07/12/2006 04:22 pm ET Updated May 25, 2011

Army Should Fire Halliburton From All Contracts

The U.S. Army Corps of Engineers announced plans to terminate Halliburton's largest and most scandalous contract in Iraq and Afghanistan later this year, the Washington Post reported today. This the same logistics services contract, known as LogCap that The Pentagon's auditors said they used to charge taxpayers well over $1 billion in questionable costs.

Current and former employees have described a variety of abuses, including instances where Halliburton overcharged U.S. taxpayers by paying $45 per case of soda, $100 for a standard cleaning of laundry, and $80,000 for brand new Mercedes trucks that were torched because of minor equipment problems. At one point, Halliburton billed the government for 36 percent more meals than was actually served to the troops while an internal company report said it had overcharged by 19 percent. Another military audit, first revealed by HalliburtonWatch, accused Halliburton of imposing "increased costs to the government" (and therefore higher profits for the company) by purchasing millions of dollars in trucks that were sitting idle and unused in parking lots under Iraq's desert sun. In addition, a report by Halliburton employee revealed how the company was delivering contaminated and unhealthy water to unsuspecting troops throughout Iraq on a regular basis.

Even though Iraq's oil industry was still performing well below par (i.e. not even at the level before the war), early last year Halliburton bailed out of its scandal-plagued oil reconstruction contract with the Army. "It's just not an environment, either legally or risk-wise" to do business, Andy Lane, Halliburton's Chief Operating Officer & Executive Vice President, told investors last year. It's unclear whether Halliburton cut-and-run from the oil work or was pushed out by the U.S. State Department, which had produced a scathing report that harshly criticized the company's work.

Today's decision by the Army means the LogCap contract will be split-up into three companies, reports the Post, with a fourth firm hired to help monitor the performance of the other three. Halliburton will be permitted to rebid on some of the new work. But last year, the company's CEO, David Lesar, said: "If we do choose to rebid, we're going to jack the margins up significantly," a threat that could prove costly to taxpayers if Halliburton is allowed back into any LogCap work.

Halliburton is still permitted to sell its oil services to Iraq's government and companies doing business there, so it's doubtful the company is leaving Iraq entirely. "This is the year of transition for Iraqi reconstruction. The U.S.-funded projects are being completed and transferred to Iraqi management and control," a spokesperson for the Inspector General for Iraq Reconstruction told the Post. Moreover, with the U.S. military still planning to keep a number of "enduring" bases in Iraq, there's likely to be LogCap work there for a long time. Hard to imagine Halliburton won't get a piece of that action.

Thus, the decision by the Pentagon is really just a modest first step designed to improve contract oversight and hopefully keep expenses down, but there's no guarantee that it will do that. Certainly no proof it will eliminate all the fraud. Especially when there is so little oversight.

There's plenty of blame to go around for that. Not just at the Pentagon. The Senate, for instance, could pass Senator Dorgan's Honest Leadership and Accountability in Contracting Act of 2006 And Justice Department attorneys need to release the dozens of False Claims Act cases that have been sitting on their desks for months, effectively paralyzing the best tool that whistleblowers and others who discover fraud have.

In Halliburton's case, moreover, this is really a slap on the wrist, given the company's record. By now it's clear that the Pentagon should be banning Halliburton from all new contract work until the numerous investigations of the company, including criminal investigations, are concluded. Of course the Cheney-esque "culture of corruption" and secrecy virtually ensures that will never happen on its watch -- especially since the head of procurement policy at the GSA is himself about to head off to jail.

But it has happened before. Halliburton was fired in 1997 from most of its LogCap work after charging astronomical prices for delivering things like plywood to Army bases in the Balkans. After that, DynCorp held the contract until 2001. Then, in the first few months after the Bush administration came to power, Halliburton was re-hired exclusively for the contract. The company says they won it in a fair competition, but evidence indicates Cheney improperly played a role in awarding Halliburton the controversial no-bid Iraqi oil infrastructure contract in the weeks prior to the March 2003 invasion. And that first contract was actually ordered under the LogCap. (I.e. outside the scope of the LogCap work.)

Rep. Henry Waxman (D-CA), one of the toughest Congressional critics of all this contracting corruption, told the Post he'd like to see more companies involved in the LogCap contract. "When you have a single contractor, that company has the government over a barrel," Waxman said. "One needs multiple contractors in order to have real price competition. Real competition saves the taxpayer money."

So far, Halliburton has received over $16 billion in revenue from the Pentagon for its work in Iraq that began after the March 2003 invasion.

The Army expects to announce the new LogCap contractors in November.