volatile nature of the war in Iraq and the unanticipated need for additional resources prevented the Army from launching a new competition until now.

"We could use more people ... reviewing the contract on a daily basis," said Bolton. "(But) each person I send over there is a target. As I look at this, we do the best job we can under difficult conditions."

Late last year, the Army announced plans to award up to three 10-year contracts worth up to $50 billion (€36.76 billion) each, as well as a single five-year oversight pact worth up to $225 million (€165.43 million). Bolton said the new pacts would help to increase competition and improve oversight and accountability on Logcap.

No KBR officials testified Thursday at the hearing and calls to the company were not immediately returned.

Halliburton recently completed a stock-swap program that separated it from KBR, leaving two independent companies.

Shares of Halliburton Co. were down 37 cents to $31.99 in afternoon trading while shares of KBR fell 7 cents to $21.16, both on the New York Stock Exchange.



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