Army to Halliburton: this just isn't working out

| 7/12/2006

The presence of KBR-contracted civilian truckers in Iraq may be up in the air, following a change in the U.S. Army’s plan for logistical support.

The Army announced Wednesday, July 12, that it is discontinuing a multi-billion-dollar logistics deal with Halliburton. The contract gave the company near-exclusive rights to the hauling and transportation efforts in the war-torn country, The Associated Press reported.

Instead of giving all the work – which has also included troop support and construction projects – to one company, the contracts will now be divided amongst three companies, with a fourth company monitoring the other three, The AP reported. Those companies have not yet been decided, and are expected to be announced some time in the fall.

The decision calls into question the future role in Iraq of Kellogg, Brown & Root, a subsidiary of Halliburton, which currently has more than 50,000 employees and subcontractors in Iraq, Kuwait, Afghanistan, Uzbekistan and Djibouti, Melissa Norcross, a spokeswoman for Halliburton, told Land Line.

Halliburton’s work with the Army has not been without controversy. Several government audits found examples of gross overcharging for supplies, the Washington Post reported.

However, Norcross said Halliburton has received numerous several positive evaluations of its work in Iraq, and that the contract decision was not out of the ordinary.

“It is neither unusual nor unexpected that the … contract may be replaced with another competitively bid approach,” Norcross said in a prepared statement. “Since the competitive award of the … contract in December 2001, we have been open and forthcoming that this work may be modified or replaced at any time during the term of the contract.”

Norcross said Halliburton would put in an offer in the upcoming bidding process if it proves to be a “good business opportunity.”

KBR, which has almost exclusively handled the civilian-contracted trucking and logistics needs of the military during the Iraq war, took in about $7 billion in 2005 under the contract, according to the Post.

News of the contract break put a slight dent in Halliburton’s stock prices. On Wednesday, the company closed at 74.87 a share on the New York Stock Exchange, down a little less than a percentage point from the day before.