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Halliburton denies price gouging charges

Halliburton Co., accused last week of overcharging the government when shipping fuel into Iraq, said Thursday it had saved the U.S. government money in Iraq and strongly rejected the price gouging allegations.
/ Source: news services

Halliburton Co., accused last week of overcharging the Pentagon by $61 million on a contract to provide gasoline to Iraqis, flatly denied the charges and said that it has in fact saved the government money.

"Let's put this cost of fuel in Iraq into perspective," Halliburton Vice President Chuck Dominy told NBC's Fred Francis. "We were tasked by the Corps of Engineers to go into Kuwait and procure fuel to take care of an emergency situation in Baghdad. And we've done that. We completed it. We had four offers and we selected the lowest bidder. We constantly try to drive down the costs."

Kellogg Brown and Root, the Halliburton subsidiary that was awarded a no-bid contract in March to rebuild Iraq's oil industry, said the government approved a deal to have fuel shipped from Kuwait even though it was at a higher cost than that available via Turkey.

"We believe our response proves KBR delivered fuel to Iraq at the best value, the best price and the best terms," said Randy Harl, KBR's president and chief executive.

Last week, Pentagon auditors said they suspected that the Halliburton subsidiary overcharged the department by about $61 million by using gasoline provided by a Kuwaiti firm rather than less expensive imports from Turkey.

Pentagon auditors said Halliburton charged $1.09 per gallon more for gasoline from Kuwait than from Turkey. But Halliburton said the Kuwaiti firm was the only one approved as a supplier by the U.S. Army Corps of Engineers, which oversees the contract.

A defense official confirmed the Defense Contract Audit Agency had received Halliburton's responses but declined to comment.

Company officials said they were the first to suggest ways of cutting costs and had suggested Turkey was a better source than Kuwait for getting fuel into Iraq.

"And we were able, through good competition [in Turkey], to get a lower cost.," Dominy told NBC News. "In fact, it's going to save about $130 million to the government, to the American taxpayer, so we're very pleased with that."

The company said it is now bringing in about two-thirds of Iraq's fuel via Turkey while the rest is from Kuwait. The cost of fuel from Kuwait is nearly double because it was the more dangerous option, it said.

KBR also said it had "maxed out" on how much it could bring in from Turkey and that was why some fuel came from Kuwait.

Fundamental flaws
Democrats have criticized the contracts in Iraq, which have netted Halliburton about $5 billion this year. Several congressional Democrats have called for further investigation of the company and the contract proscess.

On Thursday, Reps. Henry Waxman, D-Calif., and John Dingell, D-Mich., sent a letter to Iraq Program Management Office urging immediate changes to the way contracts are awarded.

"We are writing because the Administration's contracting approach is fundamentally flawed," the letter said. "Rather than creating opportunities for true price competition, the Administration intends to award individual contractors monopolies over different sectors of the Iraqi economy."

The letter also calls the Management Office's plan to have 120 people in Iraq overseeing $18.7 billion in contracts "woefully inadequate."

"We urge you to reassess your contracting plan immediately," the letter said. "The goal should be to protect the American taxpayer and benefit the Iraqi people rather than reward favored government contractors with lucrative monopolies."

Last week, President Bush said he believed Halliburton had overcharged and he expected the company to reimburse the government.

Vice President Dick Cheney headed Halliburton from 1995 until he quit in 2000 to become Bush’s running mate. Cheney says he severed all ties with the company and is not involved in overseeing its contracts.

Halliburton got its contract to rebuild Iraq’s dilapidated oil industry as an outgrowth of its contract with the Army. It was to provide emergency logistical help for situations such as the Iraq war. The Corps of Engineers opened the oil rebuilding process to competitive bidding earlier this year and is preparing to award $2 billion in replacement contractslast week.

NBC News' Fred Francis, Reuters  and the Associated Press contributed to this report.