Endymon32

Halliburton, the energy services and logistics company of which VP Cheney used to be CEO, has taken a lot of heat in the media over the past few months. The left continually uses Halliburton as some kind of leftist rallying point. Well, here are a few articles that explain just what is going on with Halliburton, and why the politically-motivated attacks against them are nothing more than a desperate attempt to smear the Bush administration.

Halliburton: The Bush/Iraq Scandal that Wasn’t
The president’s critics come up empty.
by Byron York
National Review
July 9, 2003, 9:30 a.m.

On March 24, Halliburton, the giant energy-services company once headed by Vice President Dick Cheney, announced that a subsidiary, Kellogg Brown & Root, had signed a contract with the Army Corps of Engineers to put out oil fires in Iraq, as well as to evaluate and repair the Iraqi oil infrastructure. The announcement set off an angry reaction in some circles on Capitol Hill. On March 26, California Democratic representative Henry Waxman wrote a letter to the Corps demanding to know why the contract was signed "without any competition or even notice to Congress." On April 8, Waxman, joined by Democratic representative John Dingell, requested a General Accounting Office investigation, writing that "ties" between Cheney and Halliburton "have raised concerns about whether the company has received favorable treatment from the administration." On April 10, Waxman wrote the Corps again, demanding more information. More Waxman letters followed on April 16, May 6, and June 6.

Liberal voices in the press followed Waxman's lead. Writing in the Washington Post, columnist Michael Kinsley called the Halliburton contract "nation-building, Republican-style, with huge contracts awarded in secret to politically connected companies." The New York Times editorialized that the contract "looks like naked favoritism" and "undermines the Bush administration's portrayal of the war as a campaign for disarmament and democracy, not lucre."

One element missing from all the criticism was a serious examination of what the Halliburton contract actually involved and how it came to be signed. For example, was it really reached without competition, as Waxman charged? As it turns out, the evidence that is publicly available (some of it remains classified) suggests that Waxman's accusations are misleading at best and flat wrong at worst. It appears not only that there was not "naked favoritism" at work in the Halliburton contract, but that the Corps of Engineers, and the Bush administration, acted reasonably and properly in awarding the contract — no matter what Waxman says.

THE FIRES THIS TIME?
Waxman has made three basic accusations about the Halliburton deal. The first is that it was signed without appropriate competition. The second is that it called for Halliburton to be paid under an arrangement that — Waxman says — often results in overcharges to the government. The third objection is that it is a questionable use of federal money because of what Waxman calls Halliburton's "troubling" performance record.

First the competition issue. Last year, as administration officials made plans for war in Iraq, they were greatly concerned that Saddam Hussein would set fire to his country's oil fields, just as retreating Iraqi troops had done in Kuwait at the end of the first Gulf War. That, military planners knew, would result in a huge economic and environmental disaster. "The model we were looking at was what the Iraqis had done in Kuwait at the end of the Gulf War," says Lt. Col. Eugene Pawlik, a spokesman for the Army Corps of Engineers. "We had to consider the possibility that the Iraqis would set that many or more wells on fire in Iraq and what it would take for us to throw a maximum response at a maximum destruction scenario."

Last November, the Corps assigned Kellogg Brown & Root (KBR), which has been a wholly owned subsidiary of Halliburton since the 1960s, to do a classified study of potential damage and repairs in the Iraqi oil fields. Contrary to Waxman's assertion, the work was done under a competitively awarded contract system known as the U.S. Army Logistics Civil Augmentation Program, or LOGCAP. The LOGCAP system came about because of the military's need to perform complex jobs — peacekeeping in Bosnia, intervention in Haiti — on sometimes very short notice. In such situations, American troops require lots of logistical support; camps have to be built, utilities have to be supplied, food has to be cooked. By the early 1990s, as the size of the active-duty force shrank, the Pentagon began to "outsource" much of that work, that is, pay civilian contractors to do it rather than tie up soldiers with non-essential tasks. Instead of going through a months-long competitive-bidding process for each job, the military came up with LOGCAP.

LOGCAP is, in effect, a multi-year supercontract. In it, the Army makes a deal with a single contractor, in this case Halliburton, to perform a wide range of unspecified services during emergency situations in the future. The last competition for LOGCAP came in 2001, when Halliburton won the contract over several other bidders. Thus, when the oil-field study was needed, Corps officials say, Halliburton was the natural place to turn. "To invite other contractors to compete to perform a highly classified requirement that Kellogg Brown & Root was already under a competitively awarded contract to perform would have been a wasteful duplication of effort," Corps commander Lt. Gen. Robert Flowers wrote to Waxman in April.

