Cheney's former firm paid fines on prior contracts

One of the companies selected for a lucrative no-bid contract to help rebuild Iraq paid a $2 million fine after being accused of fraud during previous Defense Department work and was criticized by the General Accounting Office for cost overruns on another contract, according to government documents.

The company, KBR-the engineering and construction division of Halliburton and formerly known as Kellogg Brown & Root-won a two-year, $7 billion contract from the U.S. Army Corps of Engineers to put out oil well fires in the war-ravaged country. Democrats want GAO to determine if the company was hired because of its ties to Vice President Dick Cheney.

Army Corps Lt. Gen. Robert Flowers defended the KBR contract, saying the company was well suited to extinguishing the oil fires because it already had a government contract to develop contingency plans for keeping the Iraqi oil fields in operation. In a letter last Tuesday to House Government Reform ranking member Henry Waxman, D-Calif., Flowers said bidding the contract would have created "a wasteful duplication of effort" that "would have delayed CENTCOM's war planning in order to obtain security clearances for potential competitors."

Waxman, in a response last Thursday, said awarding no-bid contracts for emergency work during the war might be valid, but awarding a two-year contract worth billions is not. While he did not raise the issue in his correspondence with Flowers, Waxman suggested in a separate letter seeking a GAO investigation that KBR's lucrative government work might be due to ties between its parent company, Halliburton, and Cheney, who was CEO of the company from 1995 until he resigned to run for vice president in 2000.

"These ties between the vice president and Halliburton have raised concerns about whether the company has received favorable treatment from the administration," Waxman and Energy and Commerce ranking member John Dingell, D-Mich., wrote. A spokeswoman for Cheney said the vice president has no remaining ties to the company and played no role in the awarding of the contract.

KBR was criticized in earlier GAO reports that detailed billing the Army for excessive costs for work in Kosovo. In reports in 1997 and 2000, GAO reported that the firm used more workers and equipment than necessary to clean offices and provide electricity and backup power supplies to bases and billed the service nearly $86 per sheet for plywood that it bought for $14.06.

The company denied running up costs to boost its profits on the contract, saying it provided the equipment and manpower to meet specifications and that the cost of plywood included the high cost of flying the material to the Balkans.

Last year, in an unrelated case, the company paid a $2 million fine to deal with fraud allegations raised in investigations by a federal grand jury and the Pentagon's inspector general. The company did not immediately respond to questions about the investigation.