February 14, 2004 - Halliburton’s motto, according to a former employee working in Iraq, is “Don’t worry about the price. It’s cost-plus.” There are some situations in which cost-plus contracting make sense. It is applicable where the cost of the project can’t be calculated in advance and equity dictates that the risk is shared by both sides of the contract. Iraqi reconstruction and combat support may be one of those situations in which prudent management requires that the contractor be guaranteed a fair profit. A cost-plus contract requires that the contractor be reimbursed its reasonable costs and then adds a reasonable profit – usually stated as a percentage of the costs. Administration of those contracts is difficult requiring both sides to diligently monitor costs to determine whether or not hey are reasonable. The reason is obvious. The higher the costs are the greater the profits become.

Nobody seems to be rigorously monitoring the billings coming from Halliburton and its KBR subsidiary. As a result the Defense Department’s contracts with Dick Cheney’s former employer resemble more of a blank check than prudent contracting. The scandals keep coming – a $61 Million overcharge for fuel to keep the Humvees moving; $6.3 Million in kickbacks to KBR contract administrators; billing for 47 Thousand meals a day when only 14 Thousand meals were served. In each instance the guaranteed profit margin was added and deposited in the company’s Cayman Islands tax shelter. And these were just the deals that were caught!

Now it comes out that Halliburton operates in a culture of corporate corruption created while Dick Cheney was its CEO. That is when Halliburton used wholesale bribery – to the tune of $180 Million – to get a natural gas contract in Nigeria. That is a blatant violation of US law and it happened while Cheney was at the helm. It is inconceivable that Cheney did not know that his company was spending that much to leaven the contracting bread. $180 million is a lot to pay for yeast, even for Halliburton. Dick, hidden away in his undisclosed secure location, isn’t talking but former Halliburton employees are.

This whole thing is hard for those of us who are older then dirt to understand. We remember when the US Army Corps of Engineers and the Seabees built facilities, repaired battle damaged infrastructure. We remember when Senator Harry Truman rose to national prominence holding government contractors on a tight rein fighting against war profiteers. We even remember when soldiers pulled KP and served their own meals.

But this is modern warfare fought with corporate pipelines into the US Treasury.

Of course the Bush Whitehouse eliminated the costs of war from its proposed budget. Our Wartime President has submitted his Peacetime budget written in red ink. He won’t let us into the price of the red blood shed in Iraq and Afghanistan until after the election. That leaves us without an answer to the question, “What costs and plus what?”