More on emerging of Haliburton scandal and its ties to the Bush/Cheney Administration. Feel free to comment or e-mail: wahkonta@graffiti.net Blog On.
EXCERPT BEGINS
http://www1.iraqwar.ru/iraq-read_article.php?articleId=33845&lang=en
Halliburton, U.S. Army and Iraqi oil
22.01.2004 [17:04]

May 6, 2003

Lt. Gen. Robert B. Flowers
ATTN: Directorate of Military Programs
U.S. Army Corps of Engineers
441 G Street, NW
Washington, DC 203 14
Dear General Flowers:

Thank you for responding to my letter of April 10, 2003, about the Army
Corps of Engineers' sole-source contract with the Halliburton subsidiary
Kellogg Brown & Root.

Your May 2 letter indicates that the contract is considerably broader in
scope than previously known. Prior descriptions of the Halliburton contract
had indicated that the contract was for extinguishing fires at oil wells and
for related repair activities. It now appears, however, that the contract
with Halliburton - a company with close ties to the Administration - can
include "operation" of Iraqi oil fields and "distribution" of Iraqi oil.
Your letter further indicates that the contract is likely to remain in place
until at least the end of August and could last into 2004.

Moreover, your letter indicates that the Administration is currently
developing a proposal to issue a long-term contract to replace the
Halliburton contract. Like the Halliburton contract, this contract would
apparently designate a non-Iraqi company to produce and distribute Iraqi oil
and generally exercise some of the responsibilities that an Iraqi oil
company - or the newly reconstituted Iraqi oil ministry - would be expected
to have.

These new disclosures are significant and they seem at odds with the
Administration's repeated assurances that Iraqi oil belongs to the Iraqi
people. They thus raise additional questions that I hope you will be able to
answer.

The Scope and Length of the Halliburton Contract

Information about the contract with Halliburton has been released by the
Administration in dribs and drabs. The contract was issued to Brown & Root,
a Halliburton subsidiary, without competition on March 8. However, the
existence of the contract was not announced until March 24, and the Corps
did not disclose until April 8 that the contract had a potential value of up
to $7 billion. (1) Moreover, it was not until your May 2 letter, which I
received late on Friday afternoon, that the Corps revealed that the scope of
the contract includes "operation of facilities" and "distribution of
products." Only now, over five weeks after the contract was first disclosed,
are members of Congress and the public learning that Halliburton may be
asked to pump and distribute Iraqi oil under the contract.

The Brown & Root contract was first disclosed by Halliburton on March 24.
The information provided by Halliburton at that time gave no indication that
the contract could include operation of Iraqi oil fields. The company press
release announcing the contract was titled "KBR Implements Plan for
Extinguishing Oil Well Fires in Iraq."(2) That press release described the
contract as "assessing and extinguishing oil well fires in Iraq and
evaluating and repairing, as directed by the U.S. government, the country's
petroleum infrastructure."

In a one-page description of the contract that your office provided to me,
the Corps generally confirmed this description. According to the Corps
release, the Corps was in charge of "implementation of plans to extinguish
oil well fires and to assess oil facility damage in Iraq" and would be
contracting with Brown & Root to perform these functions. (3)

The announcement of the Halliburton contract received considerable public
attention. As a result of the incomplete disclosure, however, the news
reports consistently described the contract as a contract to "put out
oil-field fires,"(4) to "fight oil fires,"(5) or to "fix Iraqi oil fields.
"(6)

We now know, however, that the contract actually has a much broader scope
than simply extinguishing oil well fires and repairing broken oil well
infrastructure. In a letter to me on April 8, you disclosed that the
contract was worth up to $7 billion and had a term of up to two years. And
in your most recent May 2 letter, you further disclosed that the contract
includes the operation of facilities and distribution of products.

The May 2 letter also adds additional detail about the likely duration of
the sole-source contract with Brown & Root. The letter states that "the best
estimate" for awarding a new competitive contract is "approximately the end
of August." However, the letter goes on to say that "the time required to
complete [the process of awarding the contract] is estimated to be from four
to nine months" - meaning the current contract could last through January
2004.

