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Windfalls of war: KBR, the government’s concierge

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KBR’s umbrella contract to provide everything from showers to rebuilding airfields tops $37 billion. “It’s like a gigantic monopoly,” says one critic.

Secretary of Defense Donald Rumsfeld talks with troops in Iraq. KBR has been paid $37 billion to build infrastructure like this dining hall. Jim Watson/AP

After a decade of war, KBR’s umbrella contract tops $37 billion

Sharon Weinberger – (The Center for Public Integrity – iWatch News) – August 30, 2011 – The rush to war in the months following the terrorist attacks of 9/11 created an urgency in the Pentagon, not just for military operations but also for contracting.

When U.S. forces moved into Afghanistan in 2001, there was little, if any, infrastructure to support and house U.S. troops. The military needed someone to do everything from housing troops to rebuilding airfields. The solution was a contract called the Logistics Civil Augmentation Program, or LOGCAP, a type of umbrella contract the Army had been using to support is military bases overseas. In late 2001, the Army, after a competition, awarded LOGCAP III to KBR. The Houston-based firm [3], once a subsidiary of Halliburton, began providing everything from showers to dining halls.

Even beyond single-source contracts, the Pentagon has other types of contracts it can use to quickly award work without having to compete specific jobs. They include umbrella-type contracts, like LOGCAP, that allow the government to buy unspecified goods and services over long periods of time. “It’s the government’s way of saying ‘We don’t know what we want, and we don’t know how much it costs,’” said Laura Peterson, a senior policy analyst with Taxpayers for Common Sense, a watchdog group. “Instead they say, ‘we’ll put you on retainer and tell you later what we want and when we want it, and you just bill us.’ You become the government’s concierge, and it’s like a gigantic monopoly.”

Indeed, that’s the way LOGCAP III  operated for almost a decade. And while KBR was competitively awarded the umbrella contract in December 2001, it didn’t have to compete for any of the subsequent work, which totaled over $37 billion by the end of July this year. For the next 10 years, the company provided water systems, heaters, tents, and dining facilities. The company also provided electricians, cooks and cleaners and other civilian workers needed to run military bases.

When the U.S. went to war in Iraq in 2003, KBR came along  too, eventually providing modern dining facilities for  military and State Department personnel, featuring everything from made-to-order Caesar salads to a dessert station featuring over a dozen types of pie and cakes. Though costs were supposed to be limited to $20 a person per day, a State Department Inspector General investigation [4] found personnel were being encouraged to scan their attendance at meals and snacks as many times as possible. A notice in an embassy newsletter read, “more scans = more goodies,” and the Inspector General found people were scanning multiple times, which hid the true cost of the meals. One person scanned his card 25 times in two days,” the report states. A later Defense Contract Audit Agency report confirmed those findings, saying that headcount inflation could be as high as 36 percent.

As LOGCAP expanded in Iraq, adding more and more work, KBR came under increasing scrutiny, particularly when the Army tried to extend the contract into new areas. In 2003, the U.S. Army Corps of Engineers, at the direction of the Pentagon, was preparing to issue KBR a sole-source award, known as the Restore Iraqi Oil, or RIO contract, based on urgent need, over the objections of Bunnatine Greenhouse [5].

As the senior contracting official at the Army Corp of Engineers, Greenhouse questioned the selection of KBR as a the only qualified company, and raised a number of concerns about the justification for the sole-source ward, ranging from nonexistent cost estimates to the lack of reasonable justification for granting a sole-source contract for more than one year. “The fact that it was a no-bid, sole source contract meant that the government was placing KBR in the position of being able to define what the reasonable costs would be to execute the RIO contract and then charging the government what it defined as being reasonable,” she testified [6] in 2005 to the Senate Democratic Policy Committee.  In addition, a Defense Contract Audit Agency audit found the company had overcharged the RIO contract by $61 million.

Greenhouse maintains the Army retaliated against her for voicing her concerns on the sole-source contract and then later making statements to Congress criticizing the deal; she was eventually stripped of her high-level position and her security clearance. Greenhouse sued the government, and the National Whistleblowers Center announced in July 2011 that the U.S. government had agreed to pay Greenhouse $970,000 to settle her claims.

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5 Comments

  1. Comment by JOBS PLAN WATCH:

    Jobs Plan. What would it mean to U.S. Small Business if the 45% of Prime Contractors subcontracting was enforced – just for this PRIME?

    I don’t mean foreign Muslim owned small business, I am talking about U.S. Registered and certified small businesses where the dollars made have a chance to circulate in the American Economy.

    Has anyone asked what dollar value has been spent at foreign-owned businesses (many owned by Muslims) vs U.S. Owned (51% or greater ownership ) THAT OBAMA is a jobs plan. Make all U.S. Government contracts be performed and supplied by U.S. Registered Small Business. Indian doesn’t mean India, it means North American Indian.

    The United States has sold out U.S. Businessmen and Businesswomen. Obama, start with the $ 770 Billion that Congress just approved for the DoD.

    Enough said. Nothing will change because Contracting Officers are NOT being held accountable. If they were, the winners would be Americans instead of foreign-owned small businesses and where are those dollars going after they are wasted ? Buildings in Lebanon with the profits going to what organization. You have to wonder where the money is going after first spent by the U.S. ? IT is not coming back into the U.S. Economy if spent on a foreign owned business. Wake up Obama. Your contracting officers taking kickbacks are getting them from foreign owned and then those continue to get more contracts because the FBI and Army CID are neutered when it comes to taking action against them. So, don’t let them have to worry about getting kickbacks themselves to look the other way. Don’t let ASG commanders worry that they cannot initiate an IG because their revenue stream will suffer. And stop giving money to foreign owned small business – that is the JOBS PLAN OBAMA that is Patriotic and American. Get on it.

  2. Ping from State Department Mismanages Food Contract in Iraq | Private Security Jobs:

    […] day whilst conducting diplomacy. The purveyor of said food, mega-contractor KBR, has pocketed some $37 billion dollars of taxpayer money. And guess […]

  3. Comment by Brittany Coffey from Houston, TX:

    Ms. Sparky,
    I’m the daughter of a overseas contractor and I was wondering if you knew of any way to find them? or even just contact them? Thank you or if anybody has heard of him, his name is Kenneth (Ken) Coffey.

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