"In Tough Times, a Company Finds Profits in Terror War", 13 July 2002

The Halliburton Company...is benefiting very directly from the United States efforts to combat terrorism.

From building cells for detainees at Guantánamo Bay in Cuba to feeding American troops in Uzbekistan, the Pentagon is increasingly relying on a unit of Halliburton called KBR, sometimes referred to as Kellogg Brown & Root.

Although the unit has been building projects all over the world for the federal government for decades, the attacks of Sept. 11 have led to significant additional business. KBR is the exclusive logistics supplier for both the Navy and the Army, providing services like cooking, construction, power generation and fuel transportation. The contract recently won from the Army is for 10 years and has no lid on costs, the only logistical arrangement by the Army without an estimated cost.

The government business has been well timed for Halliburton, whose stock price has tumbled...sagging profits in its energy business and an investigation by the Securities and Exchange Commission into its accounting practices back when Vice President Dick Cheney ran the company. The government contracts, which the company said Mr. Cheney played no role in helping Halliburton win, either while he led the company or after he left, offer the prospect of a long and steady cash flow that impresses financial analysts.

Since the Sept. 11 attacks, Congress has appropriated $30 billion in emergency money to support the campaign against terrorism. About half has gone to the Pentagon, much of it to buy weapons, supplies, and services...

The value of the contracts to Halliburton is hard to quantify, but the company said government work generated less than 10 percent of its $13 billion in revenue last year...

Mr. Cheney played no role, either as vice president or as chief executive at Halliburton, in helping KBR win government contracts, company officials said.

...the company said that Mr. Cheney ''steadfastly refused'' to market KBR's services to the United States government in the five years he served as chief executive...Mr. Cheney sold Halliburton stock, worth more than $20 million, before he became vice president. After he took office, he donated his remaining stock options to charity.

Like other military contractors, KBR has numerous former Pentagon officials who know the government contracts system in its management ranks...

''Brown & Root had the upper hand with the Pentagon because they knew the process like the back of their hand,'' said T. C. McIntosh, a Pentagon criminal investigator...He said he found that a contractor ''gets away with what they can get away with.''

For example, KBR got the Army to agree to pay about $750,000 for electrical repairs at a base in California that cost only about $125,000, according to Mr. McIntosh...

KBR officials did not dispute the electrical cost figures, which were part of an $18 million contract. But they said government investigators tried to suggest wrongdoing when there was not any.

''The company happened to negotiate a couple of projects we made more money on than others,'' said one company lawyer, who insisted on anonymity. He added, ''On some projects the contractor may make a large or small profit, while on others it may lose money, as KBR sometimes did on this contract.''...

KBR's ability to earn the Pentagon's trust dates back decades...

At its base in Cuba, the Navy has followed the same pattern as the Army: use the military first and augment it with KBR. The Navy's construction brigade, the Seabees, built the first detention facility for battlefield detainees at Guantánamo Bay. Then the Navy activated a recently awarded $300 million, five-year logistic support contract with KBR to construct more permanent facilities, some 600 units, built mostly by workers from the Philippines and India, at a cost of $23 million...