[Lerkfish]

this NYT story requires registration, so here it is quoted:

December 10, 2003
High Payments to Halliburton for Fuel in Iraq
By DON VAN NATTA Jr.

The United States government is paying the Halliburton Company an average of $2.64 a gallon to import gasoline and other fuel to Iraq from Kuwait, more than twice what others are paying to truck in Kuwaiti fuel, government documents show.

Halliburton, which has the exclusive United States contract to import fuel into Iraq, subcontracts the work to a Kuwaiti firm, government officials said. But Halliburton gets 26 cents a gallon for its overhead and fee, according to documents from the Army Corps of Engineers.

The cost of the imported fuel first came to public attention in October when two senior Democrats in Congress criticized Halliburton, the huge Houston-based oil-field services company, for "inflating gasoline prices at a great cost to American taxpayers." At the time, it was estimated that Halliburton was charging the United States government and Iraq's oil-for-food program an average of about $1.60 a gallon for fuel available for 71 cents wholesale.

But a breakdown of fuel costs, contained in Army Corps documents recently provided to Democratic Congressional investigators and shared with The New York Times, shows that Halliburton is charging $2.64 for a gallon of fuel it imports from Kuwait and $1.24 per gallon for fuel from Turkey.

A spokeswoman for Halliburton, Wendy Hall, defended the company's pricing. "It is expensive to purchase, ship, and deliver fuel into a wartime situation, especially when you are limited by short-duration contracting," she said. She said the company's Kellogg Brown & Root unit, which administers the contract, must work in a "hazardous" and "hostile environment," and that its profit on the contract is small.

The price of fuel sold in Iraq, set by the government, is 5 cents to 15 cents a gallon. The price is a political issue, and has not been raised to avoid another hardship for Iraqis.

The Iraqi state oil company and the Pentagon's Defense Energy Support Center import fuel from Kuwait for less than half of Halliburton's price, the records show.

Ms. Hall said Halliburton's subcontractor had had more than 20 trucks damaged or stolen, nine drivers injured and one driver killed when making fuel runs into Iraq.

She said the contract was also expensive because it was hard to find a company with the trucks necessary to move the fuel, and because Halliburton is only able to negotiate a 30-day contract for fuel. "It is not as simple as dropping by a service station for a fill-up," she said.

A spokesman for the Army Corps of Engineers, Bob Faletti, also defended the price of imported fuel.

"Everyone is talking about high costs, but no one is talking about the dangers, or the number of fuel trucks that have been blown up," Mr. Faletti said. "That's the reason it is so expensive." He said recent government audits had found no improprieties in the Halliburton contract.

Gasoline imports are one of the largest costs of Iraqi reconstruction efforts so far. Although Iraq sits on the third-largest oil reserves in the world, production has been hampered by pipeline sabotage, power failures and an antiquated infrastructure that was hurt by 11 years of United Nations sanctions.

Nearly $500 million has already been spent to bring gas, benzene and other fuels into Iraq, according to the corps. And as part of the $87 billion package for Iraq and Afghanistan that President Bush signed last month, $18.6 billion will be spent on reconstruction projects, including $690 million for gasoline and other fuel imports in 2004.

From May to late October, Halliburton imported about 61 million gallons of fuel from Kuwait and about 179 million from Turkey, at a total cost of more than $383 million.

A company's profits on the transport and sale of gasoline are usually razor-thin, with companies losing contracts if they overbid by half a penny a gallon. Independent experts who reviewed Halliburton's percentage of its gas importation contract said the company's 26-cent charge per gallon of gas from Kuwait appeared to be extremely high.

"I have never seen anything like this in my life," said Phil Verleger, a California oil economist and the president of the consulting firm PK Verleger LLC. "That's a monopoly premium — that's the only term to describe it. Every logistical firm or oil subsidiary in the United States and Europe would salivate to have that sort of contract."

In March, Halliburton was awarded a no-competition contract to repair Iraq's oil industry, and it has already received more than $1.4 billion in work. That award has been the focus of Congressional scrutiny in part because Vice President Dick Cheney is Halliburton's former chief executive officer. As part of its contract, Halliburton began importing fuel in the spring when gasoline was in short supply in large Iraqi cities.

The government's accounting shows that Halliburton paid its Kuwait subcontractor $1.17 a gallon, when it was selling for 71 cents a gallon wholesale in the Middle East.

In addition, Halliburton is paying $1.21 a gallon to transport the fuel an estimated 400 miles from Kuwait to Iraq, the documents show. It is paying 22 cents a gallon to transport gas into Iraq from Turkey.

The 26 cents a gallon it keeps includes a 2-cent fee and 24 cents for "mark-up costs," the documents show. The mark-up portion is intended to cover the overhead for administering the contract.

Ms. Hall of Halliburton said it was "misleading" for the corps to call it a mark-up. "This simply means overhead costs, which includes the general and administrative costs like light bulbs, paper and employees," she said. "These costs are specifically allowable under the contract with the Corps of Engineers, are defined by detailed regulations, and are scrutinized and approved by U.S. government auditors."

