Thursday, July 13, 2006

Army to rebid huge Halliburton contract

Army to rebid huge Halliburton contract
By Will Dunham

WASHINGTON (Reuters) - The U.S. Army said on Wednesday it will end a Halliburton Co. unit's multibillion-dollar contract to provide logistical support to soldiers in Iraq and other parts of the globe, and will rebid the contract later this year.

Army officials said they will not renew the contract awarded in 2001 to Halliburton subsidiary KBR to provide water, dining and laundry services and transport fuel and other items, including mail, to U.S. troops.

Instead, they described a plan to divide the work among three companies, with a fourth supporting the work. "It will be rebid," said Dave Foster, an Army spokesman at the Pentagon, adding KBR is free to take part in the new competition.

Texas-based Halliburton, formerly run by Vice President Dick Cheney, has drawn scrutiny from auditors, congressional Democrats and the Justice Department for the quality and pricing of its work in Iraq.
KBR has gotten orders worth $17.1 billion since the start of the contract, including about $15.4 billion in Iraq, according to Army figures.

"The termination of Halliburton's contract is long overdue. Taxpayers can breathe easier knowing that the days of $45 cases of soda and $100 bags of laundry are coming to a close," said Rep. Henry Waxman, top Democrat on the House of Representatives Government Reform Committee.

"It should not have taken five years for the Bush administration to realize that competition reduces costs and improves performance," added Waxman, of California.

Halliburton is the world's second-largest oil services company and the U.S. military's biggest contractor in Iraq. Cheney's office has said the vice president played no role in securing the company's Iraq work.

The Army said it will solicit bids on July 28 and expects to award in late November a contract for one year with four option years.

Engineering and construction firm Fluor Corp. may bid. Lisa Glatch, president of Fluor's government group, said the opportunity to bid was "very interesting to us."

Northrop Grumman said it would study the Army's needs while Lockheed Martin said it was premature to comment. Boeing Co., the Pentagon's top supplier after Lockheed, said none of the work was in its core businesses.


"It falls under lessons learned," the Army's Foster said when asked why the Army decided to rebid the contract. "We're constantly working the process -- lessons learned, how can we do things better, what may offer a better, more effective way of doing that."

Foster did not specify the nature of "lessons learned."

Halliburton said the U.S. Army's move did not come as a surprise.

"It is neither unusual nor unexpected that the LOGCAP contract may be replaced with another competitively bid approach as previous iterations of this contract vehicle have experienced," Halliburton spokeswoman Melissa Norcross said in a statement.

The company defended its troop support work. In Iraq, Kuwait and Afghanistan, KBR said it has prepared nearly 375 million meals, washed more than 18.5 million bundles of laundry and transported supplies more than 100 million miles.

"By all accounts, KBR's logistical achievements in support of the troops in Iraq, Kuwait and Afghanistan have been nothing short of amazing," Norcross said.

Shares of Halliburton ended down 70 cents at $74.88 on the New York Stock Exchange Wednesday, amid a broad retreat in U.S. stocks. Over the last 12 months its shares have traded a low as $45.77, in July last year, and as high as $83.95, on April 20.

Halliburton declined to comment on whether the Army's move would affect its planned initial public offering of KBR stock, expected to raise up to $550 million.

One company watcher said the company had been telling investors for months the government could end the contract.

"I wouldn't think this would have much impact on (KBR) one way or the other," Kurt Hallead, analyst with RBC Capital Markets said.

(Additional reporting by Matt Daily in Houston and Jim Wolf in Washington)