In February 2003, with the study done, the Corps of Engineers decided to issue a contract to actually execute the plan that KBR had drawn up for dealing with problems in the Iraqi oil fields. At the end of that month, Army headquarters authorized the Corps to issue a sole-source contract to KBR. (The assignment seemed logical for another reason: Halliburton/KBR put out 350 oil-well fires in Kuwait after the first Gulf War.) "Only KBR, the contractor that developed the complex, classified contingency plans, could commence implementing them on extremely short notice," Flowers wrote Waxman. "The timing was driven by Central Command's operational requirement to have support available in advance of possibly imminent hostilities." Flowers added that the contract was always intended as a temporary "bridge" to a more permanent contract that would be offered for competitive bidding.

The next question was how large the contract should be. That was a difficult problem, because no one knew how big the problem would be. Would all the fields burn? Would none of them? Just a few? The Army assumed a worst-case scenario and decided the contract would be worth any amount between $0 and $7 billion (a common contracting practice known as ID/IQ, which stands for indefinite delivery/indefinite quantity). The $7 billion cap was thought to be sufficient to handle any emergency.

When the Army told Waxman that, he immediately began calling the KBR deal a $7 billion contract. "We are told it was a short-term contract for very little money, then it turned out it was a $7 billion contract," he said on National Public Radio in early May. What Waxman did not say was that he had been told a month earlier that the contract would not be worth anywhere near the cap amount. Because most of the anticipated disasters did not take place, the Army has asked KBR to do much less work than the original worst-case scenario envisioned, and the contract has therefore been worth far less than it might have been. "We will come nowhere close to the $7 billion figure," says Lt. Col. Pawlik. As of mid June, Pawlik says, the task orders issued to Kellogg Brown & Root totaled about $214 million. It's estimated that, in the end, costs will probably amount to around $600 million. While that is not pocket change, it's also not $7 billion — contrary, again, to Waxman's assertion.

Army officials also suggest that critics consider what might have happened had the Iraqi situation worked out differently. Suppose the wells had been torched and the Army, following Waxman's advice, had begun a long, complicated competitive-bidding process to find a company to put out the fires. "I don't think people would have been satisfied for the wells to have been burning while we were going through standard contract practices," says Pawlik. "I think we would have been getting a lot of questions about why did we pursue that course of action."

HALLIBURTON — THE CLINTON CONTRACTOR
Waxman's second objection concerns the way the company will be paid for its services. The LOGCAP payment method, known as a cost-plus-award, calls for KBR to be paid its costs plus a profit of 1 percent. According to the General Accounting Office, KBR could also earn "an incentive fee of up to nine percent of the cost estimate, based on the contractor's performance in a number of areas, including cost control." In one of his letters to the Corps of Engineers, Waxman says that the cost-plus-award system is "generally discouraged in the executive branch because it provides the contractor with an incentive to increase its profits by increasing the costs to the taxpayer." But in fact, the cost-plus-award method is an extremely common arrangement throughout the defense-contracting industry; one can leaf through the pages of Defense Daily and see many hundreds of contracts handled on the same basis. Given such widespread use, it is hard to conclude that the cost-plus-award method somehow makes the Halliburton contract a sweetheart deal for a politically favored company. (Nor is the contract unusually generous; the LOGCAP's range of a 1 percent to 9 percent fee is in line with standard government/industry practice.)

[Editor's note — Since this article was published in National Review magazine, Halliburton has said that while the LOGCAP that was in effect from 1992 until 1997 called for a one-to-nine percent profit range, the LOGCAP in effect now calls for significantly less, a one-to-three percent profit margin.]

Finally, Waxman objects to what he calls Halliburton's "troubling" performance record, suggesting that Halliburton would not have gotten the contract had Vice President Cheney not once headed the company. But Waxman's charges — and their echoes in outraged editorials — overlook Halliburton's extensive history of defense work for earlier administrations. Indeed, far from having a "troubling" past, one could argue that Halliburton was a favorite contractor of the Clinton Pentagon.

The first LOGCAP was awarded in 1992, as the first Bush administration (including then-Secretary of Defense Cheney) was leaving office. Four companies competed, and the winner was Brown & Root, as it was known at the time (Halliburton changed the name to Kellogg Brown & Root after an acquisition in 1998). The multi-year contract was in effect during much of the Clinton administration. During those years, Brown & Root did extensive work for the Army under the LOGCAP contract in Haiti, Somalia, and Bosnia; contract workers built base camps and provided troops with electrical power, food, and other necessities.