In recent weeks, the costs of importing fuel from Kuwait have risen. Figures provided recently to Congressional investigators by the corps show that Halliburton was charging as much as $3.06 per gallon for fuel from Kuwait in late November.

If the corps concludes that Halliburton has successfully administered the gas contract, it could be paid an additional 5 percent of the total value of the gas it imported.

Halliburton's Kuwait subcontractor was hired in May. Halliburton and the Army Corps of Engineers refused to identify the company, citing security reasons. Aides to Representative Henry A. Waxman, the California Democrat who has been a critic of the fuel contract, said government officials had identified it as the Altanmia Commercial Marketing Company. Several independent petroleum experts in the Middle East and the United States said they had not heard of Altanmia.

Copies of the Army Corps documents were given to Mr. Waxman's office, which provided them to The Times.

Iraqi's state oil company, SOMO, pays 96 cents a gallon to bring in gas, which includes the cost of gasoline and transportation costs, the aides to Mr. Waxman said. The gasoline transported by SOMO — and by Halliburton's subcontractor — are delivered to the same depots in Iraq and often use the same military escorts.

The Pentagon's Defense Energy Support Center pays $1.08 to $1.19 per gallon for the gas it imports from Kuwait, Congressional aides said. That includes the price of the gas and its transportation costs.

The money for Halliburton's gas contract has come principally from the United Nations oil-for-food program, though some of the costs have been borne by American taxpayers. In the appropriations bill signed by Mr. Bush last month, taxpayers will subsidize all gas importation costs beginning early next year.

In an interview on Tuesday, Mr. Waxman responded to the latest information on to costs of the Halliburton contract. "It's inexcusable that Americans are being charged absurdly high prices to buy gasoline for Iraqis and outrageous that the White House is letting it happen," he said.

[petehammer]

Originally posted by SimeyTheLimey:
I generally have a low tolerance for conspiracy theories and shibboleths. This stuff about how Halliburton is making Cheney money is both. Cheney has nothing to do with Halliburton any more, and the contract that Halliburton won was won back when Clinton was president. I'm tired of arguing this point because, like the "it's all about oil" argument, it has become a matter of faith in some circles. I don't argue with people who hold a "religious" point of view

[adamk]

so here is a simple question. why doesn't the US simply subcontract to the kuwaiti company (or better iraq's SOMO) that is already doing the real work anyway? it seems to me that contracts should go to those that can deliver a product or service at the best price? and the only thing haliburton is contributing is tacking on another $0.26 to the cost.

am i right?

[Spheric Harlot]

Originally posted by adamk:
so here is a simple question. why doesn't the US simply subcontract to the kuwaiti company (or better iraq's SOMO) that is already doing the real work anyway? it seems to me that contracts should go to those that can deliver a product or service at the best price? and the only thing haliburton is contributing is tacking on another $0.26 to the cost.

am i right?

For the same reason Halliburton was paid $50 million to repair a bridge the local subcontractor got $300,000 for.

-s*

[Lerkfish]

Originally posted by adamk:
so here is a simple question. why doesn't the US simply subcontract to the kuwaiti company (or better iraq's SOMO) that is already doing the real work anyway? it seems to me that contracts should go to those that can deliver a product or service at the best price? and the only thing haliburton is contributing is tacking on another $0.26 to the cost.

am i right?

yes, you are right. Unfortunately, you're using logic. Logic evaporates when trumped by cronyism.

[christ]

Lefties using logic! Over here Simey, over here!

You should all know by now that no-one in the middle east is competent to do the work that Halliburton can do. Only Halliburton has the expertise in the US system that will allow them to rebuild Iraq. And Halliburton are (almost) losing money on everything they do, because they are so eager to help the poor benighted heathens, with their boundless altruism, and dedication to charity.

The ingratitude shown by you reactionary, anti-Americans is just astonishing.

And shame on all of you for imputing a profit motive.

And it's all Clinton's fault.

Or Carter's.

Or whatever.

[zigzag]

For that kind of money, I expect them to check the tires and give me a free wash.

I hear it has a special additive in it: gasoline.

[Lerkfish]

Originally posted by zigzag:
For that kind of money, I expect them to check the tires and give me a free wash.

I hear it has a special additive in it: gasoline.

LOL!

[adamk]

Originally posted by Lerkfish:
yes, you are right. Unfortunately, you're using logic. Logic evaporates when trumped by cronyism.

oh, okay i see. so nothing will be done to rectify the situation?

[thunderous_funker]

What good is Idealistic foreign policy if we can't make a buck? What could be more American than that?

[Spheric Harlot]

Originally posted by adamk:
oh, okay i see. so nothing will be done to rectify the situation?

If anybody wanted to do anything about it, there wouldn't BE a bloody situation.

-s*

[mr. natural]

Posted by thunderous_funker:

What good is Idealistic foreign policy if we can't make a buck? What could be more American than that?

And let's not forget too, it's our hard earned money that's lining Halliburton's pockets just to play *middle-man* in this shell game!

Ain't America grand!

