washingtonpost.com

Contracts to Rebuild Iraq Go to Chosen Few

By Jackie Spinner
Washington Post Staff Writer
Friday, March 28, 2003; Page E01

KBR, the company the U.S. government picked this week to put out oil-field fires in Iraq, has a long history of working for the military on big projects in foreign hot spots. The former Kellogg Brown & Root -- a subsidiary of Houston-based energy services firm Halliburton Co., which Vice President Cheney headed from 1995 until 2000 -- developed a contingency plan for extinguishing the fires as part of a 10-year Pentagon logistics contract it was awarded in 2001 through a competitive bid, company officials said. So when the U.S. Army Corps of Engineers needed a firm to douse fires ignited by retreating Iraqi forces, the company was already on the ground in Kuwait. "KBR have been over there, and they had an existing contract with the Army," said Scott Saunders, a spokesman for the Corps of Engineers. "Because of that and because of that need to snuff those fires quickly, KBR was sole-sourced." The work is being subcontracted to Boots & Coots International Well Control Inc. and Wild Well Control Inc.

The latest contract was awarded under a waiver the Bush administration granted in January, allowing government agencies to handpick companies for Iraqi reconstruction contracts. The U.S. Agency for International Development is handling the bulk of the contracts. KBR is also on the short list of companies the USAID invited to bid for the prime contract to rebuild Iraq's infrastructure after the war, including highways, bridges, airports and government buildings. The others include Fluor Corp., Washington Group Inc., Bechtel Group, Louis Berger Group and Parsons Corp. That contract, for at least $900 million, could be awarded as soon as today. The government is proposing to spend $2.4 billion on humanitarian aid and reconstruction in Iraq.

Halliburton plans to put KBR and another subsidiary into bankruptcy protection this summer as part of a plan to settle outstanding asbestos-related claims for about $4 billion. But KBR's government operations aren't part of that plan, Halliburton said.

Some government contract experts said the latest KBR award shows how companies with long-standing ties to the military get dibs on new work. The company has been building ships , mess halls and toilets at base camps around the world for six decades, originally as Brown & Root. Over the past decade it has won contracts to provide logistical support to troops, most recently in Somalia, Haiti and the Balkans.

But the experts said the problem is that not putting the contracts out for bid allows critics to question the fairness of the process and whether the most politically connected companies have an edge in getting the awards.

"The administration has made potential use of shortcuts and exceptions that let it put literally billions of taxpayer dollars in the hands of selected contractors," said Charles Tiefer, a law professor at the University of Baltimore and the author of a casebook on government contracting. "Naturally, a large credibility gap looms between the administration's plausible excuses that tight deadlines and exceptional security needs compelled it to forgo the usual competitive safeguards and the critics' observations that it is awfully convenient for juicy plums to land in the lap of the vice president's former company."

William H. Carroll, a government contract lawyer who also teaches at American University's Washington College of Law, said there is justification for getting the contracts out as soon as possible. But he said it could come at a price.

"Because of the intense nature of the need to do things quickly, the work may not be as well defined, and the fact that there isn't a competitor putting pressure on price, these are probably going to be expensive contracts," Carroll said. "I don't think there's an evil intent. But our procurement process relies on competition to determine what is a fair and reasonable price."

The General Accounting Office found in September 2000 that the U.S. Army had not done enough to contain costs associated with KBR's $2.2 billion work providing logistical and engineering support in the Balkans.

Officials "frequently have simply accepted the level of services the contractor provided without questioning whether they could be provided more efficiently or less frequently and at lower cost," the report said. The company and the Pentagon disputed the findings, which did not question the quality of the work KBR had performed.

The Corps of Engineers said the value of the KBR contract in Iraq will depend on the scope and number of fires it will have to extinguish during and after a war that has not yet ended. So far there are seven oil fires burning in Iraq. Steven L. Schooner, co-director of the Government Procurement Law Program at George Washington University's law school, said KBR's track record is not in question.

"They have won the hearts and minds and stomachs of the military," he said. "They have done a fabulous job, and our troops are better off for it."

Schooner said the Cheney connection to Halliburton should not be an issue. But, he said, the noncompetitive nature of awarding the Iraqi reconstruction contracts has made it one.

"Had these contracts not been awarded in a secretive manner it would be easier to cut off the questions earlier," he said.

© 2003 The Washington Post Company