Audit: Halliburton subsidiary too secretive
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Not suprising....
Iraq contractor abused rules, agency says; firm says data is proprietary
08:05 AM CDT on Saturday, October 28, 2006
From Wire Reports
WASHINGTON – A subsidiary of Houston-based Halliburton Co. has systematically abused federal regulations to withhold basic information on its practices in Iraq from U.S. officials, a federal oversight agency said Friday.
The auditors found that Halliburton subsidiary KBR Inc. was marking nearly all information it gives to the government "proprietary," even with such basic records as daily counts of how many people ate at the company's dining facilities.
In effect, KBR has turned contracting rules "into a mechanism to prevent the government from releasing normally transparent information, thus potentially hindering competition and oversight," said the report written by Stuart W. Bowen Jr., special inspector general for Iraq reconstruction.
In a written response, Halliburton spokeswoman Cathy Mann said that using the proprietary stamp was "not only encouraged but required" by the Army.
"KBR has included proprietary markings on the majority of its data and property in support of its government contracts for the U.S. Army for at least the last decade," Ms. Mann said.
That assertion could not immediately be confirmed with the Army. But in its memo, the inspector-general's office said that during the course of its investigation, both Pentagon auditors and Army contracting officers shared serious concerns about the practice.
And a statement released late Friday by the Army Sustainment Command in Rock Island, Ill., said that it had "implemented corrective actions relative to the concerns raised" in the memo.
Guarding its data?
Under federal law, contractors are allowed to mark some documents proprietary, especially when they are bidding on a deal. But the auditors concluded that KBR's actions represent "an abuse" of the Federal Acquisition Regulation, the set of rules for government contracts.
And those claims about proprietary information, Mr. Bowen said, have kept the government from releasing information that should have been made available to the public.
"KBR is not protecting its own data but is in many instances inappropriately restricting the government's use of information that KBR is required to gather," the report said.
KBR has been subjected to a number of investigations and has paid substantial fines. The new allegations come at a critical time for the company, as Halliburton is attempting to spin off the subsidiary. In July, the Army announced that it would terminate KBR's largest contract with the government, and the company says that it will compete to regain some of that business when the government calls for new bids.
Mr. Bowen's office examined only the provision of basic support services – ranging from serving food to washing clothes – for the U.S. Embassy in Iraq, but KBR's "inappropriate" use of the proprietary designation could be "a systemic problem" throughout its logistics contract with the Pentagon, the report said.
KBR, formerly known as Kellogg Brown & Root, is the Pentagon's largest contractor in Iraq, providing logistics support for the Army including meals, fuel, laundry service and base construction. Its contracts total about $20 billion.
KBR and the Defense Department were both criticized last year after it came to light that the company had advised Pentagon officials to heavily redact a series of unfavorable audits before they were delivered to U.N. monitors. The Pentagon complied.
Arrogant or twice shy
"The arrogance is astounding on the part of KBR," said William L. Nash, a retired Army major general who is a senior fellow at the Council on Foreign Relations and an expert on post-conflict zones. "It's time for Congress to step in, because this has just gone too far."
Rep. Henry Waxman, D-Calif., the ranking minority member of the House Committee on Government Reform and one of the earliest critics of KBR's use of the proprietary label, said the new memo showed how the company had tried to conceal "corporate profiteering during wartime."
Sen. Susan Collins, R-Maine, who is chairwoman of the Homeland Security and Governmental Affairs Committee, said, "I am concerned that the special inspector-general has not always had full cooperation and access to the corporate documents that his office needs to carry out its critical mission."
Access to that information, Ms. Collins said, "helps to ensure that government contractors fulfill their contractual obligations and that government gets the best value for taxpayer dollars."
Sen. Byron Dorgan, D-N.D., who has conducted a series of hearings on contractor abuses as chair of the Democratic Policy Committee, said Friday that he had been denied information about KBR's operations in Iraq because it had been deemed proprietary.
"The American people don't have access to information that should be made available," Mr. Dorgan said.
Halliburton was once headed by Vice President Dick Cheney. And Democrats on Capitol Hill have long been suspicious about the company's contracts and critical of its performance.
But Stan Soloway, who leads contractor trade group the Professional Services Council, said it was not unusual for a company to want to protect information that could give it an edge over other firms. That's particularly true for KBR, which Mr. Soloway said has had proprietary information leak out.
"This is a company that's been once burned and is going to be twice shy," he said. "To say this is abuse is an overreach."
Ms. Mann, the Halliburton spokeswoman, said that since the current contract is being reviewed and may be divided among several contractors, "it is clearly appropriate to mark data as proprietary that could potentially be used for competitive purposes," as would be the case in any new contract.
In his report, the inspector general also accused KBR officials of trying to impede his office's effort to analyze data. For example, the company was asked to turn over information pertaining to the amount of fuel KBR provided to foreign embassies.
Instead of providing the data in its original Excel spreadsheet format, the inspector general said, the company turned over a 50-page, Acrobat PDF file, which could not be converted back into a spreadsheet. Auditors would have had to "re-enter the data into a spreadsheet, a time-consuming process, to perform any meaningful analysis of the data."
In another instance, the inspector general's office asked for a copy of the database KBR used to track retail vehicle fuel issues. At first, the firm refused to provide the database, offering only to pull the information itself for auditors.
The company informed the inspector general's office: "There is no contractual requirement to submit the databases that constitute KBR's competitive edge in performing the required services. The actual databases created by KBR provide specific proprietary information related to how KBR conducts its business."
A contracting officer refused to accept that response and ordered the company to provide the data. A few days later, KBR complied.
