Bush: Halliburton Must Pay for Overcharge

Bush: Halliburton Must Pay for Overcharge

By MATT KELLEY, Associated Press Writer

WASHINGTON - As Democrats demand further investigations of Vice President Dick Cheney's former company, President Bush says Halliburton Co. should repay the government if it overcharged for fuel in Iraq.

"If there's an overcharge, like we think there is, we expect that money to be repaid," the president told reporters Friday when asked about the contract controversy.

Pentagon auditors say Houston-based Halliburton charged up to $61 million too much for delivering gasoline to Iraqi citizens under a no-bid contract to rebuild Iraq's dilapidated oil industry. The company denies overcharging.

Meanwhile, an Army spokesman disclosed that companies from France, Germany, Russia and Canada won't be eligible to replace Halliburton as the recipient of the oil reconstruction contract.

The Army Corps of Engineers is reviewing bids and hopes to decide this month who will get the oil reconstruction deals worth up to $800 million in northern Iraq and $1.2 billion in the south.

The decision means that an additional $2 billion in contracts in Iraq, not disclosed before, would be forbidden to countries that opposed the war, along with the $18.6 billion in Iraq work the administration declared off-limits earlier this week.

The countries that have been left out see the rules as payback, but Bush says limiting contracts to countries that sent troops and money to Iraq makes sense and will encourage more nations to join the U.S.-led coalition.

Democrats have joined the fray, saying the president is needlessly alienating allies and rewarding political supporters. Cheney headed Halliburton from 1995 until he became Bush's running mate in 2000, and other executives from the company gave generously to the Bush campaign.

"George W. Bush is preventing entire nations from bidding on contracts in Iraq so his campaign contributors can continue to overcharge the American taxpayers," Democratic presidential candidate Howard Dean said Friday while campaigning in Iowa.

The political impact is unclear. As long ago as last May, in a CBS-New York Times poll, about half the respondents said they thought the administration gave contracts to companies because they had close Republican ties.

Pentagon officials say they gave Halliburton the prewar oil reconstruction contract because it was essential to start rebuilding quickly after the U.S.-led invasion. Halliburton already had a competitively bid contract to provide short-notice logistical help for the Army.

Separately under that contract, Halliburton has been paid about $3 billion for supporting the military with cafeterias, mail delivery and other services.

The oil contract started as a relatively small order for fighting oil well fires and has grown into the largest reconstruction contract in Iraq. Halliburton has received more than $2.2 billion so far on that contract.

Together, the 11 other Iraq reconstruction projects awarded to other companies have paid out $1.7 billion. The largest, to construction conglomerate Bechtel Corp. for rebuilding infrastructure such as highways and bridges, has delivered more than $1 billion so far.

The largest part of Halliburton's oil reconstruction contract is providing gasoline and other fuel to Iraqis while the country's oil industry is being rebuilt.

A Pentagon audit found Halliburton was charging $1.09 more per gallon for gasoline it trucked into Iraq from Kuwait than for the same fuel imported from Turkey.

Pentagon officials said Thursday that Halliburton's Kuwaiti subcontractor apparently charged too much for the gasoline. Halliburton's president, Dave Lesar, said the Kuwaiti firm was the only one that met the contract's requirements. Lesar said Halliburton earned "a few cents on the dollar" for delivering the fuel.

Under the contract, Halliburton gets a guaranteed profit calculated as part of the company's costs. In other words, the higher the costs, the more money for Halliburton.

Halliburton is guaranteed a profit equal to at least 2 percent of its costs. Depending on performance, Halliburton can earn a profit of up to 7 percent of costs.

If the subcontractor were to overcharge by $61 million, Halliburton would be guaranteed $1.2 million in profit from that amount. If Halliburton earned the entire 7 percent, its profit on the overcharge would be about $4.3 million.

The Army Corps of Engineers is reviewing bids for the $2 billion in contracts that will replace Halliburton's no-bid award. At least 69 companies — including Halliburton — were sent solicitations, according to a Corps Web site.

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