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Halliburton unit expands war-repair role
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By Stephen J. Glain and Robert Schlesinger, Globe Staff, 7/10/2003
BAGHDAD -- They travel like foreign dignitaries, their SUVs escorted by two
US Army Humvees and a security detail led by a master sergeant. No Iraqi
official is too busy to meet them and when it comes to Iraq's most precious
resource, oil, they are granted total and instant access.
Officials from Kellogg, Brown & Root Services, a subsidiary of oil-services
giant Halliburton Co., are using a broadly worded contract to evaluate and
repair Iraq's petroleum infrastructure, ''as directed'' by the US
government, to gain a huge head start over potential competitors in
redeveloping the country's vast, outdated oil industry. With much of Iraqi
reconstruction bogged down by sabotage, chronic looting, and bureaucratic
mire, KBR -- which also is supposed to repair war-damaged oil wells and
provide general logistical support to the US Army -- has expanded its role
to include everything from gasoline imports to laundry services.
Some Iraqi oil officials say KBR is using what appears to be an open-ended
mandate to effectively corner a market coveted by its rivals and to win
business Iraqis can do themselves.
''We don't need KBR,'' says Dathar Al Khashab, general manager of Baghdad's
Daura Refinery Co., which like Iraq's other refineries badly needs new
equipment after a generation of sanctions. ''I can work with any other
company to do this job.''
KBR's work in Iraq comes under two different contracts. In 2001 the company
was awarded a 10-year contract under the Army Logistics Civil Augmentation
Program, known as Logcap, that calls for the company to provide a wide range
of logistical services to the US Army. By the end of May, KBR had received
$425 million under that contract, according to correspondence between
Representative Henry A. Waxman of California, the ranking Democrat on the
House Government Reform Committee, and the Department of the Army.
Through that contract, KBR had prepositioned personnel and equipment in the
Iraq region -- deployments that in the Army's eyes made the company the
logical choice for an oil infrastructure contract that was awarded soon
after the war in Iraq began.
That KBR contract -- according to Waxman, who is investigating the deal --
has ''no set time limit and no dollar limit and is apparently structured in
such a way as to encourage the contract to increase its costs and,
consequently, the costs to the taxpayer.''
It took Waxman's investigation to uncover key details of the KBR contract,
which was awarded by the Army Corps of Engineers as part of a secret process
by US government agencies charged with rebuilding postwar Iraq. Several of
the companies involved in the closed-door bidding, allowed in times of a
national crisis under federal procurement laws, have close ties to the White
House or were major contributors to the Bush presidential campaign.
In addition to KBR, the winning bidders included San Francisco-based
Bechtel/Parsons Brinckerhoff, which was awarded a $780 million contract to
supervise Iraqi reconstruction. Bechtel, together with Halliburton, donated
more than $2 million in campaign contributions, primarily to Republican
candidates, according to the Center for Responsive Politics. From 1995 to
2000, Halliburton was headed by now-Vice President Dick Cheney.
KBR, according to an Army Corp of Engineers official responding in early
April to Waxman's written queries, was awarded a two-year, $7 billion
contract to put out oil well fires and evaluate the state of petroleum
fields in postwar Iraq.
By early July, five ''task orders'' had been issued under the infrastructure
contract worth more than $282 million, according to a website set up by the
Army Corps of Engineers. The orders included training and advice for safely
shutting down equipment and assessing damage, repairing facilities, building
base camp facilities, and bringing oil into Iraq while indigenous
distribution systems are still being repaired.
The contract was designed to cover a ''worst-case estimate'' of possible
damage, wrote Lieutenant General Robert Flowers, and ''those services
necessary to support the mission in the near term.''
Flowers gave Waxman his written assurance that ''no other contractor could
satisfy the mission requirements.''
That's not how many Iraqis see it. They say KBR's preponderant role in
postwar reconstruction reinforces local suspicion that the invasion of Iraq
was more about promoting American corporate interests than removing Saddam
Hussein. At a time when US officials in Iraq have been criticized for
employing American companies to do what Iraqis are capable of doing on their
own, KBR manages laundry services and a hair salon at US occupation
headquarters.
''KBR is performing tasks as directed by our clients to provide for the
continuity of operations of the Iraqi oil infrastructure, as well as the
logistical support services required as part of the Logcap contract,'' Cathy
Gist, a KBR manager of public and community relations, wrote in response to
e-mailed queries.
Iraqi and US officials offer different interpretations of KBR's core
business in Iraq. Philip Carroll, US adviser to the Iraqi oil ministry, says
the terms of KBR's contract limits the company to a survey of war-related
damage and recommendations on how to fix it. The survey should not cover
equipment damaged or worn out during the 13-year-old UN embargo imposed on
Iraq after Baghdad's 1990 invasion of Kuwait, he said.
By year's end, according to Carroll, KBR will submit its report for
evaluation by the oil ministry, which will use it as a blueprint for the
repair of Iraq's oil infrastructure. ''When they come up with a plan they
will submit it to the ministry, and we will review it and compare it with
the terms of their contract,'' he said.
To hear Iraqi oil officials tell it, the rebuilding process has already
begun, with KBR as both consultant and supplier.
Khashab of the Daura refinery said there is little war damage to evaluate,
because the facility survived the war unscathed. ''We can go straight'' into
rebuilding, he said. ''The refinery is very old, and KBR is happy to help
us. We're sitting down with them, and they're working to get what we need.''
Khashab says he and KBR are discussing ways to upgrade Daura's capacity to
develop light-oil products, such as lubricating oil. It is a procurement job
Khashab says he is perfectly capable of doing without KBR's help. ''But
since KBR is here,'' he said, ''why not work with them?''
KBR's Gist said that the company is conducting ''emergency repairs'' of the
infrastructure.
''KBR personnel continue to assess the situations and inspect the oil
infrastructure, performing repairs as directed by the Corps of Engineers,''
she wrote. ''However these assessments and reviews are not complete, and it
is too early to speculate on an overall condition or course of action.''
Waxman, when informed of the scope of the company's activities in Iraq,
expressed reservations about KBR's expanding role.
''It's important that we provide essential services to our servicemen and
women, but some of the services Halliburton is providing go beyond that and
certainly give the appearance of a `Full Halliburton Employment Act,' ''
Waxman said. ''There may be good reasons why taxpayers are paying a
multinational corporation like Halliburton to cut hair and wash shirts, but
it would be helpful to know why.''
KBR has also been tasked to arrange overland shipments of gasoline to ease
fuel shortages following waves of postwar looting that crippled Iraqi oil
production. Thousands of tanker trucks are entering Iraq each week from
Syria, Saudi Arabia, Turkey, and Jordan, nearly all of which are fixed by
KBR agents. It is a business with which the Iraqis have years of experience;
since the 1991 Gulf War, Iraq provided Jordan with discounted oil in return
for Amman's support of Baghdad's invasion of Kuwait. Those shipments ended
with the coalition assault in March, and Iraqi truckers have been out of
work since then. KBR agents have hired foreign truckers, not Iraqi ones, say
Iraqi transport companies.
''We have enough trucks to do this ourselves,'' says Shahab Ahmed Hamid, a
member of a local truckers' union. ''We were promised subcontracts from the
Americans, but no Iraqi trucks have been employed.''
Stephen J. Glain can be reached at glain@globe.com.
This story ran on page A1 of the Boston Globe on 7/10/2003.
) Copyright 2003 Globe Newspaper Company.