All Smoke, No Fire: The administration's critics are wrong about Halliburton and Iraq

National Review, July 14, 2003 by Byron York

On March 24, Halliburton, the giant energy-services company once headed by Vice President Dick Cheney, announced that a subsidiary, Kellogg Brown & Root, had signed a contract with the Army Corps of Engineers to put out oil fires in Iraq, as well as to evaluate and repair the Iraqi oil infrastructure. The announcement set off an angry reaction in some circles on Capitol Hill. On March 26, California Democratic representative Henry Waxman wrote a letter to the Corps demanding to know why the contract was signed "without any competition or even notice to Congress." On April 8, Waxman, joined by Democratic representative John Dingell, requested a General Accounting Office investigation, writing that "ties" between Cheney and Halliburton "have raised concerns about whether the company has received favorable treatment from the administration." On April 10, Waxman wrote the Corps again, demanding more information. More Waxman letters followed on April 16, May 6, and June 6.

Liberal voices in the press followed Waxman's lead. Writing in the Washington Post, columnist Michael Kinsley called the Halliburton contract "nation-building, Republican-style, with huge contracts awarded in secret to politically connected companies." The New York Times editorialized that the contract "looks like naked favoritism" and "undermines the Bush administration's portrayal of the war as a campaign for disarmament and democracy, not lucre."

One element missing from all the criticism was a serious examination of what the Halliburton contract actually involved and how it came to be signed. For example, was it really reached without competition, as Waxman charged? As it turns out, the evidence that is publicly available (some of it remains classified) suggests that Waxman's accusations are misleading at best and flat wrong at worst. It appears not only that there was not "naked favoritism" at work in the Halliburton contract, but that the Corps of Engineers, and the Bush administration, acted reasonably and properly in awarding the contract- no matter what Waxman says.

Waxman has made three basic accusations about the Halliburton deal. The first is that it was signed without appropriate competition. The second is that it called for Halliburton to be paid under an arrangement that- Waxman says-often results in overcharges to the government. The third objection is that it is a questionable use of federal money because of what Waxman calls Halliburton's "troubling" performance record.

First the competition issue. Last year, as administration officials made plans for war in Iraq, they were greatly concerned that Saddam Hussein would set fire to his country's oil fields, just as retreating Iraqi troops had done in Kuwait at the end of the first Gulf War. That, military planners knew, would result in a huge economic and environmental disaster. "The model we were looking at was what the Iraqis had done in Kuwait at the end of the Gulf War," says Lt. Col. Eugene Pawlik, a spokesman for the Army Corps of Engineers. "We had to consider the possibility that the Iraqis would set that many or more wells on fire in Iraq and what it would take for us to throw a maximum response at a maximum destruction scenario."

Last November, the Corps assigned Kellogg Brown & Root (KBR), which has been a wholly owned subsidiary of Halliburton since the 1960s, to do a classified study of potential damage and repairs in the Iraqi oil fields. Contrary to Waxman's assertion, the work was done under a competitively awarded contract system known as the U.S. Army Logistics Civil Augmentation Program, or LOGCAP. The LOGCAP system came about because of the military's need to perform complex jobs-peacekeeping in Bosnia, intervention in Haiti-on sometimes very short notice. In such situations, American troops require lots of logistical support; camps have to be built, utilities have to be supplied, food has to be cooked. By the early 1990s, as the size of the active-duty force shrank, the Pentagon began to "outsource" much of that work, that is, pay civilian contractors to do it rather than tie up soldiers with non-essential tasks. Instead of going through a months-long competitive-bidding process for each job, the military came up with LOGCAP.

LOGCAP is, in effect, a multi-year supercontract. In it, the Army makes a deal with a single contractor, in this case Halliburton, to perform a wide range of unspecified services during emergency situations in the future. The last competition for LOGCAP came in 2001, when Halliburton won the contract over several other bidders. Thus, when the oil-field study was needed, Corps officials say, Halliburton was the natural place to turn. "To invite other contractors to compete to perform a highly classified requirement that Kellogg Brown & Root was already under a competitively awarded contract to perform would have been a wasteful duplication of effort," Corps commander Lt. Gen. Robert Flowers wrote to Waxman in April.

In February 2003, with the study done, the Corps of Engineers decided to issue a contract to actually execute the plan that KBR had drawn up for dealing with problems in the Iraqi oil fields. At the end of that month, Army headquarters authorized the Corps to issue a sole-source contract to KBR. (The assignment seemed logical for another reason: Halliburton/KBR put out 350 oil-well fires in Kuwait after the first Gulf War.) "Only KBR, the contractor that developed the complex, classified contingency plans, could commence implementing them on extremely short notice," Flowers wrote Waxman. "The timing was driven by Central Command's operational requirement to have support available in advance of possibly imminent hostilities." Flowers added that the contract was always intended as a temporary "bridge" to a more permanent contract that would be offered for competitive bidding.