[tie]

The United States government is paying the Halliburton Company an average of $2.64 a gallon to import gasoline and other fuel to Iraq from Kuwait, more than twice what others are paying to truck in Kuwaiti fuel, government documents show.
...
Iraqi's state oil company, SOMO, pays 96 cents a gallon to bring in gas, which includes the cost of gasoline and transportation costs, the aides to Mr. Waxman said. The gasoline transported by SOMO — and by Halliburton's subcontractor — are delivered to the same depots in Iraq and often use the same military escorts.

The Pentagon's Defense Energy Support Center pays $1.08 to $1.19 per gallon for the gas it imports.

This profiteering is outrageous.

[Lerkfish]

Originally posted by tie:
This profiteering is outrageous.

and yet, way back when, I and others correctly predicted not only that halliburton and bechtel and other cronies would receive exclusive contracts (and they have), and they would gouge in astronomical proportions.

Oh no, the chorus of republicans claimed, Oh no, how unfair and tawdry of us to predict that. What a looney conspiracy theory nut you are....

when all my conspiracy theories come true, and so far they all have, what then? What will be the assessment of the right? That the reality is tawdry and looney?

[The Mick]

Originally posted by Lerkfish:
and yet, way back when, I and others correctly predicted not only that halliburton and bechtel and other cronies would receive exclusive contracts (and they have), and they would gouge in astronomical proportions.

Oh no, the chorus of republicans claimed, Oh no, how unfair and tawdry of us to predict that. What a looney conspiracy theory nut you are....

when all my conspiracy theories come true, and so far they all have, what then? What will be the assessment of the right? That the reality is tawdry and looney?

The silence is deafening.

[Lerkfish]

Originally posted by The Mick:
The silence is deafening.

yeah, funny dat.
I wonder if when there is such an irrefutable verification of something the right claims would never happen, they shy away from those threads because to enter them, they'd have to admit to being wrong, or have to try to defend something that is indefensible.

OR....

everyone's asleep (very possible).

I don't think you can always read too much into stuff.

[jbartone]

Slightly OT...

Someone in another thread posted

edit: bleh, just tried it and it didnt work

[Lerkfish]

Since not everyone likes me being an archealogist and responding directly in old threads, I STILL think there is a value to seeing what was said as far back as 8 months ago, when people like me predicted this outcome, and others were outraged at the suggestion of what has, in fact, transpired as predicted.

links:

cheny's chums
spoils of war
Iraq war quiz
Bechtel first to rebuild Iraq
cost of Iraq war
Arianna's rant on cronyism
halliburton contract larger than expected

[tie]

Here we are:

Originally posted by SimeyTheLimey:
T_F, you and your friends seem to have a real hard on for witchunting this particular corpopration, but in this case it is clearly misplaced. The corporation has done exactly what US law requires. You should be patting them on the back.
...
I think the phrase "broken record" is appropriate. By the time the election comes, nobody is going to be listening. These are only scandals to people looking for scandals, or who have already decided that all corporations are evil monsters. That will get you votes with people who vote for Ralph Nader and who march in anti-globalization marches. To almost anybody else, it makes you seem a little wild-eyed.

Suspicion is not the same thing as scandal. That's really the whole problem here. Lots of smoke, and suspicion of smoke, but no fire. But because mention the names Rumsfeld, Halliburton, and Cheney, mere unsupported suspicion is apparently enough. (link)

T_F, your standard would disqualify a very large number (probably most) large government contractors. When you have a multi-year cost-plus contract, and a dispute between the government and the contractor, accusations of fraud and waste are common. So are fines for overcharging. The punishment is set out in the statutes. It is fines (and I believe, potentially jail). It's also set out in the contracts. What it isn't is isn't permanent disqualification from government contracting.

There are two reasons for this. First, there are a limited pool of large corporations capable to doing these kinds of contracts. For example, I know off the top of my head that both Boeing, and Lockheed have been fined in the past for cost overruns. Disqualify both of them and where are you going to buy fighter jets from? You just disqualified the entire industry.

If you disqualify Halliburton from receiving this contract because it previously had a contract with Iraq (legal ones, nobody has accused them of sanctions-busting) then please show me the rival corporation without such a history that is capable of fulfilling the contract as the same or similar bid. That's going to be a pretty small pool of bidders. Think about it, T_F, Iraq has been a major oil-producing country for decades. It wasn't always under sanctions. Probably every major oil company in the world has done business with Iraq. You can't disqualify them all. Who were you thinking of, TotalElf? Oh wait, they did business with Saddam as well.

The second reason you don't disqualify an entire corporation forever because of past (caught) contracting irregularities, is because a lot of workers depend on those contracts. They aren't the guilty ones. You want to put them all out of work every time the government finds an overcharge on a contract?

Ethics piety is all very well. But you have to consider reality as well. (link)

I suppose Simey thinks the Defense Contract Audit Agency is a broken record for finding Halliburton has overcharged us for tens of millions of dollars for oil, and other violations (heavily biased NY Times link). Apparently, Iraq's own state oil company can ship the oil for well less than half as much, but there are a lot of people working for Halliburton who would lose their jobs if Halliburton was disqualified. Like Iraqi subcontractors and American executives. Ethics piety is all very well, but you have to consider those poor executives as well.