Administration Intentions Regarding Iraqi Oil

Besides shedding new light on the contract with Brown & Root, the May 2
letter indicates that the Corps is in the process of preparing a proposal
for a long-term contract to replace the existing Brown & Root contract.
According to the letter, the Corps is "completing the competitive
acquisition strategy and plan, preparing the statement of work, and
preparing the solicitation that will request proposals to perform the work."
The May 2 letter states that this new contract will also authorize the
contractor to operate oil facilities and distribute oil products.

The contract with Halliburton and the planned successor contract raise
significant questions about the Administration's intentions regarding Iraqi
oil. The Administration has previously drawn a bright line on Iraqi oil:
according to White House spokesman Ari Fleischer, "[t]he oil fields belong
to the people of Iraq, the government of Iraq, all of Iraq. All the
resources of Iraq need to be administered by the Iraqi government."(7)
Likewise, Secretary of State Colin Powell has said that "[t]he oil of Iraq
belongs to the Iraqi people."(8) And Secretary of Defense Donald Rumsfeld
has reiterated that Iraqi oil "belongs to the Iraqi people."(9)

In light of these statements, I am puzzled as to why the Corps is actively
preparing a solicitation for a long-term contract to produce and distribute
Iraqi oil. That contract would clearly seem to contradict Mr. Fleischer's
statement that the "the oil fields belong to the people of Iraq." In fact,
such a contract would apparently mean that Halliburton or another similar
company - and not the Iraqi people - would be making the fundamental
decisions on how much oil should be produced and who should produce it.

Just this weekend, the Administration appointed an Iraqi, Thamer Abbas
Ghadban, to run Iraq's oil ministry. According to press accounts, Mr.
Ghadban will head a team overseeing the country's oil industry, as well as
its oil sales and marketing operations. (10) The information provided in
your May 2 letter, however, appears to conflict with these intentions. Your
letter says that it will be the Corps - not Mr. Ghadban - that will issue a
contract to operate facilities and distribute oil.

While Iraqis may need American help in the short-term to rebuild the country
's oil infrastructure, it is less clear whether they need or want an outside
company to produce and distribute their oil on a long-term basis. Indeed,
press reports have already described tensions between Iraqi oil managers and
Americans, (11) as well as frustration among Iraqi oil workers unable to
resume their jobs. (12) Some Iraqi oil workers are apparently dissatisfied
with the pace of work done by Brown & Root and with the lack of consultation
about how to rebuild and operate the country's oil infrastructure. (13) The
Administration's decision to appoint a former American oil executive to
chair an advisory board overseeing the Iraqi oil ministry may well increase
the perception among some Iraqis that they are not being given full control
over the resources that the Administration previously indicated belonged to
them. (14)

There appears to be a conflict between the Administration's statements of
intent (that the oil belongs to Iraqis) and its actions (issuing contracts
to U.S. companies like Halliburton to produce and distribute the oil). This
conflict should be addressed by the Administration in a forthright manner.

Release of Information

I am grateful to you for clarifying matters concerning the scope and
duration of the Brown & Root contract. Moreover, I do not mean to suggest
that the Corps has intentionally misled anyone about the contract. I am,
however, concerned that the Administration's reluctance to provide complete
information about this and other Iraqi contracts has denied Congress and the
public important information and caused unnecessary confusion about the
contracts' details. The solution to this problem is for the Corps to release
the contract and any supporting documentation.

I would thus like to reiterate the request for documents and information
relating to the contract that I made in my letter of April 16 (attached). I
believe that it would be in the best interests of all concerned parties -
not least of the American taxpayer - for the Corps to release this
information publicly as soon as possible.

I also request that you release complete information on an ongoing basis
about any task orders issued to Brown & Root under the contract, all work
done under the contract to date, and any funds paid to the company.

Thank you again for your cooperation.