In 1997, when LOGCAP was again put up for bid, Halliburton/Brown & Root lost the competition to another contractor, Dyncorp. But the Clinton Defense Department, rather than switch from Halliburton to Dyncorp, elected to award a separate, sole-source contract to Halliburton/Brown & Root to continue its work in the Balkans. According to a later GAO study, the Army made the choice because 1) Brown & Root had already acquired extensive knowledge of how to work in the area; 2) the company "had demonstrated the ability to support the operation"; and 3) changing contractors would have been costly. The Army's sole-source Bosnia contract with Brown & Root lasted until 1999. At that time, the Clinton Defense Department conducted full-scale competitive bidding for a new contract. The winner was . . . Halliburton/Brown & Root. The company continued its work in Bosnia uninterrupted.

That work received favorable notices throughout the Clinton administration. For example, Vice President Al Gore's National Performance Review mentioned Halliburton's performance in its Report on Reinventing the Department of Defense, issued in September 1996. In a section titled "Outsourcing of Logistics Allows Combat Troops to Stick to Basics," Gore's reinventing-government team favorably mentioned LOGCAP, the cost-plus-award system, and Brown & Root, which the report said provided "basic life support services — food, water, sanitation, shelter, and laundry; and the full realm of logistics services — transportation, electrical, hazardous materials collection and disposal, fuel delivery, airfield and seaport operations, and road maintenance."

In 2001, after the Bush administration came into office, the giant LOGCAP contract expired again and another competition was held. Once again, Halliburton won the contract, and it was under that arrangement that the Iraqi-oilfield analysis was done. As the record shows, Halliburton won big government contracts under the Clinton administration, and it won big government contracts under the Bush administration. The only difference between the two is that Henry Waxman is making allegations of favoritism in the Bush administration, while he appeared untroubled by the issue during the Clinton years.

INVESTIGATE, INVESTIGATE, INVESTIGATE
That is not to say that there have not been problems with Halliburton's work — under both administrations. For example, Waxman cites a case last year in which the company paid a $2 million fine to resolve fraud allegations stemming from its work on a California military base. He also suggests that Halliburton/KBR overcharged the military throughout the Bosnia mission.

In the California case, the company clearly engaged in wrongdoing. But the scope of the problem, when considered in light of the enormous amount of work Halliburton/KBR does for the government and the fact that the issues have been resolved, does not seem a reason to cut Halliburton off from future work. As far as Bosnia is concerned, while critics correctly point out that the company's payment far exceeded original estimates, they fail to mention that a 1997 General Accounting Office report placed the blame mostly on the Army, and not Halliburton/KBR. "Our review shows that the difference in the Army's estimates was largely driven by changes in operational requirements once the forces arrived in Bosnia," the GAO wrote. "Specifically, the Commander in Chief of U.S. Army, Europe, decided to increase the number of base camps from 14 large camps to 34 smaller ones and to accelerate the schedule for upgrading troop housing." Halliburton/KBR was paid more because the Army wanted more.

Now the company is doing major work in Iraq. And while Halliburton's record is generally good, it seems clear that projects of such enormous scope and cost warrant constant scrutiny from government accountants. Because of that, Waxman's request for a GAO investigation of the Iraqi oil contracts seems entirely reasonable. So reasonable, in fact, that by the time he made the request, the GAO had already decided to study the issue. The study will be part of a long line of GAO investigations of military matters. For example, from 1991 to 1993, the GAO published 75 reports on all aspects of Operation Desert Shield and Operation Desert Storm. It would not be unreasonable to expect as many from Operation Iraqi Freedom.

The problem, from Henry Waxman's perspective, is that the investigation will likely show that both the government and Halliburton/KBR acted properly. Such a conclusion won't help Waxman's ongoing campaign to suggest that there is something inherently corrupt in the relationship between the Bush administration and Halliburton. Nor is the New York Times likely to editorialize about it. But if the president's critics really want the truth, they'll have to accept the results of the investigations they have demanded.



Halliburton’s “Gouging”: What Really Happened
There's a good explanation — if anyone is interested.
by Byron York
National Review
December 19, 2003, 8:59 a.m.

New details are emerging that suggest the energy giant Halliburton did not overcharge the Defense Department for fuel in Iraq — contrary to the claims of critics in Congress and in the field of Democratic presidential candidates.

