Panel to Hear of Halliburton Waste

By Robert O'Harrow Jr.
Washington Post Staff Writer
Thursday, July 22, 2004; Page E01 

In the spring of 2003, not long after John Mancini arrived in Kuwait City as procurement employee for Halliburton Co., he came to an unsettling conclusion: No one cared about his skill at buying goods and making sure government money was wisely spent.

Over the next three months, Mancini said in a recent interview, he watched as colleagues at Halliburton subsidiary KBR paid inflated fees for cell phone services, bought hundreds of rolls of duct tape for $60 each and obscured the waste by failing to file paperwork properly. In one case, he said, a fellow procurement employee recorded a multimillion-dollar purchase as a $200 order, then dismissed it as a mistake.

After he and others raised questions, Mancini said, the company sent in a team to prepare for government audits. "The waste was unbelievable," said Mancini, who left KBR after three months. "This was pure negligence."

Stories like Mancini's will be the focus of a hearing today by the House Committee on Government Reform, as it examines allegations of waste, abuse and profiteering related to the Army's contracts in Iraq with Halliburton, the oil services company that Dick Cheney ran from 1995 to 2000.

Halliburton spokeswoman Wendy Hall said she did not know the particulars of Mancini's allegations, but that the company would look into them.

Mancini isn't scheduled to testify, but the committee will hear from several KBR executives. Halliburton officials have acknowledged some misspending in Iraq -- including $6 million in overcharges that the company repaid -- but have said repeatedly that the company is doing a good job overall.

"KBR is pleased to have the opportunity to appear before the Committee . . . so we may describe our efforts in Iraq to support our troops in a very difficult, demanding and dangerous mission," Hall wrote in an e-mail. "We recognize that any effort like this demands oversight.''

The hearing is shaping up as a political sparring match over Halliburton because of the Cheney connection. The minority Democrats, led by Henry A. Waxman (D-Calif.), pressured Republican leaders to allow whistle-blowers to testify, in part to promote the company as an election year issue.

Committee Chairman Thomas M. Davis III (R-Va.) said "the so-called whistle-blowers" simply misunderstood the logistical reality of life during wartime. He said he was giving the Democrats a chance "to put up or shut up" on an issue that won't go away.

"They're taking a series of anecdotes and trying to turn them into some kind of scandal," Davis said in an interview yesterday.

Under a wide-ranging contract called LogCAP, Halliburton furnished the Army with logistical support throughout the Middle East. It was guaranteed a certain level of profit and allowed to pass on all costs to the government, with the assumption that it would operate efficiently. Halliburton has been awarded work in Iraq worth about $5.6 billion through May, according to a report by the Government Accountability Office.

One issue to be explored at the hearing is whether the Houston-based Halliburton, its subsidiary KBR and their subcontractors overcharged the government for food, oil, housing and other services, while failing to properly oversee spending.

Scheduled to testify are several former employees interviewed earlier by Waxman's staff. One told of filling out time cards saying he worked 12-hour days, seven days a week, even though he put in no more than a week's worth of labor. Another said the company removed spare tires from new Mercedes and Volvo trucks and then abandoned one that had a flat tire.

Marie deYoung, who began working on LogCAP in December 2003, said she will tell the committee that the company tried to mislead government auditors by limiting the amount of information entered into computers -- a practice that "contributed to cost overruns and poor management."

The committee will also hear about two new studies about contracting in Iraq, one from the GAO and one from Waxman's staff.

The GAO report said its investigators found "a pattern of contractor management problems," including poor financial reporting and an inability to schedule work in a timely way. The report said the Army did not plan how to use LogCAP effectively until after the fall of Baghdad. The Army also did not limit spending on the contract until this spring, after Halliburton's cost estimates increased from $5.8 billion to $8.6 billion.

The report said "the contractor's managers at individual sites have no knowledge of the costs associated with their task orders." Hall said the company worked with oversight teams from the Pentagon "and have refined systems and improved our processes and performance."

A separate report prepared for Waxman by staff Democrats says that a no-bid contract with Halliburton to import gasoline and other fuel into Iraq resulted in $167 million in extra charges before the government began using in-house experts to handle the task. A Defense Department audit last year said the company overcharged by about $61 million. Hall said the Army was aware of the prices it paid to buy and deliver fuel from Kuwait to Iraq and that KBR believes the terms of the new contract are significantly different.

Waxman dismissed Davis's contention that only politics is at play in the examination of Halliburton contracts. "It's inexcusable that taxpayer money should be squandered in overpayments," he said. "We have an obligation to see whether billions of dollars are being wasted."