Pentagon backs off threat to withhold Halliburton fees

August 19, 2004|By LOS ANGELES TIMES

WASHINGTON - The Army has abruptly reversed itself and decided to pay all of Halliburton Co.'s fees to house and feed U.S. troops in Iraq and Kuwait after the company threatened to legally challenge the effort to penalize it.

The Houston oil-and-service company announced early Tuesday that the Army had decided to pay just 85 percent for services in the war zone after a dispute over how the company calculated its bills.

But late Tuesday, a spokeswoman for the Army Field Support Command said the 15 percent penalty for the company's Kellogg Brown and Root subsidiary - amounting to an estimated $60 million a month - would not be levied.

Halliburton, run from 1995 to 2000 by Vice President Dick Cheney, said earlier in the day that it would challenge the decision in court because there was "no legal justification" for withholding the fees.

The penalty would have withheld 15 percent of future payments on Iraq-related contracts valued at up to $18 billion. An audit by the Defense Contract Auditing Agency found that the firm's system for generating cost estimates used in government negotiations was "inadequate."

In response, the company said in a statement that Halliburton would cut some payments to its many subcontractors in Iraq and Kuwait by 15 percent.

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