Not suprising....
Iraq contractor abused rules, agency says; firm says data is proprietary
08:05 AM CDT on Saturday, October 28, 2006
From Wire Reports
WASHINGTON – A subsidiary of Houston-based Halliburton Co. has systematically abused federal regulations to withhold basic information on its practices in Iraq from U.S. officials, a federal oversight agency said Friday.
The auditors found that Halliburton subsidiary KBR Inc. was marking nearly all information it gives to the government "proprietary," even with such basic records as daily counts of how many people ate at the company's dining facilities.
In effect, KBR has turned contracting rules "into a mechanism to prevent the government from releasing normally transparent information, thus potentially hindering competition and oversight," said the report written by Stuart W. Bowen Jr., special inspector general for Iraq reconstruction.
In a written response, Halliburton spokeswoman Cathy Mann said that using the proprietary stamp was "not only encouraged but required" by the Army.
"KBR has included proprietary markings on the majority of its data and property in support of its government contracts for the U.S. Army for at least the last decade," Ms. Mann said.
That assertion could not immediately be confirmed with the Army. But in its memo, the inspector-general's office said that during the course of its investigation, both Pentagon auditors and Army contracting officers shared serious concerns about the practice.
And a statement released late Friday by the Army Sustainment Command in Rock Island, Ill., said that it had "implemented corrective actions relative to the concerns raised" in the memo.
Guarding its data?
Under federal law, contractors are allowed to mark some documents proprietary, especially when they are bidding on a deal. But the auditors concluded that KBR's actions represent "an abuse" of the Federal Acquisition Regulation, the set of rules for government contracts.
And those claims about proprietary information, Mr. Bowen said, have kept the government from releasing information that should have been made available to the public.
"KBR is not protecting its own data but is in many instances inappropriately restricting the government's use of information that KBR is required to gather," the report said.
KBR has been subjected to a number of investigations and has paid substantial fines. The new allegations come at a critical time for the company, as Halliburton is attempting to spin off the subsidiary. In July, the Army announced that it would terminate KBR's largest contract with the government, and the company says that it will compete to regain some of that business when the government calls for new bids.
Mr. Bowen's office examined only the provision of basic support services – ranging from serving food to washing clothes – for the U.S. Embassy in Iraq, but KBR's "inappropriate" use of the proprietary designation could be "a systemic problem" throughout its logistics contract with the Pentagon, the report said.
KBR, formerly known as Kellogg Brown & Root, is the Pentagon's largest contractor in Iraq, providing logistics support for the Army including meals, fuel, laundry service and base construction. Its contracts total about $20 billion.
KBR and the Defense Department were both criticized last year after it came to light that the company had advised Pentagon officials to heavily redact a series of unfavorable audits before they were delivered to U.N. monitors. The Pentagon complied.
Arrogant or twice shy
"The arrogance is astounding on the part of KBR," said William L. Nash, a retired Army major general who is a senior fellow at the Council on Foreign Relations and an expert on post-conflict zones. "It's time for Congress to step in, because this has just gone too far."
Rep. Henry Waxman, D-Calif., the ranking minority member of the House Committee on Government Reform and one of the earliest critics of KBR's use of the proprietary label, said the new memo showed how the company had tried to conceal "corporate profiteering during wartime."
Sen. Susan Collins, R-Maine, who is chairwoman of the Homeland Security and Governmental Affairs Committee, said, "I am concerned that the special inspector-general has not always had full cooperation and access to the corporate documents that his office needs to carry out its critical mission."
Access to that information, Ms. Collins said, "helps to ensure that government contractors fulfill their contractual obligations and that government gets the best value for taxpayer dollars."
Sen. Byron Dorgan, D-N.D., who has conducted a series of hearings on contractor abuses as chair of the Democratic Policy Committee, said Friday that he had been denied information about KBR's operations in Iraq because it had been deemed proprietary.
"The American people don't have access to information that should be made available," Mr. Dorgan said.
Halliburton was once headed by Vice President Dick Cheney. And Democrats on Capitol Hill have long been suspicious about the company's contracts and critical of its performance.
But Stan Soloway, who leads contractor trade group the Professional Services Council, said it was not unusual for a company to want to protect information that could give it an edge over other firms. That's particularly true for KBR, which Mr. Soloway said has had proprietary information leak out.
"This is a company that's been once burned and is going to be twice shy," he said. "To say this is abuse is an overreach."
Ms. Mann, the Halliburton spokeswoman, said that since the current contract is being reviewed and may be divided among several contractors, "it is clearly appropriate to mark data as proprietary that could potentially be used for competitive purposes," as would be the case in any new contract.
In his report, the inspector general also accused KBR officials of trying to impede his office's effort to analyze data. For example, the company was asked to turn over information pertaining to the amount of fuel KBR provided to foreign embassies.
Instead of providing the data in its original Excel spreadsheet format, the inspector general said, the company turned over a 50-page, Acrobat PDF file, which could not be converted back into a spreadsheet. Auditors would have had to "re-enter the data into a spreadsheet, a time-consuming process, to perform any meaningful analysis of the data."
In another instance, the inspector general's office asked for a copy of the database KBR used to track retail vehicle fuel issues. At first, the firm refused to provide the database, offering only to pull the information itself for auditors.
The company informed the inspector general's office: "There is no contractual requirement to submit the databases that constitute KBR's competitive edge in performing the required services. The actual databases created by KBR provide specific proprietary information related to how KBR conducts its business."
A contracting officer refused to accept that response and ordered the company to provide the data. A few days later, KBR complied.
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This is a problem that the American people cannot fix.
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