Halliburton says Army won't extend waiver

Decision to deny company time to account for costs could cut payment by 15%


Halliburton Co. said yesterday that the U.S. Army had decided not to grant it additional time to substantiate its costs in Iraq and Kuwait, a decision that could cost the company 15 percent of its payment.

Government contractors normally cannot be paid more than 85 percent of their invoices until they fully account for their costs. Twice this year, the Army set this rule aside for Halliburton as the company cataloged its costs and explained how it was billing the government. The most recent reprieve expired Sunday, and company officials said Monday that the Army had given them assurances they could have another extension.

But yesterday the company issued a press release reversing that, saying that the Army would not grant it the reprieve after all.

"Halliburton announced that it was advised this morning that the Army Materiel Command has refused to grant an extension" of the 15 percent clause, the statement said.

Company officials said they believed they had the extension "based on clear oral assurances from senior Pentagon representatives." The statement went on to say about their statements Monday that a "politically charged environment and leaks to news media have likely contributed to yesterday's events."

On Monday, Linda Theis, a spokeswoman for Army Field Support Command in Rock Island, Ill., a part of the Army Materiel Command, said that Army personnel were talking with representatives of Kellogg Brown & Root, the Halliburton subsidiary that is working in Iraq, to resolve the billing dispute.

The waivers granted to Halliburton have annoyed several members of Congress, who say the company has enjoyed undue privileges because of its former ties to Vice President Dick Cheney. Cheney led the company from 1995 until he became the Republican vice presidential candidate in 2000.

Halliburton, an oil services and construction company based in Houston, said the government's shifting needs and the intricacies of providing logistical support to U.S. troops made it difficult to quickly account for its many costs.

"Because of the size and scope of the tasks in Iraq and the fact that the process is complex and constantly changing," the Army Materiel Command and Kellogg Brown & Root "have agreed to work closely together to produce the final results," Wendy Hall, a Halliburton spokeswoman, said Monday in an e-mail message.

Although hundreds of millions of dollars are at issue, withholding payments would have no effect on Halliburton's cash flow, the company said. Kellogg Brown & Root would simply deny its subcontractors that money, Hall said. "This is in accordance with contract agreements with subcontractors," she said. Even so, she added, "we believe these issues will be resolved in our favor."

As the largest corporate recipient of the government's Iraq-related contracts - worth more than $8 billion - Halliburton has been accused in congressional hearings of overcharging and overspending in Iraq.

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