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.