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Halliburton Subsidiary Faulted For Hurricane Work

POSTED: 05:13 PM ET, 06/17/2008 by Derek Kravitz

"Washington Watchdogs," a periodic feature of the Post's Investigations blog, looks at the findings of the federal government's official investigators.

Reports of problems with defense contractor KBR Inc. just keep piling up.

The Houston-based company's efforts to repair Navy facilities following Hurricanes Ivan and Katrina were deemed shoddy and substandard, auditors say, prompting one technical adviser to claim that the federal government "certainly paid twice" for many KBR projects because of "design and workmanship deficiencies," according to a report (see PDF here) released today by the Defense Department's inspector general.

The report, released following a Freedom of Information Act request, says the U.S. Navy hired KBR, Inc., then known as Kellogg, Brown and Root, in July 2004 to repair Defense Department facilities after Hurricanes Ivan and Katrina. The federal government agreed to pay the company $500 million over five years.

At the time, the company was a subsidiary of Halliburton, the Texas oil company, whose former chief executive is Vice President Dick Cheney.

As part of the Navy project, KBR was tasked with removing water-damaged carpet and drywall; applying temporary roofing; removing debris; and building trailer parks for displaced Navy families at the Naval air stations in Pensacola, Fla.; Gulfport, Miss.; the Stennis Space Center in Hancock County, Miss.; and other Navy facilities in the Gulf Coast region.

Among the inspector general's findings:

-- KBR awarded sole-source or limited competition subcontracts that overpaid hourly rates to roofers and paid $4.1 million worth of services and meals that should have cost only $1.7 million

-- The Navy entered into an illegal "cost-plus-percentage-of-cost" contract with KBR, the audit found. As a result, higher costs meant higher profit and KBR was rewarded for "inefficiency and non-economical performance."

-- KBR was paid nearly all of the contract amounts despite "marginal-to-average performance," the audit found.

The audit recommended the Navy try to recoup about $8.4 million in "excessive" equipment lease payments and material profits and noted several over-the-top costs, including employees getting $540 per month for cell phone charges during roof repairs; $720 per month in gas charges despite existing payment of work site fuel expenses; and expensive meals, including steak and eggs (full meal prices were redacted from the report).

Investigators also found that as part of the recovery effort, KBR was hired to build trailer parks for Navy personnel displaced by Hurricane Katrina. Each trailer was supposed to have 200 amps of electricity and water piping.

But the subcontractors hired by KBR gave each trailer 100-amp outlets and failed to lay piping at proper building code levels. As a result, a second contractor was paid $200,000 to fix the problems in the KBR construction, the audit said.

KBR officials responded to the mounting criticism, saying they worked in conditions where "surrounding infrastructure and the local labor pool were decimated."

The company was also featured in a New York Times story today about Charles M. Smith, the former senior civilian who oversaw a multibillion-dollar contract with KBR during the first two years of the war. Smith told The Times that he was forced from his job in 2004 after informing KBR officials that the Army would impose escalating financial penalties if they failed to improve their chaotic Iraqi operations.

--Derek Kravitz

By Derek Kravitz |  June 17, 2008; 5:13 PM ET Washington Watchdogs
Previous: U.S. Hid Abused Detainees, Congress Finds | Next: Psychology of Suffering Detainees Examined


Please email us to report offensive comments.

The real question is how much has KBR donated to W and GOP?

Posted by: Garak | June 17, 2008 6:17 PM

Almost daily we read or hear about some audit or investigation that showed how the government managed to spend 2X, 3X or more on some project that any self-respecting, responsible business person could have done far better and at considerably lower cost. Why isn't some action being taken? Why does this continue business-as-usual? Why do we tolerate such ineptitude from our elected officials, both state and federal? Why, why, why?

Posted by: tmurt | June 17, 2008 6:21 PM

THIS is what ALWAYS happens when republicans are allowed to hold office.

Republican, corruption and treason is thy name.

