U.S. to Direct Iraq Fuel Imports

A Pentagon agency said Tuesday that it was taking over management of fuel imports into Iraq from the Army Corps of Engineers, after Pentagon auditors found that Halliburton Co., Vice President Dick Cheney’s former firm, may have overcharged taxpayers under the corps’ supervision.

The Defense Energy Support Center, which buys fuel for the military, will supervise the letting of competitive bids for a new contract for imports to serve Iraq’s civilian population, according to a statement released by the agency Tuesday.

The statement implies that the no-bid contract now held by Halliburton to import fuel to Iraq is being canceled. It appears to leave open the possibility that Halliburton could bid on the new contract.

The oil-services company is not mentioned in the agency’s statement, and officials there could not be reached for comment. But the agency said, “Any responsive, responsible supplier will be able to bid.”

“The center will strive to put competitively awarded contracts in place as quickly as possible for this mission,” Richard T. Connolly, director of the support center, said in the statement.

The company said late Tuesday that “the task of transporting fuel into Iraq was always understood by [Halliburton] to be temporary.” The company would not comment on whether it would bid on the new contract.

Connolly said the existing contract would remain in place until a new contract was awarded, so that fuel deliveries to Iraq would not be interrupted. The agency said it could take 60 to 90 days for a new contract to be in place.

Officials would not comment on whether the audit of Halliburton prompted the Pentagon action, ordered Dec. 23 in a memo to the fuel-purchasing agency by Michael Wynne, acting undersecretary of defense for acquisition, technology and logistics.

Iraq’s oil infrastructure was severely disrupted by the war and has not recovered. Even though the country has the world’s second-largest oil reserves, gasoline is rationed and drivers can wait 10 hours to fuel their cars.

A Defense Department audit released this month found that KBR, a Halliburton subsidiary, sought as much as $61 million in excess charges for deliveries in Iraq, a potential overcharge to the Army of more than $1 per gallon for nearly 57 million gallons of gasoline.

But the Pentagon’s comptroller said a week later that he had “no basis whatsoever” to believe the overcharge was intentional. Instead, he and other Bush administration officials have suggested that Halliburton itself was overcharged by a Kuwaiti subcontractor that supplied the fuel.

There have been reports that Halliburton was pressured both by the Kuwaiti government and the U.S. Embassy to do business with the Kuwaiti firm, Altanmia Commercial Marketing Co. The arrangement was overseen by the Army Corps of Engineers.

Halliburton has a $7-billion contract with the corps to restore Iraq’s oil sector, with about $1.2 billion of that to supply gasoline and other fuels to Iraqi citizens. It also has another contract, for $8.6 billion, to provide logistical support to U.S. troops.

The contracts are the biggest awarded to date by the Pentagon for work with private companies in Iraq. They were awarded without competitive bidding.

Cheney headed Halliburton before running for vice president. The company, based in Houston, provides construction, engineering and logistics services to the oil and gas industry.

Some Democrats, most notably Rep. Henry A. Waxman of Los Angeles, have criticized the awarding of Iraq reconstruction contracts to the company, saying politics played a role.

Administration and Halliburton officials have denied any political motivation in awarding the contracts to the company, a longtime defense contractor.