Army Splits Award Among 3 Firms

By Former Halliburton Unit Retains Piece of Massive War Services Contract
By Dana Hedgpeth
Washington Post
Jul. 01, 2007

The Army awarded a contract worth up to $150 billion to feed, house and provide other services to U.S. troops in Iraq, Afghanistan and Kuwait, spreading among three companies work that recently had been linked to a single, controversial contractor: Halliburton.

Fluor Intercontinental of Greenville, S.C., DynCorp International of Fort Worth and KBR of Houston were chosen from among a half-dozen competitors. Each company's part of the contract is worth up to $5 billion a year and can be extended for up to nine more years.

The contract award was a particular victory for KBR, Halliburton's former contracting arm, after the firm was accused of misdeeds under the past contract, one contracting expert said.

"For KBR, their success is partial vindication," said Loren Thompson, chief operating officer of the Lexington Institute, a defense research organization in Arlington. "But for other winners, it is a portal into some truly sizable revenues."

"This is potentially the biggest battlefield services contract that any company is going to win for the remainder of this decade," Thompson said.

Known as the Logistics Civil Augmentation Program, or LOGCAP IV, the contract is considered one of the biggest deals in the contracting services industry. It has ballooned in value from $2 billion when it was first awarded in 1992 to $23 billion under the most recent LOGCAP III contract.

Two of the new winners have a history with the contract. KBR won the initial LOGCAP contract when support services were needed mainly in Bosnia. DynCorp won it in 1997 to do work in East Timor and the Philippines. And in 2001, it was again awarded to KBR to provide services in Afghanistan, Kuwait and, after the 2003 invasion, Iraq.

Since then, the contract has come under scrutiny by members of Congress, and critics have alleged that KBR had an advantage in winning the 2001 contract because Vice President Cheney had been Halliburton's chief executive.

There have been other allegations of overcharging and poor record-keeping by KBR and lax oversight by the government. Government auditors turned up more than $1 billion in questionable costs. Whistle-blowers have said the company charged $45 per case of soda, allowed troops to bathe in contaminated water and double-billed on meals -- all allegations Halliburton denied.

As of the end of May, KBR -- the largest single contractor in Iraq -- had been paid $19.7 billion for its work under the contract.

About 50,000 contractors work for KBR directly or as subcontractors to deliver services, and 500 government employees provide oversight of the logistics contract, according to Army officials. In February, Serco of Vienna was chosen for a contract worth up to $45 million a year to help the government in planning and oversight of the contract.

Last year, the Army decided to award the logistics contract to more than one company after concerns were raised about a lack of competition in giving such a large contract to one company. Under the new contract, the three companies will have to compete for each individual task order.

"Awarding it to three allows us to mitigate our risk by not having to rely on only one source, and at the same time allows us further competition," said Jim Loehrl, director of the Acquisition Center at the Army Sustainment Command in Rock Island, Ill., which oversees the contract.

The three winners were chosen, Army officials said, based on their management, past performance, price and technical abilities.