No Iraq supplemental bills expected in 2004

The Pentagon has no plans to ask for another supplemental spending bill for Iraq or the war on terrorism next year and intends to make only minor changes in the two-year budget plan presented this year, Pentagon Comptroller Dov Zakheim said Wednesday.

Zakheim also said the alleged overcharges by Halliburton Corp. in Iraq reconstruction and service contracts appeared to be more a problem of an "antiquated accounting system" than a deliberate effort by the huge corporation to overcharge. But Zakheim insisted at a defense writers breakfast that the overcharge issue is being investigated by company auditors and the Pentagon's inspector general.

Zakheim said the department was committed to sticking to the "two-year budget drill" it began during the fiscal 2004 budget.

"This year's budget is going to be the second year of this two-year process. It's going to reflect changes on the margins, as opposed to a complete zero-based review," he said.

The budget, which will be sent to Congress in February, is "going to maintain the themes we set last year," Zakheim said, and is expected to maintain the top line of $426.2 billion budget authority for total defense. And, Zakheim warned, if the services cannot identify a source for the funds they propose to spend someplace else, "we're not going to entertain the proposal."

Zakheim said the dispute over Halliburton's contract for services in Iraq involves $61 million out of a worldwide civilian support program of more than $8.5 billion. Of that total, about $1.6 billion has been funded, $856 million has been paid and $61 million is being questioned. That $61 million is in the subcontract for supplying gasoline in Iraq until the oil industry can be restored. Halliburton's $67 million contract for dining hall services, which is in dispute, has not been paid, he said. The "systemic issue" in the Halliburton contracts "is not overcharging," Zakheim said.

"The systemic issue, as I understand it, is this rather antiquated accounting system" which creates problems for the company in reconciling some of the labor rates they have used as a basis of charges. If the government auditors determine there was overpricing on the gasoline supplies, "then it's going to be the company that's out, not the taxpayers," he said.

Zakheim also said the Boeing contract to start the lease-buy program for 100 KC-767 Air Force tankers is "very much" suspended until the inspector general issues his report on allegations that the company had illegal contact with key Air Force contracting officials.