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Taking Aim At War Deals

Several lucrative contracts for postwar Iraq have been awarded to firms with powerful political connections.

A $7 billion contract to cap oil fires in Iraq was awarded to Kellogg, Brown, and Root — a subsidiary of Halliburton, the company once run by Vice President Dick Cheney.

The Army Corps of Engineers sealed the deal without seeking bids from other companies, prompting calls from some in Congress for an investigation, reports CBS News Correspondent Jim Acosta.

"The fact is that we can have billions and billions of dollars, perhaps even a hundred billion dollars spent on these contracts in the next decade and the American people want to see this job done right," said Sen. Ron Wyden, D-Ore.

In a letter to House Democrat Henry Waxman of California, who's called for a probe into the deal, the army denies any wrongdoing, arguing an open bidding process "would have delayed…war-planning in order to obtain security clearances for potential competitors."

Through a spokeswoman, Halliburton insists, "the vice president has absolutely nothing to do with the awarding of defense contracts."

Also under scrutiny is the U.S. Agency for International Development — or USAID — which has limited the number of companies competing for deals to rebuild Iraq.

In the running for an USAID contract is the Bechtel Group. One of its board members, former Secretary of State George Schultz, is a key player in the Committee for the Liberation of Iraq, a bipartisan group that lobbied for the removal of Saddam Hussein.

And while other companies are under consideration, former USAID chairman Brian Atwood says the handling of these contracts sends the wrong message.

"This just enhances the suspicions people have on the way we are operating and I think it's not a good practice," he said.

Other companies are also likely to benefit from the war. In Friday's editions, Roll Call reported that the Bush administration has doubled the amount of money it wants from Congress for missiles, bombs and bullets. That will be a boon to munitions companies, the paper says.

The Pentagon is already backpedaling on the Halliburton deal, predicting the company will make nowhere near $7 billion dollars because the deal was based on a worst-case scenario of widespread oil fires that never materialized.

The Iraq conflict is not the first instance that Bush administration policies have, however indirectly, benefited the vice president's former firm. The company also provided services during the military action in Afghanistan and has contracted with the Defense Department to build cells at Guantanamo Bay for detainees from that war.

Nor is this the first time that Cheney's links to the company have been questioned; he received a package valued at around $20 million when he left the firm to run for vice president. He continues to receive money from the firm in the form of interest on deferred compensation, which is salary he earned before leaving the firm that he elected to receive later, probably for tax purposes.

Halliburton's defenders point out that one reason it gets so many contracts is that it is one of the few firms capable of performing a range of construction and logistics services on a worldwide basis. It's also true that the firm garnered lucrative contracts even during the Democratic Clinton administration.

Halliburton spokeswoman Wendy Hall said the lawmakers have ignored the exemplary record of the Houston-based firm that employed Cheney as chief executive officer from 1995 to 2000 and still pays him deferred compensation for his services during that period.

"With more than 60 years of government experience, KBR has a proven track record on military contracts such as production of Navy warships for World War II, construction of the Phan Rang air base in Vietnam in 1965 and designation as the premier logistics service provider for U.S. troops in the Balkans," she said.

The lawmakers said federal procurement data showed that the government awarded KBR work worth more than $624 million from October 2000 through March 2002.

Hall said Halliburton does not comment on the amounts of its contracts but contended KBR had competed for its government work during the period cited, which disputes the letter's contention.

The lawmakers cited these previous problems with KBR, formerly Kellogg, Brown & Root:

  • A GAO finding in 1997 that the company billed the Army for questionable expenses for work in the Balkans, including charges of $85.98 per sheet of plywood that cost $14.06.
  • A year 2000 follow-up report on the Balkans work that found inflated costs, including charges for cleaning some offices up to four times a day.
  • $2 million in fines paid in February, 2002, to resolve fraud claims involving work at Fort Ord, Calif. The Defense Department inspector general and a federal grand jury had investigated allegations by a former employee that KBR defrauded the government of millions of dollars by inflating prices for repairs and maintenance.

    The Securities and Exchange Commission already is investigating Halliburton's accounting practices, looking into an accounting change made in 1998, during Cheney's tenure as CEO.

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