Critics of the contract said the move was overdue and that hundreds of millions of dollars had probably been wasted.
Halliburton subsidiary KBR, also known as Kellogg Brown & Root, provides food, water, shelter, laundry service and other logistical support for troops under a 2001 contract that has been extended several times.
Halliburton is a Texas-based oil services conglomerate once led by Vice President Dick Cheney. Bush administration officials have come under fire since the beginning of the war in Iraq for awarding more than $10 billion to the company and its subsidiaries in 2003 and 2004, some of it in no-bid contracts. There have been allegations of fraud, poor work, overpricing and other abuse, which the company has denied.
Army spokesman Dave Foster said Wednesday that although the service will rebid the contract, it has not decided yet how that will be done. KBR would be allowed to bid in the new competition, but one option Army officials are considering is to divide the work among three companies.
Asked why the contract was being discontinued, Foster said it was part of the Army's "lessons learned" process.
"The Army lives on 'lessons-learned.' We get better each and every time we do it," Foster said. "There's discussion under way that there may be, may be, a better way of doing this. If you open it up to as many as three bids, that offers more open competition."
Halliburton spokeswoman Melissa Norcross said it was "neither unusual nor unexpected that the ... contract may be replaced with another competitively bid approach."
KBR's achievements in Iraq, Kuwait and Afghanistan have been "nothing short of amazing," she said, noting that KBR has prepared nearly 375 million meals, washed more than 18.5 million bundles of laundry and transported hundreds of millions of gallons of military fuel for troops in America's two ongoing wars.
Shares of Halliburton Co. stock declined on the New York Stock Exchange on the news, dropping 70 cents to close at $74.88.
"It has taken them far too long," Byron Dorgan, D-N.D., said of the Army. "I believe literally hundreds of millions, and probably billions, of dollars have been wasted, it's almost an unbelievable amount of waste and abuse and likely fraud."
Earlier in the day in a speech on the Senate floor, he held up a hand towel that he said cost double what it should have because the company "wanted its name embroidered on the towels given to the troops."
"Taxpayers can breathe easier knowing that the days of $45 cases of soda and $100 bags of laundry are coming to a close," said Rep. Henry Waxman, D-Calif.
The Washington Post reported the decision to end Halliburton's contract Wednesday, saying the Army had paid KBR $7 billion under the contract last year and is expected to pay between $4 billion and $5 billion this year.
Halliburton's Norcross said KBR, with some 50,000 employees and subcontractors in Iraq, Kuwait, Afghanistan, Uzbekistan and Djibouti, has won outstanding performance ratings from the government for its work under the contract.