updated 10/27/2006 2:54:48 PM ET 2006-10-27T18:54:48

The Halliburton subsidiary that provides food, shelter and other logistics to U.S. troops in Iraq and Afghanistan exploited federal regulations to hide details on its contract performance, according to a report released Friday.

The special inspector general for Iraq reconstruction found that Halliburton’s Kellogg, Brown & Root Services routinely marked all information it gave to the government as proprietary, whether it actually was or not. The government promises not to disclose proprietary data so a company’s most valuable information is not divulged to its competitors.

By marking all information proprietary — including such normally releasable data as labor rates — the company abused federal regulations, the report says.

In effect, Kellogg, Brown & Root turned the regulations “into a mechanism to prevent the government from releasing normally transparent information, thus potentially hindering competition and oversight.”

Halliburton spokeswoman Cathy Mann said that since the current contract is being reviewed and may be divided between several contractors, “it is clearly appropriate to mark data as proprietary that could potentially be used for competitive purposes” as would be the case in any new contract.

She said such proprietary markings have been used on a majority of the data for at least the last decade, and the company will work with the military on matters outlined in the interim report as the final audit is completed.

The Iraq reconstruction audits have routinely found significant problems with contracting and rebuilding in the country, ranging from high costs for security and overhead to alleged fraud and lack of oversight.

Sen. Byron Dorgan of North Dakota, chairman of the Democratic Policy Committee, said that in 13 oversight hearings on the war in Iraq the committee found more than $1 billion in waste, fraud, abuse and what it called “shoddy work” by contractors.

“I’m convinced that this is the biggest waste, fraud and abuse in the history of this country,” Dorgan said.

If the Democrats take control of the Senate, he said, they will launch oversight hearings on war matters ranging from faulty intelligence leading up to the war to wrongdoing by contractors.

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