New York Times reports U.S. government is splitting up KBR/Halliburton military contract monopoly in Iraq due to mismanagement and wasteful spending, rape, and electrocutions

Controversial Contractor’s Iraq Work Is Split Up

Published: May 24, 2008

WASHINGTON — Sometime soon, a group of American corporate executives and military leaders will quietly sit down and divide Iraq into three parts.

Their meeting will not have anything to do with Iraq’s national sovereignty, but instead will involve slicing up billions of dollars in work for the defense contractors that support the American military’s presence in the country.

For the first time since the war began, the largest single Pentagon contract in Iraq is being divided among three companies, ending the monopoly held by KBR, the Houston-based corporation that has been accused of wasteful spending and mismanagement and of exploiting its political ties to Vice President Dick Cheney.

Yet even as the Pentagon begins to pull apart the enormous KBR contract, critics warn that the new three-company deal could actually result in higher costs for American taxpayers and weak oversight by the military. In fact, under the new deal, KBR and the two other companies could actually make more than three times as much as KBR has been paid each year since the war began.

Last month the Pentagon awarded the companies pieces of a new contract to provide food, shelter and basic services for American soldiers, a 10-year, $150 billion deal that stretches far beyond the final days of the Bush administration. KBR will still get a sizable chunk of the business, but now it will have to share the work with Fluor Corporation and DynCorp International.

Army officials and executives of the three companies are planning to meet in the next few weeks to start the complex process of breaking up KBR’s sprawling operations in Iraq.

KBR, previously a subsidiary of Halliburton, once headed by Mr. Cheney, has collected more than $24 billion since the war began. It has 40,000 employees in Iraq and 28,000 more in Afghanistan and Kuwait.

But KBR has come under fire from Congress and Pentagon auditors for complaints ranging from making more than $200 million in excessive charges, including meals never served to soldiers, to delivering unsafe water to American troops to doing little to prevent sexual assaults of its female employees, often by their KBR co-workers.

Army officials acknowledge that they were under intense pressure from Capitol Hill to give KBR some competition, yet leading Democratic lawmakers and other critics say the new contract will merely paper over the fundamental problems that stem from the Pentagon’s heavy dependence on outside contractors in Iraq.

“This is just another verse in the same old song,” said Senator Byron L. Dorgan, a Democrat from North Dakota who is one of the leading Congressional critics of KBR and other major defense contractors. “It appears to me that this is a broken process.”

Critics also say they doubt that the new contract will result in significant cost savings or better services for soldiers in Iraq. The Army has built into the deal the potential for larger profits for the contractors than existed under the prior contract, and it plans to outsource much of the management and oversight of the contractors to yet another company, Serco Inc., for $59 million.

“This new contract sounds good, they are splitting it up, but there are serious flaws, including what looks like outsourcing oversight,” said Dina Rasor, an investigator and co-author of a book about contracting in Iraq. “And the size of the contract is enormous. When you think of these big, multibillion-dollar defense contracts and contractors, you think of companies like Lockheed, and you can see their big airplane plants. But what is KBR doing for all this money? They are slinging hash, washing laundry.”

Army officials said that they would not be able to actually shift work from KBR to the other companies until late this year, meaning that the change would be under way just as Americans are choosing a new president. The Army officials said the huge new multiyear contract for Iraq would not commit any new presidential administration to paying billions of dollars to defense contractors for services in Iraq if the new president decided to withdraw American troops.

It is not clear how the Pentagon will try to untangle KBR’s operations in Iraq to share them with DynCorp and Fluor. Lee Thompson, the executive director of the Logistics Civil Augmentation Program, as the program is called, said the Army would first try to split work in Kuwait among the three companies, and would then move on to Afghanistan and Iraq.

Even if the United States remains in Iraq long term, the contract could ultimately cost much less than $150 billion over 10 years, Mr. Thompson said. But after being caught off guard by the scale of the spending at the start of the war, the Army is building in a cushion this time, he said.

Army officials have been working for two years to undo KBR’s monopoly on business in Iraq.

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