Posted by: Frank D | June 17, 2008 6:23 PM

One thing you can say about the republicans is that their huge scandal a day plan even beats Brittany Spears!

Posted by: Frank D | June 17, 2008 6:26 PM

Nothing will ever come of this. The Democrats are in on it too. Everything that's going down suits the powers that be, otherwise - it wouldn't be going down. The country cannot be and does not deserve to be rescued.

Posted by: Luke R. | June 17, 2008 6:26 PM

These type of government contractors are nothing more than economic terrorists. They are doing more to damage America than Bin Laden and his boys. I would hope that someone one in Washington would wake up and do something about this but I guess the U.S. government has about as much chance of stopping this corporate corruption as does the Italian government in stopping the Mafia in Naples. These American economic terrorists have permeated the whole U.S. government.

Posted by: ecomcon | June 17, 2008 6:43 PM

Business as usual per the GHW Bush family longstanding rape of the US treasury for friends of theirs. That is what George Walker Bush learned at the feet of his mother and father and grandfather. Of Course the Republican Credo has always been 'we are for conservative economic and moral values when the other guy is in charge but the Republican credo is we rape our spoken conservative economic and moral values when we are in charge.' Nothing is new check the Reagan era.

Posted by: russell | June 17, 2008 6:50 PM

Sounds just like the vice presidents work for the and workmanship deficiencies...In other words you suck DICK!! Dick.

Posted by: 1-20-09 | June 17, 2008 7:00 PM

As Floodwaters Rise, Bush Vows to Speed Relief...Money to Iraq for the carlyle group and haliburton - F U C K THE USA
is the bush motto...

Posted by: 1-20-09 | June 17, 2008 7:09 PM

KBR will likely get a few more million just to help them get over the costs of this audit. When Darth Vader is a major shareholder in your firm (yes, the VP still is) you can do no wrong. The Empire is always right and everyone is always wrong, no exception. Move along people and please, do not write your Senators or Representatives about this issue or you will be audited and possibly jailed. Move along people, nothing to see here.

Posted by: thw2001 | June 17, 2008 7:27 PM

"The federal government agreed to pay the company $500 million over five years."

"The audit recommended the Navy try to recoup about $8.4 million...."

$8.4 million on a $500 million contract? That's less than 2% of the contract.

If there was egregious behavior on the part of KBR, it's hard to tell from these numbers.

Posted by: WylieD | June 17, 2008 7:30 PM

I'm thinking not only will KBR not be forfeiting a penny on this contract they are going to pick up a big fat performance bonus.

Posted by: marc | June 17, 2008 7:44 PM

I've watched Brown & Root get away with stuff like this for years on both government and private contracts. I don't know how they manage to stay in business, but it's cost us taxpayers a fortune. Best that the government not investigate, just shut the company down, period.

Posted by: Joe | June 17, 2008 8:10 PM

I find this very difficult to believe.

Posted by: Cletus | June 17, 2008 8:40 PM

Following their fine work on those no-bid contracts in Iraq, Halliburton just keeps raping the American taxpayer, thanks to GOP friends like Cheney and Bush. Is there no end to the fraud, incompetence, corruption and arrogance of the Bush administration? Isn't 35 high crimes and misdeameanors enough to impeach the GOP traitors?

Posted by: Tom | June 17, 2008 8:42 PM

Actually Garak, the real question is:

"How many shares of Halliburton and KBR does Vice President Cheney hold today, and how much has the value of those holdings increased since 9/11?

Vice President Cheney chose to disclose his holdings in Halliburton rather than liquidate them into a blind trust. It is allowed, however, for obvious war profiteering reasons most Vice Presidents and Presidents have employed a blind trust for their holdings in the past. This is to eliminate any chance of a conflict of interest.

Since Vice President Cheney KNEW we were going to war with Iraq his anticipation of earnings in Halliburton most certainly played a role in his decision to become a war profiteer on the lives of our finest citizens: The fallen and injured men and women in our volunteer armed services.

