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Pentagon's top auditor says KBR shortchanging US

Pentagon's top auditor says KBR shortchanging US

The U.S. Defense Department's top auditor on Monday criticized the performance of KBR Inc. on a $31.7 billion combat support contract, pointing to numerous instances when the company failed to make sure U.S. taxpayers were getting the most for their money.
In written testimony at a hearing held by the Wartime Contracting Commission, April Stephenson, head of the Defense Contract Audit Agency, said KBR relies heavily on subcontractors for the dining facilities, transportation, sanitation systems and warehouses required under the contract.
Yet Stephenson said audits of the contract, known as "LOGCAP III," revealed there often was too little documentation "to justify the reasonableness of the prices and costs billed to the government."
The contract audit agency "found many examples where KBR did not take aggressive action to obtain sufficient data from vendors that would have facilitated adequate analyses to ensure the lowest possible prices for the taxpayer," she said.
In a statement submitted to the commission, KBR defended its handling of the contract, saying the demands for services were heavy and constantly changing, especially during the early stages of the war in Iraq.
"In this volatile situation, the pace of paperwork trailed the pace of the demand for services," KBR said.
Before the commission's long scheduled hearing, two senators called on the Defense Department to do more to reclaim $100 million worth of overcharges paid to KBR subcontractors.
In a letter sent Friday to Defense Secretary Robert Gates, Sens. Claire McCaskill, a Democrat, and Republican Susan Collins also said the Army has not done enough to make the rewarding of logistics contracts in Iraq, Kuwait and Afghanistan more competitive.
KBR was the sole LOGCAP company until June 2007 when the Army decided to rebid the contract. It selected KBR, DynCorp and Fluor to compete against each other for the support work. Army officials said this arrangement would improve government oversight and reduce costs.
But McCaskill and Collins said the Army continues to rely on KBR for combat support, defeating the purpose of expanding the number of contractors.
The two senators called the military's continued reliance on KBR "particularly disturbing," according to the six-page letter, obtained by The Associated Press.
McCaskill and Collins are, respectively, the chairman and ranking Republican on a contracting oversight subcommittee of the Senate Homeland Security and Governmental Affairs Committee.
Several former KBR officials have acknowledged taking kickbacks from subcontractors who then overcharged the Pentagon for work done overseas, the letter adds.
Jeffrey Parsons, head of the Army Contracting Command, told the commission the military realized early in the Iraq war that the problems KBR was having were due to overtaxed accounting systems and how the company was managing its subcontractors.
Linda Gustitus, one of the Wartime Contracting Commission members, asked why, given those and other problems, KBR was selected to be one of the three companies for the next phase.
Parsons said it appeared KBR had resolved its deficiencies. And under the new arrangement, there would be greater scrutiny over contract awards.
Commissioner Christopher Shays, a former Republican congressman from Connecticut, referred to Stephenson's testimony as a "litany of abuses."
Shays faulted the Army for not moving quickly enough to shift from KBR to the competitive arrangement.
"With this one contractor," he said, "we basically said, `KBR is too big to fail. We're still going to fund you.'"
KBR is a former subsidiary of Halliburton Co., which once was headed by Dick Cheney before he became vice president under former President George W. Bush. On its Web site, KBR says it is the U.S. Army's largest contractor, one of the 10 largest of the U.S. Defense Department and the world's largest defense services provider.
Halliburton's Web site says the company never has held U.S. government services contracts, "particularly none of the logistics support services frequently discussed in the media today."
Also, Halliburton says, neither the company nor its subsidiaries has work in Iraq or Afghanistan.
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On the Net:
http://www.wartimecontracting.gov/