Sincerely,

Henry A. Waxman
Ranking Minority Member


References
(1) Letter from Lt. Gen. Robert B. Flowers, U.S. Army Corps of Engineers, to
Rep. Henry A. Waxman (Apr. 8,2003).
(2) Halliburton, KBR Implements Plan for Extinguishing Oil Well Fires in
Iraq (Mar. 24,
2003).
(3) U.S. Army Corps of Engineers, The Corps of Engineers ' Role in
Combatting Iraqi Oil Fires (undated).
(4) Contracts to Rebuild Iraq Go to Chosen Few, Washington Post (Mar.
28,2003).
(5) The Iraq Money Tree, New York Times (Apr. 14,2003).
(6) Halliburton May Be Replaced in Iraq Oilfield Contract, Bloomberg News
(Apr. 14,
2003)
(7) White House, Press Briefing by Ari Fleischer (Feb. 6,2003).
(8)Powell Says U.S. Not after Iraqi Oil, Los Angeles Times (Jan. 23,2003).
(9) NewsHour, PBS (Feb. 20,2003).
(10) See, e.g., U.S. Names Iraqi as Team Leader of Oil Operations, Wall
Street Journal (May 5,2003).
(11) New Drill: Inside Iraq's Giant Oil Industry, Maze of Management
Tensions, Wall Street Journal (Apr. 30,2003); Getting Iraq back into the
Flow, Washington Post (May 6,2003).
(12) At Iraqi Oil Plant, Bitterness and Frustration, Washington Post (Apr.
30,2003).
(13) Id.
(14) Details about the board's authority have apparently not yet been
revealed. Three Get Top Posts to Revive Iraqi Oil Flow, New York Times (May
4,2003); U.S. Names Iraqi as Team Leader of Oil Operations, Wall Street
Journal (May 5,2003)


APPENDIX 1

DEPARTMENT OF THE ARMY
U.S. Army Corps of Engineers
WASHINGTON, 13.C. 20314-1000

May 2, 2003

Directorate of Military Programs

Honorable Henry A. Waxman
House of Representatives
Washington DC 205 15-B 143

Dear Mr. Waxman:

This is in response to your inquiry of April 10, 2003 regarding the contract
for services to repair and provide for continuity of operations of the Iraqi
oil infrastructure.

The term and total cost of the current contract are limits on, and not our
expectations regarding, the duration and potential dollar value of the
contract. These limits are based on estimates drawn from contingency plans
that addressed best to worst scenarios that might unfold in Iraq. In the
worst scenario, a large proportion of Iraq's 1500 oil wells would be on
fire, and there would be massive intentional oil spills and pollution
resulting from the fires, extensive damage to associated infrastructure,
including gas-oil separators, pipelines, pumping stations, refineries, and
import facilities. Since the actual requirement for emergency services was
unknown, the contract was structured to enable us to order the full range of
services required by any potential situation, including a scenario in which
there was extensive intentional damage to the Iraqi oil fields.

This contract was designed from the outset as a bridge to competition and is
structured accordingly. The indefinite delivery/indefinite quantity, cost
plus award fee contract allows the Government to issue individual task
orders for a specified period of performance at an estimated not-to-exceed
dollar amount. We will limit orders under this contract to those services
required prior to the availability of competitively awarded contracts.

The scope of work provided by the current contract, and the contemplated
competitive contract(s) that will replace it, includes extinguishing oil
well fires and assessing the condition of oil facilities; cleaning up oil
spills or other environmental damage at oil facilities; engineering design
and repair or reconstruction of damaged infrastructure; operation of
facilities; and distribution of products.

In order to maximize competition, we started planning for the follow-on
procurement as a classified, limited competition in parallel with the
current contract. We did not wait for the end of hostilities to begin
working to achieve, the savings that we expect competition to bring. In late
March, the project was largely declassified, thus allowing us to publicly
announce the requirement and plan for full and open competition. We are now
completing the competitive acquisition strategy and plan, preparing the
statement of work, and preparing the solicitation that will request
proposals to perform the work. The solicitation will be advertised on the
Federal, Business Opportunities (website www.fedbizopps.gov) by late spring
or early summer. The best estimate for award of the contract based on this
schedule is approximately the end of August.

