Transcripts

The Iraq War May Have To Be Won Without Halliburton

PAUL KANGAS: The U.S. Army has discontinued a controversial multi-billion dollar contract with oil services company Halliburton. The contract provided logistical support to U.S. forces in Iraq. With a new contract open to bidding by multiple companies, some analysts say the business of government contracting in Iraq may be turning a corner. Darren Gersh reports.

DARREN GERSH, NIGHTLY BUSINESS REPORT CORRESPONDENT: When U.S. troops in Iraq need a hot meal, a place to sleep, or gas for the helicopter, the Army now turns to Halliburton`s Kellogg Brown and Root. But in the future, the Army wants to create more competition for $4 or $5 million a year in logistical support business.

BRETT LAMBERT, DEFENSE ANALYST, DENSMORE GROUP: You`ll see much more of an emphasis on reducing these umbrella contracts and making them much more specialized, so that you have much greater oversight and insight into how they are performing.

GERSH: In 2001, the Army signed a one-year contract with Halliburton, with an option allowing it to renew for up to nine years. This November, the Army plans to issue a new contract dividing its logistical support workamong three companies. The winners will compete for each new task the Army needs to support ongoing operations. The contract will be good for one year with an option to renew for up to four years. Analysts say that is an improvement over Halliburton`s current sole source contract in Iraq, but it is not a free market solution. The Army simply doesn`t have the people it needs to buy what it needs with open, competitive bidding.

STEVEN SCHOONER, PROCUREMENT LAW PROGRAM, GEORGE WASHINGTON UNIVERSITY LAW SCHOOL: If we want to see better contracting solutions, then someone in the government is going to have to give more procurement personnel to the Army and the Defense Department generally so that they can break down the individual tasks into open, competitive, well-managed, well thought out contractual solutions.

GERSH: The Army says it has not made a final decision. And analysts say Halliburton`s work in Iraq has been good enough, it may win a piece of any new contract. That enrages critics who point to government audits questioning more than $1 billion in expenses Halliburton may have over- charged the government for operations in Iraq.

REP. HENRY WAXMAN (D) CALIFORNIA: I think you ought to say no more future contracts with them. I think we ought to look for other people to do our work that we know will do an honest job.

GERSH: Halliburton`s most recently reported profit margins in Iraq were less than 3 percent. But analyst say many companies will want to bid on the Army`s new support contracts, in part to give them a chance to develop valuable contacts in Iraq`s new government. Darren Gersh, NIGHTLY BUSINESS REPORT, Washington.