Documents reveal concern regarding Halliburton contracts

Introduction

Documents obtained by the Center for Public Integrity show that the Army Corps of Engineers ignored sharp objections by its top procurement official concerning Halliburton contracts in Iraq and the Balkans.

The most recent controversy surrounds the extension of a troop-support contract in the Balkans held by Kellogg, Brown & Root, a Halliburton subsidiary. Bunnatine Greenhouse, the contracting official, objected to the 11-month extension worth an estimated $165 million because she felt it was not justified. She has asked for an independent investigation of possible procurement fraud.

Time magazine broke the story regarding Greenhouse’s allegations last week. Since then, the Center has obtained additional documents—none of which was originally included among those the Army Corps supplied to the Center in response to a Freedom of Information request and follow up lawsuit against the Corps. The new documents include the letter Greenhouse’s lawyer sent to Les Brownlee, the acting Army Secretary. That letter mentions that Greenhouse came under pressure from individuals “associated with favorite companies” and experienced “repeated interference” when dealing with KBR. The documents also contain internal Army Corps e-mails and a version of the justification review document which includes notes from Greenhouse such as “Not a valid reason for extension” and “I cannot approve this.”

A spokeswoman said the Army Corps supports the rights of employees to “use established procedures to ensure” that governmental actions comply with laws and regulations. “In order to ensure the individual’s privacy rights are protected and to ensure that a fair investigation can proceed, the Army Corps of Engineers will not provide further comments on the specifics of the matter,” Army Corps spokeswoman Carol Sanders told the Center.

The Army awarded the Balkans Support Contract, worth an estimated $2 billion, to KBR on May 28, 1999. The contract, one of the largest service contracts the Army has ever awarded, was for one year with four annual options.

From 1992 to 1997, KBR held the first LOGCAP contract—an omnibus contract that allows the Army to call on KBR for support in all of its field operations—but when it was time to renew the contract, the company lost in the competitive bidding process to DynCorp after the General Accounting Office (now known as the Government Accountability Office) reported in February 1997 that KBR had overrun its estimated costs in the Balkans by 32 percent (some of which was attributed to an increase in the Army’s demands). KBR beat out DynCorp and defense giant Raytheon for the third LOGCAP contract in December 2001, this one to run 10 years.

“The issue … was fully dealt with and resolved several years ago, and since then KBR has received high marks from the Army on our Balkans Support Contract,” Wendy Hall, a Halliburton spokeswoman told the Center in response to the allegations.

According to the letter to acting Army Secretary Brownlee, Greenhouse questioned the attendance of Halliburton representatives at a February 2003 Pentagon meeting where the Restore Iraqi Oil contract was discussed. Greenhouse, the Army Corps’ top contracting official, also raised concerns about offering a five-year term—instead of one-year —in the no-compete contract.

In November 2002, the Army Corps tasked KBR, under the existing LOGCAP contract, to develop a contingency plan for extinguishing oil-well fires in Iraq. “No other contractor was permitted to participate in the drafting of the contingency plan thereby limiting the award of the letter contract and the follow-on RIO Contract to KBR,” according to the letter from Greenhouse’s attorney. Not surprisingly, on March 8, 2003, the Army Corps awarded KBR the contract to restore oil-infrastructure in Iraq, potentially worth $7 billion. The contract KBR received—contract DACA63-03-D-0005—would eventually include 10 distinct task orders. KBR did not come close to reaching the contract ceiling, billing just over $2.5 billion. No additional task orders are being added to the contract, according to the Army Corps.

Hall acknowledged that KBR did receive a sole-source contract at the outbreak of war, but emphasized that the General Accountability Office “has since reviewed the contract and reported that it was ‘properly awarded … to the only contractor the Defense Department had determined was in a position to provide the services within the required time frame given classified prewar planning requirements.'”

On Oct. 29, 2003, the Center for Public Integrity filed suit against the Army Corps for failure to fully and promptly respond to Freedom of Information Act requests. During the course of the Center’s lawsuit against the Army Corps, the agency decided to declassify the KBR oil services contract and released a copy to the Center. The suit was settled on April 30, 2004.

What follows below is a timeline of significant dates. Some of the items cited are based on the description provided by Greenhouse’s attorneys.

May 28, 1999—Army Corps awards the Balkans Support Contract to KBR.

January 2002—Top Army Corps contracting official Bunnatine Greenhouse establishes a team to review the implementation of the Balkans Support Contract.

November 2002—Army Corps tasked KBR to develop an oil contingency plan to extinguish oil well fires in Iraq.

February 26, 2003—Greenhouse raises concern in a Pentagon meeting regarding the RIO contract.

March 5, 2003—According to a June 2004 story in Time magazine, a March 5, 2003, e-mail written by an Army Corps official referred to the awarding of the oil restoration contract as having been “coordinated” with Vice President Richard Cheney’s office, an allegation that was denied by the vice president’s spokesman.

March 8, 2003—Army Corps awards no-bid Restore Iraqi Oil contract to KBR.

March 24, 2003—Army Corps publicly announces that KBR has been awarded the RIO contract.

July 10, 2003—The Center for Public Integrity files FOIA request.

October 29, 2003—The Center for Public Integrity files lawsuits against Army Corps and State Department for failure to fully and promptly respond to Freedom of Information Act requests.

December 2003—Defense Contract Audit Agency issues a draft report saying that KBR had overcharged for fuel purchases by $61 million.

January 13, 2004—An audit report from the Defense Contract Audit Agency found several deficiencies in KBR’s billing system. A second audit report was released on May 13, 2004.

January 14, 2004—Army Corps Deputy Commander Major General Robert Griffin takes over contracting responsibilities in order to conduct an “independent review” of the second RIO contract.

February 2004—The Pentagon’s Inspector General launches a criminal investigation into whether KBR overcharged the government while it was importing fuel from Kuwait to Iraq. KBR was not notified of any investigation.

April 26, 2004—The Center for Public Integrity receives a portion of the RIO contract.

April 30, 2004—The lawsuit against the Army Corps is dismissed. The Center for Public Integrity eventually receives the complete RIO contract with ten task orders.

May 27, 2004—The Balkans Support Contract is scheduled to expire. Army Corps allows KBR to continue as the contractor until April 30, 2005.

August 20, 2004—Bunnatine Greenhouse expresses her reservations in writing about the 11-month extension to KBR’s Balkans Support Contract.

August 24, 2004—Deputy Assistant Secretary of the Army (Policy and Procurement) Tina Ballard communicates to Major General Robert Griffin, the deputy commander of the Army Corps, that Greenhouse needs to be told that she can “no longer include handwritten comments on official documents.”

October 5, 2004—Greenhouse learns that the Justification and Approval document was altered by the director of contracting for the Transatlantic Programs Center on instructions from the Department of the Army’s General Counsel office. Greenhouse was never given any reasons for altering the document and did not see a final copy of the Justification and Approval. The J&A was instead signed by her deputy, Lieutenant Colonel Doyle, who was not authorized to sign on her behalf.

October 6, 2004—Greenhouse was informed by two individuals that Tina Ballard made the change for “political reasons.”

October 7, 2004—Greenhouse signs an earlier copy of the J&A document. She added handwritten contingencies on her acceptance. The document was rejected.

October 8, 2004—A revised J&A is issued. The document carries Lieutenant Colonel Norbert S. Doyle’s name. Greenhouse’s name has been removed.

October 21, 2004—A letter from Kohn, Kohn & Colapinto LLP, Bunnatine Greenhouse’s lawyers, is sent to acting Army Secretary Les Brownlee asking for an independent investigation.

Alex Cohen contributed to this report.