KBR: Where Money Is No Object

Posted on July 27, 2004

One of the most common tactics in Washington media management is to take advantage of what Mickey Kaus calls “Jo Moore days”. The reference is to Jo Moore, a former spin doctor for Tony Blair, who famously distributed an e-mail on September 11, 2001 suggesting to her staff that if they had any bad news to announce, that would be the day to do it, since it would be lost in the noise of the terrorist attacks on New York and Washington. The outcry that resulted when Moore’s e-mail was leaked got her booted from her job.

However, while her timing and approach were unquestionably crass, her basic tactical approach was nothing new — spin doctors are always looking for times when the media are all busily chasing one Big Story so that they can dump their unpleasant stories without too many people noticing.

I’m guessing that’s why the House Committee on Government Reform chose July 22nd as the date for the fourth installment of their hearings on “Contracting and the Rebuilding of Iraq“, which featured testimony from several former employees of Halliburton subsidiary Kellogg Brown & Root on instances of incredible waste and mismanagement they saw while supporting our troops in Iraq.

What made the 22nd a Jo Moore day? It was the same day the final report of the 9-11 Commission was released — an event that anyone could tell would dominate the news not just that day, but the days leading up to it and immediately following it as well. What better time to solicit testimony on massive government waste than when nobody’s looking?

In his opening statement, committee chairman Tom Davis (R-VA) made clear his opinion that the whistleblowers who were about to address his committee weren’t in touch with reality:

I can understand how the difficulties of a war zone can lead to poor record keeping. I know there are those individuals who think they can turn a quick, but questionable, buck because they hope the “fog of war” will cover their actions. And yes, there are bad apples who can turn up wherever opportunity presents itself. Such opportunism cannot be condoned. We are having this hearing today because there are those who believe we have a company, Kellogg, Brown and Root, that is wasting tax dollars or abusing its contracting role, or even defrauding the U.S. taxpayer.
I happen to disagree. I have yet to see any serious evidence of this. What I see are occasional failures to communicate, inattentiveness in adhering to strict business procedures, and a less than perfect accounting process.
Of course, in a perfect world, we would have contractors that would accomplish the mission and maintain perfect peacetime business practices with the appropriate paper trails. But even when the best business practices are not maintained, the taxpayer is still protected because our government procurement system prohibits reimbursement to KBR and other contractors until they have shown the military that the costs presented, as determined by the contracting officer, are reasonable, allocable to the contract, and allowable under the government’s cost principles. We have seen a display of this process through the various Defense Contract Audit Agency reports on cost issues that have been made public. To me, these reports show that the oversight process is alive and working. They reveal issues of contract interpretation and cost reimbursement that are not at all unusual in large, complex cost-type contracts.
The last hearing we held on Iraq contracting, little more than a month ago, explored those issues with those responsible for contract management and oversight. Because of the overheated political atmosphere surrounding the war in Iraq and a misplaced concern about use of KBR as a contractor in particular, we are holding yet another hearing on Iraq contracting. But this time, instead of contracting experts, we are hearing from so-called whistleblowers who will air their complaints against KBR. We will also hear the firm’s reaction to those complaints.

Wow, “so-called whistleblowers”. These folks must really be whining about nothing!

Let’s take a look, then, at some of what they testified to…

James Warren, former KBR convoy truck driver in Iraq:

Before coming to Iraq, I worked as a truck driver for 13 years. For 11 years, I worked for private trucking companies,… [f]or two years, I worked as an independent truck driver.
During my time in Iraq KBR didn’t seem to care about what happened to its trucks. KBR bought its trucks new, usually Mercedes or Volvo, with virtually no mileage on the odometers. KBR removed the spare tires from the trucks on my convoys. I don’t know why they did this. But on one convoy, one of the trucks got a flat tire. Since we didn’t have any spares, we had to leave the truck on the side of the road. As someone who has been in trucking for 13 years, I do not understand how a company could ditch a brand new truck because they didn’t have a spare tire…
While I was driving for these KBR convoys, people would steal things off the trucks on a daily basis. It was quite obvious. I heard the phrase, “let’s go shopping.” I personally witnessed thefts. Sometimes I would wake up inside the truck as it was rocking back and forth from people on top of the truck loosening boxes and taking things…
Another problem was that we didn’t have manifests for our cargo. I was never required to certify that the supplies I started with were the supplies I ended with. I have no idea how KBR accounted for all the equipment that was stolen and lost.

David Wilson, former KBR convoy commander in Iraq:

