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Business
& Labor
KBR Contract Has $7-Billion Cap; $50 Million Spent So Far
(enr.construction.com - 4/11/03)
By Tom
Ichniowski
The Corps of Engineers' recently awarded
contract to Halliburton Co.'s Kellogg Brown & Root unit
to fight oil fires and rebuild petroleum infrastructure in
Iraq has an estimated cost ceiling of $7 billion, says Lt.
Gen. Robert B. Flowers, the Chief of Engineers. But Flowers
also says the actual value of the contract, awarded in March,
cannot be determined because it depends on the amount of work
to be done. He says that as of April 4, four task orders totaling
$50.3 million had been placed under the contract.
Flowers also says the cost-plus-fee
contract term is two years and the maximum potential award
fee is 7% of the costs of the work to be done. The fee is
based on contractor performance.
He says the contract would be limited
"to those services necessary to support the mission in
the near term" and adds that the U.S. will replace it
"with multiple contracts." He says the $7-billion
figure is based on estimated "worst-case damage to the
Iraqui oil fields."
KBR spokesperson Cathy Gist says that
the $7-billion ceiling would refer to the total program of
putting out the fires and assessing and repairing Iraq's petroleum
infrastructure, and adds, "It would be a misrepresentation
of facts to report that KBR is responsible for the implementation
of the contingency plan in its entirety."
Flowers disclosed the information about the KBR contract in
an April 8 letter to Rep. Henry Waxman (R-Calif.), who raised
a variety of questions about the contract in a March 26 letter.
Also on April 8, Waxman and Rep. John
D. Dingell (D-Mich.) asked the General Accounting Office to
investigate the KBR contract among others the firm has won
from DOD over the past two years. They note that Vice President
Dick Cheney was Hallburton's CEO from 1995 to 2000 and say
that concerns have been raised "about whether the company
has received favorable treatment from the administration."
The lawmakers also asked GAO to probe
other U.S. contracts for work in Iraq, including one that
the U.S. Agency for International Development plans to award
for Iraq reconstruction.
KBR's Gist says that "the Vice
President has absolutely nothing to do with the awarding of
defense contracts, the bidding process or the current work
orders." She adds, "With more than 60 years of government
experience, KBR has a proven track record on military contracts,"
and cites work for in World War II, in Vietnam in the 1960s
and in the Balkans.
She also says that the firm "has
a practice of fully cooperating with all government auditing
agencies and formal inquiries related to the company's government
contracting work."/
Flowers said the KBR contract complies
with the law. He adds, "There will be ample opportunity
for competitions of the overall requirements to support the
restoration of Iraq's oil infrastructure." He said that
competition for the work covered by the KBR contract "was
not possible due to the requirements of the [Central Command]
mission."
The Corps chief also said that in December
2001, the Army awarded KBR a competitively bid contract for
"a wide variety of services, including the development
of plans required by combatant commanders."
The head of the Central Command, Gen.
Tommy Franks, "identified the requirement for contingency
planning for extinguishing oil well fires and assessing damage
to oil facilities in the immediate aftermath of hostilities,"
according to Flowers.
Flowers said it "would have been
a wasteful duplication of effort" to put the oil fire
and assessment work up for competitive bid after KBR already
had been competitively awarded the job.
He said, "Only Kellogg Brown &
Root Services, the contractor that developed the complex,
classified contingency plans, could commence implementing
them on extremely short notice….Under the circumstances,
no other contractor could satisfy mission requirements in
the time available."
Flowers also says, "The current
contract is not structured to encourage unnecessary cost."
After getting Flowers' letter,
Waxman wrote him back on April 10, asking a series of further
questions, including when the Corps plans to issue competitively
procured contracts for work in Iraq.
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