Here is a link to a chart of Halliburton stock performance. Select the ten year time line once the chart appears to determine the increase in profit Vice President Cheney has enjoyed as men and women in uniformn die:

Posted by: JBE | June 17, 2008 9:16 PM

I'm not surprised . Chalk it up to Bush's and the republicans failed policies.

Posted by: pam , s.c. | June 17, 2008 9:40 PM

to tmurt

Actually, there is at least ONE person in Government that's been trying to get to the bottom of the Bush Administration's recklessness for years, and that's Rep Henry Waxman. He has instigated hundreds of investigations into Bush's policies and the waste they've consistently contained.

The reason nothing gets done is because of the 50/50 split in Government. Once Democrats get a wider margin of votes you'll see that the Republicans won't be able to kill investigations or tie up the votes any longer.

Look at this this way. Dunring Bush's first term, with a Republican Congress, there were ZERO investigations in waste and fraud. The Pubs just covered it all up to protect their party (screw the nation, right?)

After the Dems got control in 04, they started investigating almost immediately (usually spearheaded by Waxman). But... he doesn't have the numbers and votes yet. After the next election, after there is a REAL Democratic majority, you'll see some of these traitors and money grubbers going to jail for the unbelievable way they've run things. The right wing pundits will complain (that's ALL they do ALL the time anyway), but without the Government to protect them any longer, The Bush Administration's participants will keep the courts busy for years to come. Too bad it can't happen now.

Posted by: Sam | June 17, 2008 9:56 PM

Impeach Halliburton!

Chimpy is just their errand boy.

Posted by: Impeach now | June 17, 2008 10:34 PM

Ecomcon has it exactly right..


Posted by: dt | June 17, 2008 10:42 PM

Halliburton has plundered and pillaged the treasury and stuck the taxpayers with the check. This is indeed the great train robbery of the twenty-first century.

Posted by: Black and Bitter like Coffee | June 17, 2008 10:50 PM

Why aren't FOX NEWS, Rush Limbaugh, Laura Ingraham, Bill OReilly and all of the other screamers who are constantly questioning other peoples' patriotism screaming about this? Isn't this Anti-American? My take is that since they are all millionaires, they are all probably benefiting from this cronyism in some way, even if they just own stock in KBR. And they are helping "the cause" by distracting the public from it.

Posted by: bklyn ny | June 17, 2008 11:17 PM

Why aren't FOX NEWS, Rush Limbaugh, Laura Ingraham, Bill OReilly and all of the other screamers who are constantly questioning other peoples' patriotism screaming about this? Isn't this Anti-American? My take is that since they are all millionaires, they are all probably benefiting from this cronyism in some way, even if they just own stock in KBR. And they are helping "the cause" by distracting the public from it.

Posted by: bklyn ny | June 17, 2008 11:18 PM

I agree with one of the posters above: both parties are colluding with Halliburton to push these contracts through and quash all accountability. As for Mr. Waxman's fruitless investigations, I suspect his failures have less to do with Congressional votes than electoral ones. Remember, it was Nancy Pelosi who declared the impeachment of G-Dub "off the table."

What a shame.

Posted by: William B | June 17, 2008 11:34 PM

Just another example of how Bush, Cheney, and the RepubliCON party love and support the troops.

But it's okay to defraud the American people because they have the big "R" next to their names.

And McCain supports more of the same.

