After a routine audit of Halliburton Co.'s Dept.of Defense contract to rebuild Iraq's oil infrastructure turned up "suspected irregularity," Pentagon auditors have referred the matter to DOD's Inspector General. A Pentagon spokesperson said that on Jan. 13, the Defense Contract Audit Agency made the referral to the IG "as a result of finding a suspected irregularity during a routine audit."

The DCAA audits commercial companies' contracts with the Pentagon, but doesn't do investigations.

Halliburton's KBR unit has a contract to reconstruct Iraqi oil infrastructure including providing fuel. The company used fuel sources in Kuwait and Turkey. Two House Democrats--Reps. Henry Waxman (Calif.) and John Dingell (Mich.) have criticized Halliburton for the prices it billed for fuel from Kuwait.

In a statement issued Jan. 14, the Houston-based company said it had not been notified of the DCAA request to the DOD IG. It added, "KBR delivered fuel to Iraq at the best value, the best price and the best terms. It is important to understand that the referral is a method of further studying the issue and not a condemnation of KBR processes. It is also important to understand the difference between fact and allegations. It is not fact that KBR has overcharged."

The company also said, "We welcome a thorough review of any and all of our government contracts. We have followed all government-approved processes."
Halliburton said, "The U.S. Army Corps of Engineers approved that the fuel be delivered from Kuwait, even though it was at a higher cost than [from] Turkey. It's unfair to accuse Halliburton of paying too much for Kuwaiti fuel when we were told to buy the fuel and given approval to purchase it from a specific supplier."

DOD said on Dec. 30 that it will transfer the Iraqi fuel program to the Defense Energy Support Center.

The DCAA's referral was first reported by the Wall Street Journal.