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Headed for Iraq

The US Army says its five-year no-bid LOGCAP contract with Halliburton’s KBR unit will be put up for bids after its current phase ends later this year. According to Army figures, KBR has received orders totaling $17.1 billion since the start of the current LOGCAP 3 contract, including about $15.4 billion in Iraq, for feeding, housing and providing fuel and other services to U.S. troops worldwide.

As DID has noted, KBR has found itself embroiled in controversy over its role, its prices, and audits of its work that have been unable to fully account for millions of dollars of those funds or justify all charges to the Pentagon’s full satisfaction. The firm strongly denies any wrongdoing, and Army Secretary Francis Harvey recently praised their efforts. LOGCAP 4’s new approach clearly acknowledges the controversies spawned, however, and early reports say that it will be very different…

The Army is currently in the final stages of developing its LOGCAP 4 RFP, with winners expected to be named in November 2006. They tentatively plan to split the work among three companies, with a fourth firm hired to help monitor the performance of the other three. KBR will be allowed to compete for that contract if it wishes, as it heads toward an IPO.

The Project On Government Oversight’s release hailed this decision as “a small step in the right direction”, but continued to express concern about the contracting out of oversight functions, as opposed to retaining them in-house.

Meanwhile, investors said the change won’t disrupt the planned public offering for KBR, which also builds oil refineries, chemical plants and liquefied-natural-gas terminals. High demand is projected for those facilities, and one money manager put it this way: “The Pentagon contracts are winding down and they’re not a big money maker anyway…”

Which ought to tell us something about the scale and profitability of coming investments in oil refineries, chemical plants and liquefied-natural-gas terminals.