Halliburton subsidiary labels most Iraq reports as secret

WASHINGTON — A Halliburton Co. subsidiary is abusing federal regulations by marking nearly all information it gives to the government about its operations in Iraq "proprietary," a practice that promotes unnecessary secrecy and could hurt competition, according to a report released Friday by U.S. auditors.

Under federal law, contractors are allowed to mark some documents proprietary, especially when they are bidding on a deal. But auditors for the Special Inspector General for Iraq Reconstruction found Halliburton subsidiary KBR Inc. was using that stamp even with such basic records as daily head counts of how many people ate at the company's dining facilities. KBR is the Pentagon's largest contractor in Iraq, providing logistics support for the Army including meals, fuel, laundry service and base construction.

Auditors concluded that the company's actions represent "an abuse" of the Federal Acquisition Regulation, the set of rules for government contracts.

In effect, the report said, KBR has turned contracting rules "designed to protect truly proprietary information and to enhance procurement competition ... into a mechanism to prevent the government from releasing normally transparent information, thus potentially hindering competition and oversight."

In a written response, Halliburton spokeswoman Cathy Mann said that using the proprietary stamp was "not only encouraged, but required" by the Army.

"KBR has included proprietary markings on the majority of its data and property in support of its government contracts for the U.S. Army for at least the last decade," Mann said.

According to the report, Army officials are working on ways to get KBR to cut down on the practice.

KBR and the Defense Department were both criticized last year after it came to light that the company had advised Pentagon officials to heavily redact a series of unfavorable audits before they were delivered to United Nations monitors. The Pentagon complied.

Sen. Byron Dorgan, D-N.D., who has conducted a series of hearings on contractor abuses as chair of the Democratic Policy Committee, said Friday that he had been denied information about KBR's operations in Iraq because it had been deemed proprietary.

"The American people don't have access to information that should be made available," Dorgan said.

But Stan Soloway, who leads a contractor trade group called the Professional Services Council, said it was not unusual for a company to want to protect information that could give it an edge over other firms. That's particularly true for KBR, which Soloway said has had proprietary information leak out. "This is a company that's been once burned and is going to be twice shy," he said. "To say this is abuse is an overreach."