Halliburton Unit Got Exclusive Military Bid

Since Dick Cheney became vice president, a subsidiary of his former company was chosen the exclusive contractor for overseas Army troop support and Navy construction despite being under federal investigation for fraud.

The Navy contract went to the Halliburton Co. subsidiary, Brown & Root Services, despite a recommendation from the auditing arm of Congress that new bids be solicited for the construction contract. That recommendation was ignored.

The Army deal is unusual because its stretches 10 years and has a payment structure that critics say encourages Brown & Root to spend whatever it takes to keep the troops happy.

Halliburton officials say Cheney played no role in the selection of Houston-based Brown & Root for the two contracts, potentially worth billions of dollars over the next decade.

Cheney, a former secretary of defense with experience in Congress and at the White House, headed Halliburton from 1995 until George W. Bush picked him as his running mate in July 2000.

"Cheney steadfastly refused to engage in any activities to sell Halliburton's or its subsidiaries' services to the government during his tenure with the company," Halliburton spokeswoman Zelma Branch said.

"Halliburton has made no attempt to ask for his assistance in obtaining federal contracts since he left the company."

Both Army and Navy contracting officials say they were unaware, when the contracts were awarded, that federal officials in California were investigating allegations that Brown & Root had defrauded the government on another defense contract.

The investigation ended in February when Brown & Root agreed to pay the government $2 million to settle charges it inflated contract prices for maintenance and repairs at Fort Ord, a now-closed military installation near Monterey, California.

Even had the Army known about the investigation, officials said, it would not have affected the decision to award the troop support contract to Brown & Root.

"They did not admit to any wrongdoing, and the government did not find them guilty of any wrongdoing, so legally we could not use that," said Gale Smith, spokeswoman for the Army Operations and Support Command.

The contract makes Brown & Root the Army's only private supplier of troop support services over the next decade.

There is no ceiling on spending, because the contract is designed to provide rapid troop support wherever and whenever U.S. forces move into action overseas.

Under similar contracts, the Army paid Brown & Root $1.2 billion from 1992 through 1999 to support U.S. troops, mainly in the Balkans. An extension of that contract from 1999 through 2004 is projected to cost $1.8 billion.

"It is close to unprecedented for the government to have given so much of the solution to one contractor," said Steven Spooner, a George Washington University professor who specializes in federal contracting.

Spooner said government contracts for services almost never exceed five years, while the Army's deal with Brown & Root is renewable for a decade. He said the contract also is structured so that the more the company spends to support the troops, the more it earns.

"But it's hard to criticize it, because they've convinced the Army from the bottom up that they're taking care of the troops," he said. "To the extent that they are making money hand over fist, they're taking care of the people who have the crappiest job on the planet."

The Army has paid Brown & Root $13.7 million since the contract began Feb. 1 to provide food, laundry and other support services to U.S. troops in the former Soviet republics of Georgia and Uzbekistan. The Army will not disclose other locations where the contract has been used.

The $300 million, five-year Navy contract was awarded to Brown & Root in April 2001, three months after Cheney became vice president. It followed a November 2000 recommendation from the General Accounting Office that upheld a protest of the original Navy decision in June 2000 to give the Halliburton subsidiary the contract.

The GAO arbitrator questioned the criteria used by the Navy in evaluating the bidders, as well as the Navy's cost analysis, and recommended that new bids be solicited.

Instead, the Navy decided to re-evaluate the original bids "with requested changes in criteria and the result was the same," Navy spokesman John Peters said.

The Navy has given Brown & Root $53 million in work orders in the past 15 months, including $37.3 million to build 816 detention cells at Guantanamo Bay, Cuba, where terrorist suspects captured in Afghanistan are held.

Both contracts enable the Army and Navy to use Brown & Root for their troop support or construction services, without having to seek out competitive bids from other companies.