On April 15, 2006, Halliburton filed a registration statement with the United States Securities and Exchange Commission to sell up to 20 percent of its KBR stock on the New York Stock Exchange (NYSE). On November 16, 2006, KBR shares were offered for the public in an Initial Public Offering with shares priced at $17. The shares closed on the first day up more than 22 percent to $20.75 a share. Halliburton announced on April 5, 2007 that it had finally broken ties with KBR, which has been its contracting, engineering and construction unit as a part of the company for 44 years.
KBR and the war machinery
In 1996, President Bill Clinton awarded Brown & Root a contract to support U.S. and North Atlantic Treaty Organization (NATO) troops as part of the SFOR operation in the Balkan region. This contract was extended to also include KFOR operations in Kosovo starting in 1999. Camp Bondsteel in Kosovo was constructed by the 94th Engineer Construction Battalion together with the private Kellogg Brown & Root (KBR) under the direction of the Army Corps of Engineers. KBR is also the prime contractor for the operation of the camp.
KBR was awarded a $100 million contract in 2002 to build a new U.S. embassy in Kabul, Afghanistan, from the State Department.
KBR has also been awarded 15 Logistics Civil Augmentation Program (LOGCAP) task orders worth more than $216 million for work under Operation Enduring Freedom, the military name for operations in Afghanistan. These include establishing base camps at Kandahar and Bagram Air Base and training foreign troops from the Republic of Georgia.
KBR employs more American private contractors and holds a larger contract with the U.S. government than does any other firm in Iraq. The company's roughly 14,000 U.S. employees in Iraq provide logistical support to the U.S. armed forces.
The United States Army hired KBR to provide housing for approximately 100,000 soldiers in Iraq in a contract worth $200 million, based on a long-term contract signed in December 2001 under the Logistics Civil Augmentation Program (LOGCAP). Other LOGCAP orders have included a pre-invasion order to repair oil facilities in Iraq; $28.2 million to build POW camps; and $40.8 million to accommodate the Iraqi Survey Group, which was deployed after the invasion to find weapons of mass destruction.
The Army's actions came under fire from California Congressman Henry Waxman, who, along with Michigan Congressman John Dingell, asked the General Accounting Office to investigate whether the U.S. Agency for International Development and The Pentagon were circumventing government contracting procedures and favoring companies with ties to the Bush administration. They also accused KBR of inflating prices for importing gasoline into Iraq. In June 2003, the Army announced that it would replace KBR's oil-infrastructure contract with two public-bid contracts worth a maximum total of $1 billion, to be awarded in October. However, the Army announced in October it would expand the contract ceiling to $2 billion and the solicitation period to December. As of October 16, 2003, KBR had performed nearly $1.6 billion worth of work. In the meantime, KBR has subcontracted with two companies to work on the project: Boots & Coots, an oil field emergency response firm that Halliburton works in partnership with (CEO Jerry L. Winchester was a former Halliburton manager) and Wild Well Control. Both firms are based in Texas.
KBR's maintenance work in Iraq has been criticized after reports of soldiers electrocuted from faulty wiring.Specifically, KBR has been charged by the Army for improper installation of electrical units (Not Grounded)in bathrooms throughout US bases. CNN reported that Green Beret and Staff Sgt. Ryan Maseth died by electrocution in his shower stall on January 2, 2008. Army documents showed that KBR inspected the building and found serious electrical problems a full 11 months before his death. KBR noted "several safety issues concerning the improper grounding of electrical devices." But KBR's contract did not cover "fixing potential hazards;" It covered repairing items only after they broke down.
Political connections and controversy
Brown and Root had a well-documented relationship with U.S. President Lyndon Johnson, which began when he used his position as a Texas congressman to assist them in landing a lucrative dam contract. In return they gave him the funds for his 1948 Senate race against Coke R. Stevenson. The relationship continued for years, with Johnson awarding military construction contracts to B&R.
Following the end of the first Gulf War, the Pentagon, led by then Defense Secretary Dick Cheney, paid Halliburton subsidiary Brown & Root Services over $8.5 million to study the use of private military forces with American soldiers in combat zones.
Cheney was chairman and chief executive officer of Halliburton from 1995 to 2000. He has been accused of providing work to KBR under contingency contracts to financially benefit himself and his business associates.
However, the Army contract which has been so controversial — LOGCAP — has, since its inception, been issued under competitive solicitations; of the three LOGCAP contracts, KBR won the first, DynCorp the second, KBR the third, and also the current one, dubbed "LOGCAP IV". LOGCAP is a contingency-based contract which is invoked at the convenience of the US Army as needed; the Task Orders under the contract are not competitively bid as the overall contract is.
Although DynCorp had won LOGCAP II in 1994, Clinton instead chose KBR, and thus the Balkans Support Contract was created for and awarded to KBR in February 1999. Even though the LOGCAP program is specifically for contingency operations such as the Balkans, there was little media coverage about KBR picking up that contract; the Balkans work is sometimes mistakenly mentioned as being part of LOGCAP, however.
Most media controversy involves the LOGCAP III contract which KBR successfully, and competitively, bid for and won in 2001. While it is by far the most profitable of their contracts, the functions of that contract are often mixed with the RIO contract in which KBR was given in a no-bid process. RIO, or Restore Iraqi Oil, was awarded to KBR when the United States Department of Defense determined that KBR was "the only contractor that could satisfy the requirement for immediate execution of the plan". As of September 2006, hearings are still being conducted into the RIO project over possible billing, management, and procurement violations.
One common theme is to use the term LOGCAP while using the dollar amounts from RIO, which was using LOGCAP funding for the initial staging and startup.
Jamie Leigh Jones, a 23-year-old former employee of KBR, testified at a Congressional hearing in December that she had been gang-raped by up to as many as seven co-workers in Iraq in 2005.
Another prime topic of interest is the Defense Contract Audit Agency (DCAA) report on billing-methods for meals. The auditors knew about, but disregarded, the Army's requirement, whereas KBR was directed to have varying amounts of meals prepared at certain locations regardless of how many people actually used the service. Although KBR was paying for the food, the DCAA did not believe they should be able to charge the DoD for meals prepared but not served.
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