Top Army Official Calls for a Halliburton Inquiry

The New York Times
October 25, 2004

THE BILLIONS
Top Army Official Calls for a Halliburton Inquiry
By ERIK ECKHOLM

The top civilian contracting official for the Army Corps of Engineers, charging that the Army granted the Halliburton Company large contracts for work in Iraq and the Balkans without following rules designed to ensure competition and fair prices to the government, has called for a high-level investigation of what she described as threats to the "integrity of the federal contracting program."

The official, Bunnatine H. Greenhouse, said that in at least one case she witnessed, Army officials inappropriately allowed representatives of Halliburton to sit in as they discussed the terms of a contract the company was set to receive.

Her accusations offer the first extended account of arguments that roiled inside the military bureaucracy over contracts with the company.

In an Oct. 21 letter to the acting Army secretary, Ms. Greenhouse said that after her repeated questions about the Halliburton contracts, she was excluded from major decisions to award money and that her job status was threatened. In response, Army officials referred her accusations to the Pentagon's investigations bureau for review and promised to protect her position in the meantime.

Ms. Greenhouse, 62, is a veteran of military procurement and serves the Corps of Engineers as the principal assistant responsible for contracting - the top civilian overseeing the agency's contracts. She also has chief responsibility for reviewing adherence to Pentagon rules intended to shield awards from outside influence and promote competition.

The contracts to Halliburton, a Houston-based conglomerate headed by Dick Cheney before he became vice president, have stirred controversy and charges of favoritism because some were granted on an emergency basis, without competitive bidding. The company's operations in Iraq, involving work for more than $10 billion, have also been dogged by charges of overbilling and waste and have been an issue in the presidential campaign.

The Pentagon has asserted that, as the invasion of Iraq began, Halliburton was the only company able to provide services with the required speed and secrecy. But Pentagon auditors later questioned the company's billing practices and found examples of reckless spending or unjustified charges.

Halliburton has repeatedly denied any wrongdoing, saying it has performed well in a war zone and that many of its critics are politically motivated.

Ms. Greenhouse's lawyers sent the letter on her behalf to the acting secretary of the Army, Les Brownlee, calling for a high-level investigation of what the letter describes as threats to the "integrity of the federal contracting program."

They sent copies to several Congressional committees, and a copy was provided to The Times by a Congressional staff member. Portions of the letter were described in Time magazine on Sunday.

In a response dated Oct. 22, Robert Fano, a senior lawyer in the Department of the Army, said that the acting secretary had referred her letter to the Pentagon inspector general "for review and action as appropriate" and that he had directed the Army Corps of Engineers "to suspend any adverse personnel actions" against Ms. Greenhouse.

Some of the contracts Ms. Greenhouse says she questioned, including a noncompetitive agreement with the Halliburton subsidiary Kellogg Brown & Root in early 2003 for Iraqi oil repairs that was initially worth up to $7 billion over five years, have already attracted debate in Congress and the news media. In the resulting firestorm, the contract was later shortened to one year and supplanted by a competitive process, just as Ms. Greenhouse had recommended initially.

Another decision, made this spring to extend for an extra 11 monthswithout bidding a K.B.R. contract providing logistical services in the Balkans, has received less notice. In this case, Ms. Greenhouse asserted, where operations have continued for four years, claims of an emergency or that Kellogg Brown & Root was the only feasible provider were not tenable. The company is expected to draw $165 million from the extension.

Mr. Kohn said Ms. Greenhouse was "absolutely not" seeking financial rewards through a lawsuit under the federal whistle-blower act, which offers substantial sums to government workers who expose fraud. Nor, given her senior executive status, can she be easily fired by the agency, though she could be moved to a less responsible position.

"The contracting process at the Army Corps of Engineers has broken down, and she feels she can't continue to do her job as she sees it," said Michael D. Kohn, a partner of Kohn, Kohn & Colapinto, which represents Ms. Greenhouse and signed the Oct. 21 letter, in a telephone interview.

Ms. Greenhouse said she would not grant interviews without permission from her employer, fearing possible retribution, Mr. Kohn said.

"Employees of the U.S. government have taken improper action that favored K.B.R.'s interests," the letter said, and Ms. Greenhouse "experienced repeated interference with her role" as chief monitor.

In the case of the 2003 Iraq oil award, Kellogg Brown & Root was given a secret contract months before to draw up plans for fixing oil facilities. Once the invasion began, as the letter relates, it was then deemed the only company in a position to carry out the plan.

Ms. Greenhouse says she argued strenuously that a noncompetitive contract should not be given for more than one year. Instead, the company was given a five-year contract worth up to $7 billion.

As they worked on the final contract, she asserts, Army officials held a meeting on Feb. 26, 2003, to discuss tasks and costs, and Kellogg Brown & Root representatives were invited to attend. "Eventually the discussions turned to matters that Ms. Greenhouse concluded were outside the scope of information K.B.R. should be privy to" before the contract was fully defined, the letter said.

On her protest, the company officials left the room, but "the line between government officials and K.B.R. had become so blurred that a perception of a conflict of interest existed," the letter said.

The company gained $2.4 billion on the oil contract in the first year, before the Pentagon cut it short and put out competitive bids. The company won a part of the continued work.

In another case, in late 2003 when Pentagon auditors found that Halliburton may have overcharged the government $61 million for fuel, the Army Corps of Engineers issued an unusual waiver calling the price reasonable. Ms. Greenhouse says in her letter that officials deliberately excluded her from the decision and had one of her subordinates sign off on the waiver.