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Last Updated: Wednesday, 8 September, 2004, 06:10 GMT 07:10 UK
Halliburton may ditch Iraq deal
US troops near the Iraqi town of Fallujah
Halliburton has faced criticism for overcharging
Halliburton may not submit new bids to provide US troops with logistical support in Iraq if the US army decides to break up its current contract.

The US Army confirmed reports it is considering the break-up of the deal, thought to be worth $13bn (7.3bn).

It added the firm would be allowed to rebid if the contract is cancelled.

But Halliburton chief executive Dave Lesar said that a fresh bid would depend on how many separate pieces emerged from the contract break-up.

The US Army is now considering which parts of the multibillion-dollar logistics contract awarded to Halliburton to feed, house, and operate services for troops could go to competitive bid.

Charges concerns

The company has been accused of overcharging since it was handed the no-bid contract last year.

US Vice-President Dick Cheney headed the firm until he took office in 2001.

He has, however, denied that this has led to preferential treatment for the firm.

On Tuesday the Wall Street Journal reported that the army planned to break up the contract, quoting an army memorandum which estimates the contract to be worth $13bn (7.3bn).

At this point I don't see that we could lose, whatever the outcome, because if we keep some of it(the Iraq contract), it would be higher margins
Dave Lesar, Halliburton
In the memo dated 25 August, the newspaper says, the army's chief of procurement policy, Tina Balard, directed top officials to "immediately begin the transition to competitively awarded sustainment contracts for support of US military forces in Iraq".

The memo also addresses the army's increasing frustration with efforts to devise a final estimated cost of the work, the Journal continues.

US defence officials said the intention to break the contract with Halliburton was not intended to penalise its Kellogg Brown & Root (KBR) unit which handles the Iraq operation.

KBR provides troops in Kuwait and Iraq with housing, dining halls, transportation and laundry services.

'Normal process'

The Army's decision to review the contract was the usual procedure for big military contingency contracts some time after engagement, Dan Carlson, spokesman for US Army Field Support - which oversees the Halliburton contract - said.

"It's a normal part of the process," he added.

The final decision on which functions will be put out to tender will be left up to military commanders in Iraq, who will then oversee them.

However, Halliburton's chief said he viewed the possible rebidding move as a positive one for the company which can make profit margins of around 2% on the contract.

"At this point I don't see that we could lose, whatever the outcome, because if we keep some of it, it would be higher margins," he said.

"If we're out, we'll get our liquidity and we'll move on with our business," he added.

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