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Last Updated: Thursday, 12 August, 2004, 06:35 GMT 07:35 UK
Pentagon moves over Halliburton
US marine in Najaf
Halliburton has been providing services to US troops in Iraq
Pentagon auditors have criticised US firm Halliburton over its accounting of $1.8bn (0.98bn) it charged the US government for work in Iraq and Kuwait.

The company's accounting system has been disputed by Pentagon auditors for the past 18 months.

The Pentagon could withhold 15% of the money for work done by unit Kellogg Brown & Root (KBR) if it decides it is owed money, but has not acted yet.

The government has until Sunday to decide whether to hold back the money.

Part of the dispute is believed to centre on the way KBR bills for meals.

The Pentagon wants to be charged for exactly how many meals are actually eaten, while Halliburton's systems are said to be based on estimates.

Halliburton has said it could survive any action by withholding payments due to subcontractors.

'Essential service'

Dan Carlson, spokesman for US Army Field Support Command, said work orders with a future value of $8.2bn could be affected if the billing dispute is not resolved.

He said the potential total of money withheld could amount to about $60m a month, according to current payment schedules.

"We continue to work with all parties to resolve issues and continue our essential service to our troops in the field," said Mr Carlson.

He added that $4.3bn had already been paid to Halliburton under its logistics contract with the US military.

The 4 August audit by the Pentagon's Defense Contract Audit Agency (DCAA), yet to be publicly released, found flaws in KBR's system for drawing up costs on its major logistics contract, a Pentagon spokeswoman said.

"The (auditors') opinion... is that KBR's estimating system is inadequate," the spokeswoman said.

Biggest contractor

Pentagon auditors said Halliburton should be given 45 days to draw up a plan to fix its system or its cost estimates would be disapproved.

That could lead to more in-depth audits, payments could be suspended or there could be a recommendation to stop the contract.

A Halliburton spokeswoman said it disagreed with the audit and believed the issue would be resolved in the company's favour.

The firm also said that Pentagon auditors had no authority to determine the adequacy of its estimating systems.

Halliburton was run by Vice President Dick Cheney from 1995 to 2000, and is the US military's biggest contractor in Iraq.

Earlier this month it was announced Halliburton is to pay $7.5m (4.2m) to settle charges that it failed to disclose a change in its accounting practices during 1998.

The company neither admitted nor denied the findings in coming to the settlement.

Halliburton settles accounts case
03 Aug 04  |  Business
Halliburton cuts off KBR ex-boss
19 Jun 04  |  Business
SEC probing Halliburton 'bribes'
11 Jun 04  |  Business
US to withhold Halliburton bills
17 Mar 04  |  Business
Halliburton admits $6m kickbacks
23 Jan 04  |  Business
Halliburton in Pentagon payback
04 Feb 04  |  Business

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