Posted by: Michael | June 17, 2008 11:49 PM

Since I live in New Orleans, I got to see first hand how much money was wasted and continues to be wasted. We didn't get 1 dime from FEMA and was even turned down for the $2000 emergency FEMA handouts. My wife and I don't know a single person, that got 1 cent of that money. The grants they gave to people, didn't even say they had to spend it rebuilding their homes. Most of the people who got them, were already well off. In the end, we didn't get a dime and never will. The best thing FEMA did was to supply ice, because we were 3 months without power. Running on a small diesel generator, we had no refrigerator. Last week FEMA announced there would be no ice in any future disasters, and we should make our own arrangements. With no power, how the hell is that possible? I can't wait to see gas go to $6.00 or more a gallon, the next time a hurricane hits the gulf. We give the country a 1/4 of it's oil and natural gas, but the pristine state of Florida won't allow a drop. I guess we're just a worthless swamp, and don't deserve any respect? We're both college educated and not dumb coon asses! That's slang for Cajun's!

Posted by: Bill P. | June 18, 2008 12:00 AM

I think the only thing I want to see next January is Bush and Cheney lead out the White House in handcuffs and shackles for what they have done to the U.S. in the name of profits.

Posted by: Pat | June 18, 2008 12:13 AM

KBR & HALLIBURTON...When is enough...enough?

The trust that was set aside with the administration is surely return above the national average for anything. Think about something, they have that beat as well! Now, Missionary Dick Cheney has to be held accountable for the actions of his prior employer and recently found some untapped oil reserves. Bush wants to ease on USA drilling for offshore capabilities! I see this problem coming up way after the current resident vacates 1600. And in doing so; please allow for breakdowns in syntax, recovering alcoholics (not), no exceptions. Do you have any idea how much our great country has been swindled by the James Gang, aka Bush, Cheney, and that damned aflack duck! I am looking forward to challenging this administration to do the right thing and stay out of any restoration of projects through the balance of this administration. We have to stop the hemorrhaging and apply a tourniquet.. These people are brutal. With the Bush family being the poster family for substance abuse, it makes you wonder who would want to rally behind 'W'? Furthermore, I have credentials for this type of recovering addict stuff. In this case, George Walker Bush, aka C minus at Yale! And for Missionary Dick, are we sure Dickie boy even knew what it took to make a baby? If when he sees a romantic interlock, beware and be sure Missionary Dick is not carrying that 'Dick in a box' thingy. And about gay marriage, let's not get your pants in a snit! The ruling gives the unconventional partners a balance that is required. However, the only recourse is to make that union, just as responsible. We and the courts did the correct thing. There needs to be furthers assurances between people who are not directly who you think they are! But, now they have no need for at stupid camouflage as the world is dealing with the euro and they couldn't be bothered! Stupid is what stupid does! Nothing!

Posted by: carmelita chico | June 19, 2008 9:19 PM

Just a small one: Like any normal client engaging its contractor, the contractor conforms to the requirements of its client, not the other way around, so why would the Navy be willing to accept a cost-plus contract in the first place? The Navy is in the prime negotiating position, not KBR. If the cost-plus contract was illegal, why did the Navy sign it with KBR?

Posted by: Australia | June 30, 2008 8:41 PM

I've invested some time in reading the report "Hurrican Relief Effort Costs on the Navy Construction Capabilities Contract", May 23 2008, D-2008-097.

I don't believe the original writer of the article has enough technical understanding of contract administration and contract law to be able to provide an accurate opinion on the matter.

If you read D-2008-097, the onus of responsibility has fallen quite substantially on NAVFAC, who were required to address serious procedural deficiencies relating to cost control, contract administration (including tender evaluation, and administering contract variations), and award fee determination to KBR.

The report also indicates KBR needed to address their ability to accurately assess variation costs, provide succient and sufficient scopes of work, and points to the high potential disincentive for efficient project execution due to the cost-plus nature of the contract that was signed by NAVFAC, and which was in fact initiated by NAVFAC.

The article written above also doesn't refer to the quite particular matter of the project's execution environment where an extremely compressed project schedule and disturbed market conditions had a significant effect on the commercial decisions made in doing the remedial work in a timely manner.

The various other commenters on this site have taken what the original writer of the article has written at face value without interrogating the source information more deeply.

Posted by: Oz | July 2, 2008 1:39 AM

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