Pentagon and Firm Resolve Dispute

Halliburton Co. and the Army have resolved a billing dispute over food service provided to troops in Iraq and Kuwait, with the Army Field Support Command saying it would keep $55.1 million of about $200 million in withheld payments.

The command will pay the company’s KBR unit about $1.8 billion. KBR said it would negotiate payment adjustments with its subcontractors as a result of the agreement.

KBR has said that its subcontractors billed for feeding the minimum number of troops that each dining facility was told to be prepared to serve but that the Defense Contract Audit Agency wanted the bills based on the actual number of troops served.

The Defense Department last May cited incomplete documentation for the bills.

“That the Army is keeping $55.1 million lends some credence to the previous reports of overcharging,” said Gene Pisasale, who helps manage $36 billion at Wilmington Trust Co. in Wilmington, Del., including some Halliburton shares.

A Halliburton spokeswoman did not immediately respond to a request for comment Tuesday.

KBR has been bogged down since February 2004 in a fight over cost estimates with the Army, which at one time threatened to withhold payment of up to 15% of the Houston-based company’s bills.

Halliburton, run by Vice President Dick Cheney from 1995 to 2000, is also being investigated by several U.S. government agencies over its work in Iraq, including whether it overcharged to supply fuel to Iraqi civilians.

Army auditors also have questioned at least $108 million in costs Halliburton claimed under a contract to rebuild Iraqi oil fields.

The company has said its prices were fair and has denied any wrongdoing.

Quarterly reports show that Halliburton earned about $72 million last year for KBR’s Iraq-related work before corporate costs and taxes.

Chief Executive David Lesar said in September that Halliburton would seek to shed the unit to focus on its oil field services business, the world’s largest, which is benefiting from soaring energy demand.

The Pentagon settlement followed an investigation by Army acquisition specialists, staff of the Defense Contract Audit Agency and the Defense Contract Management Agency, the Army said.