The Pentagon is investigating allegations that Halliburton overcharged it by $61 million for gasoline and other fuels delivered to Iraq. Halliburton delivered gasoline to Iraq from Kuwait at a price of $2.27 per gallon, while it delivered gas from Turkey for $1.18 per gallon.

The obvious question raised by the discrepancy was: Why would Halliburton deliver high-priced fuel from Kuwait when it could be obtained at a much lower price from Turkey?

The company says it did so because the Army demanded that it deliver fuel from Kuwait. "The U.S. Army Corps of Engineers said to find a fuel source in Kuwait," Halliburton said in a press release yesterday. "[Halliburton] sought and received bids from four suppliers in Kuwait. One met the Corps' specification, and that is the one the Corps approved."

But why did the Corps specify that fuel be delivered from Kuwait? The answer appears to lie with the nature of fuel shortages that swept Iraq in the late spring. After the war, the country's oil refineries were operating far below capacity. Both gasoline and liquefied petroleum gas, which millions of Iraqis use for cooking, were in very short supply.

American officials feared that the shortages might spark civil unrest. Of particular concern was Basra, the city in southern Iraq that had seen increasingly violent expressions of popular anger against coalition forces. According to a source in the Corps of Engineers, in May, Lt. General Ricardo Sanchez, leader of American forces in Iraq, demanded that fuel be supplied to Basra — fast.

"The initial import of fuel was in response to a request from General Sanchez to do this because there was an uprising in Basra over the lack of gas and cooking fuel," says the Corps source. "Basra is near the Kuwaiti border. The fastest way to get it there is Kuwait. So we directed them [Halliburton] to do that."

"Basra was a flash point; we were close to civil unrest," the source continues. "Probably at the time we didn't care what it cost, because we were trying to stop a riot. Cost was probably not an issue."

But the rest of Iraq was suffering from fuel shortages as well. On May 8, in an article headlined, "Angry Iraqis Blame U.S. for Fuel Shortage," the Washington Post reported on a "ubiquitous scene" in Iraq: "lines that stretch toward dusty horizons as people wait for gasoline, a problem that confronts U.S. authorities with both a complex engineering challenge and a continuing threat to their prestige."

Soon the U.S. military was ordering fuel shipments to the rest of Iraq as well. While the Kuwaiti source is relatively close to Basra, it is a great distance from northern Iraq, which made for very long shipping lines. And the violent insurgency then beginning inside Iraq made the work not only expensive but also dangerous for the crews hired by Halliburton to deliver the fuel.

"Not many people want to drive eight to fifteen days through a war zone with a truck full of flammable materials," the company says. "Three drivers have been killed and many others injured while performing this mission, and 60 vehicles have been damaged."

As a result, Halliburton officials say they came up with the idea of arranging for another fuel source in Turkey. "[Halliburton] initiated the idea to source fuel from Turkey," the company says. [Halliburton] presented this idea to its customer, and because of this, saved taxpayers well over $100 million."

Since that time, fuel has come into Iraq from both sources. According to both the Corps and Halliburton, neither country can, on its own, provide the amount of fuel needed inside Iraq.

So far, Halliburton says, about two-thirds of the fuel delivered to Iraq has come from Turkey, at the lower price, and about one-third has come from Kuwait, at the higher price. Given those proportions, Halliburton says the average fuel cost from both Turkey and Kuwait has been $1.60 per gallon, "well within what auditors think it should be."

Although Halliburton's actions have been intensely criticized by the administration's opponents, the Pentagon says it has not found any wrongdoing. Said Defense Department comptroller Dov Zakheim on Tuesday, "From what I've seen so far...I have no basis whatsoever to see anything nefarious."




Halliburton Contracts in Iraq: The Struggle to Manage Costs
By JEFF GERTH and DON VAN NATTA Jr.
New York Times
Published: December 29, 2003

WASHINGTON, Dec. 28 — The Qarmat Ali water treatment plant in southern Iraq is crucial to keeping the oil flowing from the region's petroleum-rich fields. So when American engineers found the antiquated plant barely operating earlier this year, there was no question that repairing it was important to the rebuilding of Iraq. Setting the price for the repairs was another matter.

In July, the Halliburton Company estimated that the overhaul would cost $75.7 million, according to confidential documents that the company submitted to the Army Corps of Engineers. But in early September, the Bush administration asked Congress for $125 million to do the job — a 40 percent price increase in just six weeks.

