Reprinted from Halliburton Watch:

WASHINGTON, March 11 (HalliburtonWatch.org) -- Halliburton's KBR
subsidiary may have over-billed the Navy for labor costs during
clean-up work in the aftermath of Hurricane Ivan, the Pentagon's
inspector general reported March 3rd. The report said KBR's subcontractors had been billing for
labor at rates "significantly higher" than the prevailing market rate.

Hurricane Ivan came ashore near Gulf Shores, Alabama, on September 16, 2004 as a Category 3 storm.

"The rates paid to some KBR subcontractors for labor were
significantly higher than the prevailing Bureau of Labor Statistics
rates for the area impacted by the hurricane (Pensacola, Florida)," the
report said,
adding that "additional review" is needed to make a final conclusion. The inspector general is conducting a follow-on audit.

The report contained language seen in previous military audits of
Halliburton's contracts, including criticism of the company's
notoriously-flawed cost documentation system that conceals overcharges.
It states: "The underlying documentation for the invoice that KBR
submitted in January 2005 for the Hurricane Ivan recovery effort causes
us concern about the ability of the Navy to obtain a fair and reasonable price for the labor and material needed to accomplish the
tasks associated with natural disaster recovery efforts."

(A HalliburtonWatch report earlier this year showed that KBR submits
labor invoices to the military in Iraq with exorbitantly higher costs
added ontop of the wage costs, but it's unclear how and where these
extra costs are incurred. See "Halliburton bills U.S. taxpayers $50 for $5 labor in Iraq," Feb. 6, 2006.)

The possible over-billing in the aftermath of Hurricane Ivan
occurred under Halliburton's Emergency Construction Capabilities III
contract or CONCAP III) with the Navy, worth up to $500 million over five years.

The inspector general's report chided the Navy for failing to
consider Halliburton's past delinquent performance before awarding the
CONCAP contract to KBR, including bribery and overcharges under its $13
billion Iraq logistics contract (or LOGCAP).

Although a company's past performance on government contracts is
supposed to be considered before handing out new contracts, both the
Army and the Navy failed to do so with regards to KBR, the report
concluded. So, KBR's delinquent and illegal practices in Iraq were not
entered into a military database that tracks contractor performance.
The database is used by contracting officials to determine whether new
contracts should be awarded.

Of the 36 task orders completed on the LOGCAP contract in Iraq, only
one, worth $1 million, had made it into the database. The $209 million
task order that included kickbacks worth $6 million paid to KBR
employees was not entered into the database, and therefore was not
considered by the Navy in its source selection. The Army has since
entered the missing information, according to the inspector general's
report.

For further information on the military's preferential treatment of Halliburton, visit this link.

CONCAP was first awarded to KBR in 2001, four months after former
CEO Dick Cheney became vice president. The contract allows the Navy to
direct KBR to provide emergency construction services at any time and
under short notice. Under CONCAP, KBR is rebuilding areas afflicted by
Hurricanes Katrina and Wilma. The prison facilities at Guatanamo Bay,
Cuba that hold suspected al-Qaeda terrorists were built by KBR via
CONCAP.

The Navy has paid KBR $295 million for reconstruction work since
July 2004 under CONCAP, including more than $160 million for Hurricane
Katrina reconstruction and mortuary services, $35 million for an
additional prison and psychiatric facility at Guantanamo Bay and over $47 million for Hurricane Ivan cleanup. See the CONCAP task orders awarded to KBR since 2004 at this link.

The inspector general's audit was requested by Sen. Ron Wyden (D-OR).

More Information:

DOD-IG's report

DOD-IG's summary of the report

Office of the Deputy Inspector General for Auditing