Halliburton gets headaches along with major contracts

WASHINGTON — Halliburton Co. has reaped as much as $6 billion in contracts from the U.S. invasion of Iraq, but improprieties in those military contracts have also given Vice President Dick Cheney's former company high-profile headaches.

Pentagon auditors have criticized Halliburton's estimating, spending and subcontracting, and the Army could begin withholding up to $300 million in payments May 1. The Justice Department is investigating allegations of overcharges, bribes and kickbacks. Democrats have accused the company of war profiteering.

Even some Wall Street analysts are asking whether Halliburton would be better off jettisoning its Iraq contracts.

"From the shareholders' point of view, don't you have to consider whether it's worth it?" Jim Wicklund of Banc of America Securities asked Halliburton executives during a March 11 conference call with investment analysts.

Halliburton is fighting back, strongly denying wrongdoing and claiming to be the victim of a political smear campaign. The company set aside nearly $200 million to repay the Pentagon for any overcharges. Executives reassured analysts that Halliburton has enough cash on hand — about $2 billion — to weather any more repayments or penalties.

Having a clean contracting system in Iraq is essential because it's the first experience Iraqis will have with the American model of business-government partnerships, said Peter Singer, a former Defense Department official who wrote a book on military contracting.

"The success in the war in Iraq and the follow-up to it depends on not just how good a job our soldiers do but also on how good a job our contractors do," said Singer, a fellow at the Brookings Institution. "If we award contracts to firms that aren't performing to the utmost, it's not only a waste of taxpayer money but it also harms national security."

Halliburton also is spending millions on a nationwide television advertising campaign featuring images of Halliburton workers helping American troops.

The company's defenders say Halliburton had to perform a lot of costly and dangerous work very quickly, with minimal government oversight at the beginning.

"The root cause of a lot of these problems is that it's a huge, rapidly evolving enterprise," said Steven Schooner, a contracting expert and assistant law professor at George Washington University. "When the money was spent the government was not applying the same type of resources in terms of planning, thought and caution that we normally expect and demand in public contracting."