An ad that began airing June 15 portrays a white-coated White House waiter serving contracts and wads of cash, while an announcer says the Bush administration gave Halliburton no-bid contracts "on a silver platter" and that the company was "caught" overcharging by tens of millions of dollars.
But in fact, investigators from the General Accounting Office (GAO) found Halliburton's no-bid contracts to be legal and probably justified by the Pentagon's wartime needs. Furthermore, Pentagon auditors have yet to make any final determination of whether payment should be denied to Halliburton for gasoline or meals for troops. Those billing disputes are still being negotiated.
(Note: See the italicized "footnote" below for Moveon PAC's response to this article.)
The latest ad to malign Halliburton is called "Platter." MoveOn PAC says it is spending $1 million to air it in Ohio, Missouri, Oregon, Nevada and Washington, D.C. But what it says is either unproven or contradicted by federal investigators.
MoveOn PAC Ad: "Platter"
Announcer: The Bush administration gave Dick Cheney's old company no-bid contracts for Iraq on a silver platter.
(Graphic: "Up To $7 Billion In Contracts; Halliburton")
Announcer: Then the Pentagon caught Halliburton overcharging $61 million for gasoline. Worse, they billed over $100 million for meals for our troops that they never delivered. And George Bush is still doing business with them.
(Graphic: Caught Overcharging; Didn't Deliver Meals)
Announcer: George Bush. A failure of leadership.
MoveOn PAC is responsible for the content of this advertisement.
The ads went up June 15, stating that the company's no-bid contract for Iraq came "on a silver platter." That's an opinion held by many, of course. But evidence to the contrary came to light in House hearings held just as the ads were appearing.
The head of the GAO told a House watchdog committee that it had looked into no-bid contracts in Iraq, including Halliburton's, and concluded that the Pentagon and other agencies "generally complied with applicable laws and regulations governing competition" when awarding them. Comptroller General David Walker faulted the Pentagon for some add-ons to those contracts, called "task orders," that he said were not properly justified in writing prior to the award. But he also said the agencies probably would have been able to formally justify the awards given urgent wartime needs (emphasis added):
Comptroller General David Walker: Importantly, given the war in Iraq, the urgent need for reconstruction efforts, and the latitude allowed by the competition law, these task orders reasonably could have been supported by justifications for other than full and open competition.
Preceding Walker's testimony was a formal GAO report to Congress stating, among other things, that the Army Corps of Engineers "properly" awarded a sole-source contract for rebuilding Iraq's oilfields (emphasis added):
GAO Report: For example, the Army Corps of Engineers properly awarded a sole-source contract for rebuilding Iraq's oil infrastructure to the only contractor that was determined to be in a position to provide the services within the required time frame.
That contract, of course, went to Halliburton's subsidiary, Kellogg, Brown & Root. So much for critics alleging that the Bush administration showed favortism to Halliburton because Vice President Cheney was once its CEO.
Gasoline:The ad makes a claim that Moveon can't back up when it states that "the Pentagon caught Halliburton overcharging $61 million for gasoline." To support that claim Moveon points to an Associated Press story from last December. But that's not what the AP story said. The AP reported that a Pentagon audit found Halliburton "may have overcharged the Army" and that the auditors found "potential overcharges of up to $61 million for gasoline."
The difference between a potential overcharge and an actual overcharge is a big one, of course. It's the difference between a suspicion and a proven fact. The AP story and other news accounts were based on a preliminary audit by the Defense Contract Audit Agency (DCAA), and Halliburton disputed the findings and insisted that the high prices it charged for gasoline were made necessary by wartime requirements imposed by the Pentagon. "We believe that once the DCAA receives our response, it should be clear that no overcharges have occurred," the company said in a news release at the time.
In fact, the gasoline billing dispute is still being reviewed by the Defense Contract Audit Agency, and is still considered a "potential" overcharge. A March 11 story in The Wall Street Journal reported that the Pentagon had asked the Department of Justice to look into the gasoline matter also, raising the possibility of a criminal investigation. However, a Department of Justice spokesman contacted June 18 would give no information about that.
One serious matter regarding gasoline wasn't caught by the Pentagon, either. It was caught by Halliburton's own internal auditors, who accused two company employees of taking kickbacks from subcontractors for allowing them to inflate the price they charged Halliburton for gasoline. Halliburton fired the employees and tentatively refunded $6.3 million to the Pentagon. That's still under review by Pentagon auditors and also by the Pentagon Inspector General.
Meals for Troops: The ad is partly right when it says Halliburton "billed over $100 million for meals for our troops that they never delivered." It is true that Pentagon auditors have withheld payments to Halliburton for meals served to troops, pending completion of its review of possible overcharging. And the disputed amount has grown to $186 million, actually. But that's not the whole story.