I was an alternate convoy commander and a convoy commander for Kellogg Brown and Root (“KBR”) in Iraq from November 2003 until March 2004. I arrived in Kuwait at the end of October and went to work in Iraq in the first week of KBR’s sustainer mission, delivering supplies within Iraq… I ran over 100 missions during my employment with KBR.
While I was in Iraq, I saw problems with KBR’s mission. In my opinion, the company did not adequately plan how they were going to do this job. I arrived in Iraq six months after the war and they still did not have the right personnel and equipment in place…
As every other trucker working on these convoys will tell you, KBR had virtually no facilities in place to do maintenance on the trucks. It was like their whole preparation was to buy the trucks, hire the drivers, and let the rest take care of itself. There were absolutely no oil filters or fuel filters for months on end. I begged for filters, but never got any. I was told that oil changes were “out of the question”…
For some reason that was never explained to us, KBR removed all the spare tires in Kuwait. So when one of our trucks got a flat tire on the highway, we had to leave it there for the Iraqis to loot, which is just crazy. I remember saying to myself when it happened, “You just lost yourself an $85,000 truck because of a spare tire.”
We lost other trucks too. We lost a truck because we didn’t have a $25 hydraulic line to assist the clutch… [i]n my time on the road, I saw disabled trucks — or what was left of them — abandoned on the side of the road on a daily basis…
KBR would run trucks empty quite often. Sometimes they would have five empty trucks, sometimes they would have a dozen. One time, we ran 28 trucks and only one had anything on it. Nobody knew why we were hauling around empty trucks… it also didn’t make sense for security. We only had three military gun trucks escorting the whole convoy of 28 trucks, which was two miles long. There were several times when we had empty trucks both on the way to [Camp] Anaconda and then on the way back to [Camp] Cedar II. I don’t understand why KBR would have placed our lives in danger that way for no reason.

Marie deYoung, former logistics specialist, KBR:

During my time with Halliburton, I came to the conclusion that very poor subcontract management practices were evident in every phase of the company’s work…
After receiving negative publicity about some of these issues, Halliburton established a “Tiger Team” to address subcontract issues. Not only did the “Tiger Team” fail to correct the problems, it continued questionable auditing and subcontract administration practices. When the Tiger Team examined a subcontract, they just checked to make sure all the forms were in the file. They didn’t assess the reasonableness of prices or consult with site managers. The Tiger Team looked at subcontracts with no invoices and no confirmation that the products contracted for were being used. Instead of investigating further, they would recommend extending the subcontract. For three months, this Tiger Team occupied waterfront villas at the Hilton Hotel and shuffled papers, but did nothing to effectively clean up old subcontracts…
Given these practices, it’s not surprising that I observed significant waste and overpricing. Under a subcontract with La Nouvelle, a Kuwaiti company, Halliburton was paying a fixed price of between $1 million and $1.2 million per month for laundry for a facility in Kuwait. Because there wasn’t very much laundry to be done, Halliburton was paying La Nouvelle around $100 per 15-pound bag. This was a much higher price than under other subcontracts. For example, Halliburton was paying $28 per bag under a separate subcontract with the same company, and this laundry originated in Iraq, not Kuwait. However, Halliburton management didn’t want to hear about this overpricing…
In August 2003, Halliburton entered into another subcontract with La Nouvelle to provide cans of soda with ice for a hospitality bar at the same facility in Kuwait. La Nouvelle charged for 37,200 cases of soda per month at a cost of about $1.50 per case. However, La Nouvelle delivered only 37,200 cans, and the sodas were just dropped off, without ice or a hospitality bar. Not only were we paying for cases when we received cans, we effectively paid five times the wholesale cost for cans of soda. Only after I insisted that there was a problem did the Tiger Team confirm this overpayment.
Meanwhile, Halliburton procurement and Tiger Team staff live at the 5-star Kempinski hotel while the troops in Kuwait live in tents. For a three-month period, the Kempinski hotel charged almost $1 million to house 100 Halliburton employees. By comparison, it costs less than $200,000 a year to lease tents that could house 400 soldiers. To put it differently, it costs $110 to house one KBR employee per day at the Kempinski, while it costs the Army $1.39 per day to bunk a soldier in a leased tent. The military requested that Halliburton move into tents, but Halliburton refused.
During my five months working on subcontracts in Kuwait, I tried to correct some of these practices. But the Halliburton corporate culture is one of intimidation and fear. When a new procurement manager, the thirteenth since the start of the Kuwait project, encouraged subcontract staff to speak up about the failed efforts of the Tiger Team, my co-workers cried out: “the last subcontract manager tried to speak up, but he was fired. He was the twelfth subcontracts manager.”

Um, those are some decidely non-trivial amounts of money that they’re alleging were being blown through by Halliburton and KBR. As Chairman Davis promised, the committee also heard from a representative from Halliburton (a tag team of them, actually, led by Alfred Neffgen, COO of KBR’s Government Operations, Americas Region practice).

The thing is, though that in their 21-page statement, Neffgen & Co. never get around to addressing the specific issues raised by the whistleblowers. Instead, they spoke more generally on how supplying troops in a combat zone is a tough thing to do, and in such circumstances losses are inevitable, etc. Never mind that

• the whistleblowers were all speaking about things that occurred long after the conclusion of the initial military campaign, and
• many of the things they were speaking about took place in Kuwait and relatively quiescent areas of Iraq — places that aren’t “combat zones” by any definition of the term.

In other words — look, if you come to me and say that you ran some trucks full of supplies to the front line in the middle of an offensive, and you didn’t bother filling out all the paperwork because there were troops pinned down who needed the supplies, I can buy that. I’m not going to scream about missing manifests if some soldier’s life is on the line. But running empty trucks back and forth across the desert when you know that insurgents are out there — and taking away their spare tires and oil filters to boot? What the hell is that?

Unsurprisingly, Chairman Davis’ Jo Moore tactic worked pretty well — beyond some wire service coverage, not many outlets picked up on this story. But until KBR comes up with a rebuttal to these charges that’s more compelling than “war is hell”, Americans ought to be wondering how many of their tax dollars are being thrown away through poor management, brought to you by Kellogg, Brown and Root.