The initial price was based on "drive-by estimating," said Richard V. Dowling, a spokesman for the corps, which oversees the contract. The second was a result of a more complete assessment. "The best I can lamely fall back on is to say that estimates change," said Mr. Dowling, who is based in Baghdad. "This is not business as usual."

The rebuilding of Iraq's oil industry has been characterized in the months since by increasing costs and scant public explanation. An examination of what has grown into a multibillion-dollar contract to restore Iraq's oil infrastructure shows no evidence of profiteering by Halliburton, the Houston-based oil services company, but it does demonstrate a struggle between price controls and the uncertainties of war, with price controls frequently losing.

The Pentagon's contract with a Halliburton subsidiary, Kellogg Brown & Root, conceived in secrecy before the war and signed in March, was meant as a stopgap deal to last no more than a few months. But it has been in effect since then and has grown to more than $2 billion.

The scope of the contract includes myriad tasks from importing fuels to repairing pipelines, and the costs have increased through task orders and subcontracts, some of which are carried out with limited documentation or disclosure.

The reconstruction of Iraq has taken on "a Wild West atmosphere," said Gordon Adams, a military procurement expert at George Washington University. "Wartime creates an urgent need, and under an urgent need, contractors will deliver and take a price. There's a premium for getting it done fast."

Earlier this month, Pentagon auditors questioned the $2.64 per gallon that Halliburton was charging to truck fuel from Kuwait to Iraq, and sought to recover $61 million. In response, company officials said they had actually saved the government money and had put the fuel supply subcontract up for competitive bidding. But there was little paperwork to show that any bidding had taken place, according to government officials familiar with the audit.

"Most of it was done on an emergency basis, very quickly, over the phone, and Halliburton has struggled to prove this was competitively bid," said one government official.

Wendy Hall, a spokeswoman for Halliburton, said bids were solicited by telephone in May because the corps needed fuel imported into Iraq within 24 hours. But she said a more formal bidding process was done several days later, and that KBR has provided Pentagon auditors with documentation on the bids.

"KBR followed government-approved procedures in responding to this significant, challenging and dangerous mission," she said.

Minimal Halliburton Profits

The estimated price of another KBR project, the replacement of damaged pipelines over the Tigris River, also grew significantly over the course of a few weeks. In July, KBR estimated that the cost would be $29.8 million for the job, included in a list of 220 tasks to be completed in Iraq. But by fall, the cost had more than doubled, to $70 million.

Both Mr. Dowling, the spokesman for the corps, and Ms. Hall said the price grew because the scope of the project and the method of repair had changed. Ms. Hall said the company had tried to get the lowest price from its subcontractors. In addition, Halliburton and government officials note that the violence in Iraq increases the cost of security and adds to the cost of all reconstruction contracts.

So far this year, Halliburton's profits from Iraq have been minimal. The company's latest report to the Securities and Exchange Commission shows $1.3 billion in revenues from work in Iraq and $46 million in pretax profits for the first nine months of 2003. But its profit may grow once the Pentagon completes a formal evaluation of the work. If the government is satisfied, Halliburton is entitled to a performance fee of up to 5 percent of the contract's entire value, which could mean additional payments of $100 million or more.

The nonpublic way in which KBR was selected for the job in Iraq remains a political flashpoint, especially among Democratic presidential contenders, in part because Vice President Dick Cheney served as Halliburton's chief executive officer from 1995 to 2000.

The contract to fix Iraq's oil industry was granted to KBR by a secret Bush administration task force formed in September 2002 to plan for Iraq's oil industry in the event of war. The task force, led by an aide to Douglas J. Feith, the under secretary of defense for policy, quickly concluded that the government alone could not meet the oil needs, members of the group said. "There were only a handful of companies, and KBR was always one of those mentioned," said one Pentagon official.

Almost immediately, an alarm went off among members of the group. "I immediately understood there would be an issue raised about the vice president's former relationship with KBR," the official said, "so we took it up to the highest levels of the administration, and the answer we got was, `Do what was best for the mission and we'll worry about the political' " fallout.

An Absence of Competition

Halliburton, a large energy services, engineering and construction firm, works for governments all over the world. A crucial factor in KBR's selection, members of the planning group said, was an existing Army contract it secured to provide logistical support around the world. It won that contract in a bidding process in December 2001. The Pentagon has cited that competition to deflect criticism about KBR's no-bid contract in Iraq.