In October 2002, the United States Central Command (CENTCOM) Commander, in
consultation with the Office of the Under Secretary of Defense for Policy,
identified the classified requirement to develop contingency plans for the
repair and continuity of operations of the Iraqi oil infrastructure. The
Army's Logistics Civil Augmentation Program (LOGCAP) contract provides for
development of such plans to address requirements of the Combatant
Commanders. (The LOGCAP contract, which is re-competed periodically, had
been competitively awarded by the United States Army Material Command to
Kellogg, Brown & Root (KBR) in December 2001.) Because of its planning work
under the LOGCAP contract, KBR was already very familiar with operational
plans of Combatant Commanders and was a regular participant in contingency
planning. After determining that the effort was within the scope of the
LOGCAP contract, the Army Field Support Command issued a task order under
the LOGCAP contract for Brown and Root Services (BRS), a division of KBR, to
develop the required contingency plan. The effort was classified. The task
order was issued November 11, 2002.

On January 22, 2003, the Secretary of Defense designated the Army as the
Executive Agent for the execution of the contingency plans, and on February
13,2003, the Secretary of the Army assigned the Executive Agent
responsibility to the United States Army Corps of Engineers (USACE). USACE
worked closely with CENTCOM operational planners and identified an immediate
need both to continue planning and to pre-position equipment and technical
experts. USACE determined that the most expeditious approach to meeting
these requirements was to use the LOGCAP contract. On February 94,2003,
after receiving approval from Headquarters Department of the Army, the U.S.
Army Materiel Command issued a sole source letter contract to KBR under the
LOGCAP contract to continue the planning and accomplish pre-positioning of
equipment and personnel. The pre-positioning work commenced immediately.

USACE needed to provide, on very short notice, an extremely broad range of
services. In late February 2003 USACE received approval from Headquarters
Department of the Army to issue a sole source contract to KBR to perform all
services that might be necessary to carry out the contingency plans it had
developed, and the contract was awarded March 8, 2003. This provides maximum
flexibility, so that even if the worst case unfolded, USACE could issue task
orders for performance of any combination of services without having to
negotiate another contract. Likewise, the period of performance was based on
the possibility of having to deal with a prolonged effort in an intense and
chaotic environment not well suited to transition to one or more successor
contractors. While the broad scope of the KBR contract enabled performance
in any circumstance, it is purposefully designed as a temporary mechanism to
enable execution until competitively awarded contracts can replace it. The
contract is being used judiciously. Task orders are placed only for work
that is required in the near term leaving as much as possible for
performance under competitively awarded contracts.

To conduct an effective full and open competition, there must be sufficient
time to prepare and approve the acquisition strategy and planning, to define
the scope of work for the contemplated contract(s), to prepare and issue an
unclassified competitive solicitation, to allow industry to prepare adequate
proposals, to thoroughly analyze and evaluate the proposals, to discuss and
negotiate with potential contractors, and to make award(s) to the successful
offeror or offerors. In this case, because of the effort already
accomplished, the time required to complete this is estimated to be from
four to nine months.

The initial planning task was issued to BRS because it was within the scope
of the competitively awarded LOGCAP contract, and not primarily because of a
security clearance issue. To accomplish a classified planning task of this
magnitude in a compressed period of time, BRS had to act immediately. It was
able to do so because it was already engaged in the Combatant Commander's
planning as part of the LOGCAP contract. If there had not been an existing
contract under which the planning could be done, and we had conducted a
classified competition, we would have had to have sufficient time not only
for the competitors to obtain the required clearances, but also for the
competition itself, The LOGCAP contract is in place because such time is
often unavailable, and to take the time would slow contingency planning
unacceptably and impair the mission.

The total estimated cost of specific work to be performed is established
prior to issuing the individual task order to the contractor. For each
order, the government establishes the scope of work and estimated cost. The
scope of work is presented to the contractor, who prepares its technical and
cost proposal for accomplishing the work. Negotiations result in an agreed
upon estimated cost, the task order is issued, and the contractor begins
performance. The Administrative Contracting Officer monitors performance.
During each evaluation period, the government determines the amount of award
fee based on criteria including the quality of the contractor's performance
and the effective control of costs.

I trust this information answers your questions. Thank you again for your
interest in the procurement process of the United States Army Corps of
Engineers.

Sincerely,

Robert B. Flowers
Lieutenant-General, U.S. Army
Commanding

http://www.house.gov/reform/min/inves_admin/admin_contracts.htm
EXCERPT ENDS click link for copy verify