Don’t Blame Halliburton
Halliburton surely got lambasted last week by John Kerry. “This war brings billions of dollars to big companies, either to those that manufacture weapons or those who reconstruct Iraq, like Halliburton and its sister companies,” he thundered. “And from here it becomes clear who benefits from the outbreak of wars and bloodshed: war traders and vampires who administer world politics from behind the curtain.”
Oops, sorry. That wasn’t John Kerry. That was Osama bin Laden, or at least someone claiming to be him on an audiotape. When the rhetorical lines blur between the leader of the Democratic Party and the leader of Al Qaeda, maybe it’s time for the Democrats to reconsider their demonization of the Houston-based corporation. Especially when the bodies of three more Halliburton employees have been found, bringing to 33 the number killed in Iraq.
The critique of Halliburton comes in two parts. First, the company is said to have unfairly acquired its contracts in Iraq through political influence. Second, it’s said to have unfairly taken advantage of those contracts to engage in war profiteering.
The first charge is particularly seductive because Halliburton’s former No. 1 man is now the country’s No. 2, and there is a long history of companies getting government work through political influence. Kellogg Brown & Root, now a Halliburton subsidiary known as KBR, had close ties with Lyndon Johnson, which helped it to snare lucrative contracts during the Vietnam War. Surely, cynics reason, similar machinations were behind Halliburton establishing itself in Iraq.
Actually, Halliburton is in Iraq primarily because in 2001 it won a competitive bidding process to administer the Logistics Civil Augmentation Program, a multiyear contract to supply the Army. Halliburton has also gotten some no-bid jobs in Iraq, just as it did in Bosnia and Kosovo in the 1990s, and for the same reason: Not a lot of other firms have similar expertise in supplying the U.S. military, and with a war on there’s no time to stage a lengthy bidding process.
Although Halliburton’s work in the 1990s was praised by Al Gore’s “Reinventing Government” panel, its current contracts have led to charges that it’s mulcting the taxpayer. Maybe so, but the proof is hardly in. The biggest controversies have involved alleged overcharging by subcontractors for food and fuel. In both cases, Halliburton argues that its expenses were justified, and some Army officials back it up. It has, however, suspended billing for $176 million in meals until this dispute is resolved. A criminal investigation of the fuel flap is underway.
Halliburton certainly does not appear to be making a fortune under its deal with the government. It’s guaranteed only a 1% profit on most of its Iraq work plus performance bonuses of 2% to 3% -- not a whole lot considering the risks it runs.
By focusing on Halliburton, critics ignore the real scandal, which is how inefficient our procurement bureaucracy is. Remember those stories from the 1980s about the Pentagon buying $640 toilet seats and $435 hammers? Well, things haven’t changed a lot. The same gold-plated approach is being taken to administer aid to Iraq.
Maj. Gen. David Petraeus, when he was in charge of northern Iraq, was told by the Army Corps of Engineers that it would cost $15 million to $23 million to rehabilitate a single cement plant. He managed to get it done for just $800,000 by paying local firms.
Why was the original estimate so high? Not because the Army or its contractors are corrupt. It’s because they are obligated to build everything to extremely demanding standards and to fill out reams of paperwork justifying every nickel they spend.
This system is bad enough for normal military needs; it’s even worse in the case of Iraq. We desperately need to create jobs so young Iraqi men will have something better to do with their time than shooting coalition soldiers. The best way to do that would be to toss the procurement process out the window. If the result is that buildings in Iraq aren’t up to the latest in U.S. standards, or a few million dollars goes astray, so what? That’s a small price to pay for getting the country back on its feet.
U.S. military commanders have done some informal contracting, but their discretionary funds are limited. Big projects have to go through the bureaucracy -- which means they have to be administered by giant firms like Halliburton that have legions of lawyers and accountants to decipher the impenetrable thickets of procurement regulations.
Instead of blaming Halliburton, critics would be better off trying to change the system. But that’s not terribly glamorous. It’s much more fun to beat up Texas plutocrats.
Max Boot, a senior fellow at the Council on Foreign Relations, is a weekly columnist for the Los Angeles Times.
