Author: Rep. Waxman and Sen. Dorgan
Published on Jun 28, 2005, 08:01
Rep. Waxman and Sen. Dorgan released a new report today that is the first comprehensive assessment of the magnitude of Halliburton’s unreasonable billings in Iraq. The report documents more than $1 billion in “questioned” Halliburton costs and additional $442 million in “unsupported” charges. According to an Army audit disclosed with the report, Halliburton “inflated” its cost estimates, charged “excessive costs,” submitted millions in “duplicate costs.” The report was released at a Senate DPC hearing that received testimony from a federal official, a former Halliburton employee, and a competitor about Halliburton misconduct and inflated billings.
Reports of Halliburton’s excessive billings have multiplied since the invasion of Iraq. Former Halliburton employees have described how the company charged $45 for cases of soda and $100 to clean 15-pound bags of laundry. U.S. government auditors have also issued dozens of reports finding questionable billings, including unreasonable fuel prices and charges for meals that were never served to the troops.
This report, which has been prepared jointly by the minority staff of the House Government Reform Committee and the staff of the Senate Democratic Policy Committee, is the first comprehensive assessment of the magnitude of Halliburton’s unreasonable billings in Iraq. The report also examines whether officials at the Defense Department gave Halliburton preferential treatment.
The report finds that government auditors at the Defense Contract Audit Agency have identified more than $1 billion in “questioned” Halliburton costs. DCAA challenged most of these costs as “unreasonable in amount” after completing audit action because they “exceed that which would be incurred by a prudent person.” The auditors found (1) $813 million in questioned costs under Halliburton’s Logistics Civil Augmentation Program (LOGCAP) contract to provide support services to the troops and (2) $219 million in questioned costs under the company’s Restore Iraqi Oil (RIO) contract to rebuild Iraq’s oil infrastructure. The magnitude of these questioned costs significantly exceeds previously known estimates.
The DCAA auditors have also found that an additional $442 million in Halliburton’s charges are “unsupported.” As a result, Halliburton’s total “questioned” and “unsupported” costs exceed $1.4 billion. See Table A, below.
A previously undisclosed audit by the Army Audit Agency provides additional detail about the nature of Halliburton’s questioned costs. Because Halliburton is reimbursed for all of its costs and then receives an additional fee as a percentage of those costs, it has a financial incentive to increase the amount it bills to the U.S. government. Army auditors found that Halliburton “inflated” its cost estimates, charged “excessive costs,” billed for equipment that “wasn’t necessary,” and submitted millions of dollars in “duplicate costs” under the LOGCAP contract.
In several instances, the Army auditors found that Halliburton’s cost estimates were many times higher than independent government estimates. Yet military officials “were willing to rely on the contractor’s cost estimates with little or no question.” Consequently, these inflated cost estimates became Halliburton’s “spending targets” rather than accurate reflections of required services.