Halliburton funds won’t be cut

WASHINGTON – Only hours after deciding to withhold some payments to Halliburton Co. because of questions about billing for its work in Iraq, the Army reversed itself Tuesday and said it would give the giant contractor more time to justify its claims.

The decision capped two days of confusion over whether the Pentagon would withhold 15 percent of payments to Halliburton subsidiary Kellogg, Brown & Root Inc. under federal procurement rules that require contractors to provide clear justification for their bills.

On Monday, Halliburton announced that the Army would give KBR a third extension to provide the needed documentation, meaning it will continue to be paid in full. Early Tuesday, the company said in a statement the Army called and apparently reversed itself, saying that withholding on new invoices would begin today. Halliburton estimated that $60 million a month could be withheld, pending negotiations about the bills.

Then in the afternoon officials at the Army Materiel Command – which oversees the logistical services contract with KBR – did another turnabout and decided not to withhold any payments.

Spokeswoman Linda Theis said senior Army officials had decided to review the contract more closely for the next five days, but she said no one told her why.

“I’ll ask but I’m not sure anybody will tell me,” Theis said, adding that she’s not sure who made the decision. “Let’s just say it’s breathing space.”

Theis said Halliburton has received extensions because there are not enough people in the government or at Halliburton to review the many bills the company has submitted, in part because no one anticipated how much work they would need to account for.

Congressional Democrats have accused the Pentagon of going easy on KBR, which has received about $6 billion for work it has done in Iraq and Kuwait under the logistical services contract known as LOGCAP. Halliburton has also received at least $2.5 billion for helping Iraq rebuild its oil industry. Government investigators and Defense Department auditors have repeatedly raised questions about whether KBR overcharged for food, housing and fuel and kept proper records.

Rep. Henry Waxman, D-Calif., has questioned whether Dick Cheney, who was Halliburton’s chief executive before being elected vice president, played any role in helping the company. Cheney’s staff has derided such suggestions as politically motivated.

In response to a new Defense Department audit that described Halliburton’s cost estimating system as inadequate, Waxman said last week the Pentagon is not doing enough to hold the company accountable.

“The Bush administration is giving Halliburton special treatment yet again,” he said in a written statement. “Even after eight critical audit reports by three different government agencies, the Pentagon is still waiving procurement rules and extending deadlines for Halliburton to submit accurate cost information.”

Theis, the Army Materiel Command spokeswoman, dismissed suggestions that Halliburton is receiving special treatment.