In awarding the logistics contract, the Army acknowledged last year, it failed to consider that the company was under criminal investigation for a previous Pentagon contract, even though that inquiry was disclosed in Halliburton's annual report.

The absence of competition in the selection of KBR for Iraqi oil work was meant to be remedied shortly after the war ended. "Everyone realized the selection of KBR was going to look bad, so the idea was to compete it out as quickly as possible," said another task force member.

But those competitively bid contracts have yet to be awarded, and the amount of Halliburton's work in Iraq has grown steadily.

The process began in November 2002 with a request for the company — then operating under the Army logistical contract — to plan the management of Iraq's postwar oil industry. "In the worst case scenario," said Lt. Gen. Robert B. Flowers, the commander of the Army Corps of Engineers, "there would be massive international oil spills and pollution resulting from the fires, extensive damage to associated infrastructure, including gas-oil separators, pipelines, pumping stations, refineries and import facilities."

KBR designed a plan for such an eventuality, and on March 8, as war loomed, the corps awarded Halliburton a no-bid contract to carry out the plan, officials said.

The contract is labeled IDIQ, meaning indefinite delivery, indefinite quantity.

On March 24, a few days after the American-led invasion, the Pentagon and Halliburton announced the new contract. The Pentagon press release was titled, "Army Named Executive Agent for Combating Iraq Oil Fires." Halliburton's own press release carried this headline: "KBR Implements Plan for Extinguishing Oil Well Fires in Iraq."

Inviting Other Bids

Representative Henry A. Waxman, the California Democrat who is a vocal critic of the Halliburton contract, wrote to Bush administration officials on March 26 asking why the contract was awarded without competition. Administration officials responded that the contract could be worth as much as $7 billion to Halliburton, but General Flowers said the bulk of the work would be open to competition from other contractors "at the earliest opportunity."

In April, Brig. Gen. Robert Crear of the Army Corps of Engineers described it as a "bridging contract, which would tide us over until we could have a fair competition."

"This contract is not going to be the kind of megabillion-dollar deal many have been thinking," General Crear told Bloomberg News.

During the war's first days, soldiers discovered only a few oil fires, but as the war wound down, more work came KBR's way, mostly because of acts of sabotage on pipelines and Iraq's oil facilities. When security problems made the production of fuel inside Iraq even more difficult — leading to shortages — the government asked Halliburton to import fuel. It bought the fuel from Turkey and Kuwait.

Halliburton's subcontractor in Kuwait was paid $2.27 a gallon to import fuel, almost twice what it cost to bring in fuel from Turkey. Halliburton charged an additional 36 cents a gallon. Pentagon auditors have said the price for the fuel from Kuwait was excessive.

Government officials have said the Kuwaiti subcontractor was called Altanmia Commercial Marketing Company, but Halliburton has refused to identify its subcontractors, which is a point of contention with critics of the contract.

Ms. Hall, the Halliburton spokeswoman, said subcontractors were kept confidential "in order to ensure subcontractor safety" in Iraq. By contrast, Bechtel, the other large government contractor involved in the reconstruction effort, lists its subcontractors on its Web site.

Little Public Disclosure

There has been little public disclosure of how prices are set. Mr. Dowling, the spokesman for the Army Corps of Engineers, said it is difficult to figure estimates in Iraq. A KBR task list of 220 reconstruction projects obtained by The New York Times gives some indication of the early estimates and how they quickly increased.

The most expensive project on the list was the repair of the Qarmat Ali water treatment plant, which pumps water into underground oil reservoirs, allowing oil to be extracted. By the time the Bush administration had submitted its budget request for Iraqi reconstruction in early September, the water-plant repair job had grown to $125 million from 75.7 million. The higher amount was what Congress eventually appropriated.

Mr. Dowling said that the first estimate was based on a "rough matrix" of pricing and that the final price was the product of "more refined data."

"There is nothing sinister or underhanded about construction estimates that change as the work is planned," he said. "It's the quality of the work that counts." Halliburton officials referred questions about estimates to corps officials.

Criticism that the contracting is kept secret and favors Halliburton has been leveled not just by Democrats, but also by some business executives. Although the Pentagon and KBR deny any favoritism, some executives cited a closed Pentagon workshop on Iraq's oil infrastructure that was held in August at MacDill Air Force Base near Tampa, Fla.

The three-day conference included officials from the Coalition Provisional Authority, the corps and other government agencies as well as executives from KBR. The companies that attended, according to David C. Farlow, a spokesman for the United States Central Command, included only "commercial contractors currently working in Iraq."