To start, Halliburton says its contract never called for billing according to meals actually served. The matter is still under review and auditors have made no final determination. Halliburton continues to insist that the matter will be resolved in its favor.
There's also disagreement over the size of the possible overcharge, should Halliburton's reading of its contract prove wrong. The company estimates that it has billed for 19 percent more meals than were actually consumed, while DCAA auditors say the figure could be as high as 36 percent.
The numbers are daunting; Halliburton has billed $800 million so far to build and operate more than 60 military dining halls in Iraq and Kuwait. The company says it's a tough job: it has to plan, purchase and prepare meals based on estimates because guessing who's coming to dinner in a war zone is complicated when soldiers go on leave or troops are shifted to other locations. The company said in a news release Feb. 2:
Halliburton news release: It is difficult to determine how many people will be at the dinner table in the middle of a war zone . . . This is not a neighborhood restaurant where you can quickly total up all the dinner tabs.
Nevertheless, the head of the DCAA, William Reed, testified June 15 to the House Committee on Government Reform that his auditors have found "substantial deficiencies" in the data provided by Halliburton to support its billing. "We are continuing to evaluate additional supporting information provided by KBR (Kellogg, Brown & Root, the Halliburton subsidiary) and will be issuing final recommendations . . . in the near future."
After that, the Pentagon contracting officer may or may not accept the DCAA recommendations. Should the Pentagon ultimately deny payment Halliburton would still have the option of going to court. So the matter is far from resolved.
Failure of Leadership?
The ad concludes by accusing Bush of a "failure of leadership" because he is "still doing business" with Halliburton. That suggests Bush should have cut off federal contracts to the company. However, it's far from clear that federal officials have grounds for such a serious move.
In the technical language of federal contracting, cutting off a contractor is known as "debarment" or "suspension." Both require due process, and are not supposed to be undertaken lightly.Under federal regulations, a contractor may be debarred from bidding for federal contracts for up to three years if convicted of such serious offenses as violating antitrust statutes, embezzlement, theft, forgery, bribery, falsification or destruction of records, making false statements, tax evasion, or receiving stolen property, or "commission of any other offense indicating a lack of business integrity or business honesty." Even suspending a contractor temporarily is deemed a serious matter "to be imposed on the basis of adequate evidence." Moveon's ad amounts to demanding sentence first, verdict afterwards.
(Footnote: Moveon's Web site goes even further than its ad, flatly accusing Halliburton of fraud. It says, "While soldiers are dying in Iraq, Dick Cheney's old company Halliburton has defrauded the government of millions and charged for meals for the troops which were never delivered."
That's a serious charge; fraud is a crime. In fact, Halliburton has not even been charged with fraud, much less convicted.)
Footnote: On June 25 Moveon PAC's executive director Eli Pariser sent us a rebuttal to this article and said his organization still stands by its ad. Their rebuttal quotes various newspaper clips and Democratic critics of Halliburton. It challenges none of the specific facts stated in this article, nor does it change our view that the Moveon PAC ad makes it seem that Halliburton has been found guilty of wrongdoing when in fact it has not. Nevertheless, we are posting their rebuttal in full, both as a courtesy to Moveon PAC and as a service to our readers. A link to the Moveon PAC rebuttal is posted in "supporting documents" in the right column.
David M. Walker, Comptroller General of the United States, "CONTRACT MANAGEMENT: Contracting for Iraqi Reconstruction and for Global Logistics Support," Testimony Before the Committee on Government Reform, House of Representatives, 15 June 2004.
General Accounting Office, “REBUILDING IRAQ: Fiscal Year 2003 Contract Award Procedures and Management Challenges,” June 2004.
Associated Press, "Halliburton: $61m Overcharge?" CBSnews Web site 12 Dec 2003.
Halliburton Corp, "HALLIBURTON ADDRESSES DEFENSE DRAFT AUDIT: Company says work is fairly priced, high quality," news release, 18 Dec 2003.
Halliburton Corp, "HALLIBURTON SAYS WAR-TIME CONDITIONS MAKE IT HARD TO “GUESS WHO IS COMING TO DINNER,” news release, 2 Feb 2004.
Neil King, Jr. & Glenn R. Simpson, "Pentagon Asks Justice to Join Halliburton Probe -- Move Suggests Investigators Seek Grounds for Penalties Over Billing for Fuel in Iraq," Wall Street Journal, 11 March 2004; A1.
William H. Reed, Director, Defense Contract Audit Agency, Statement before House Committee on Government Reform 15 June 2004.
(Note: Document is dated June 9, the date the testimony was originally to be delivered. However, the testimony was delivered June 15 after the hearing was postponed due to former President Ronald Reagan's funeral.)
Federal Aquisition Regulation, Subpart 9.4 - Debarment, Suspension, and Ineligibility.