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Last Updated: Tuesday, 15 March, 2005, 12:32 GMT
Halliburton in $108m Iraq probe
Halliburton's offices in Houston, Texas
Oil prices may be high but delivery costs are sometimes higher
Halliburton, the energy firm once run by US Vice-President Dick Cheney, is facing fresh questions over its work for the US Defense Department in Iraq.

A Defense Contract Audit Agency report, released late on Monday, criticised Halliburton unit KBR for failing to provide clear records of its costs.

The probe is examining more than $108m (56m) of a contract extension which was worth $875m.

No competing bids were sought by the Defense Department.

Leaked report

The executive summary of the Defense Contract Audit Agency (DCAA) report was released in the US late on Monday by Congressional Democrats critical of Halliburton's work in Iraq.

Defense Department auditors queried a bill of $27.5m for transporting propane worth $82,000.

The auditors questioned $108.41m of the overall bill.

One item, the delivery of fuel to KBR in Kuwait by government-approved contractor Altanmia, cost $62m - $61m of which is now being queried.

KBR, which was contracted to deliver petrol, kerosene and other fuel to Iraq between May 2003 and January 2004, also came under criticism over retrospective payments for Turkish fuel.

Despite having fixed-price contracts with suppliers, it added $16.8m in costs to its Turkish fuel bills because of rising oil prices.

Flexible fixed price

The DCAA audit was advisory and did not lead to any penalties against Halliburton, which continues to work on Defense Department contracts.

Henry Waxman and John Dingell, two Democrat Representatives, wrote to President George W. Bush, saying they thought the government's treatment of Halliburton was "extraordinary".

Auditors also raised concerns over the fact that the information provided to them by KBR, from Jordan and Turkey, did not match the company's internal records.

However, Reuters reports that Wendy Hall, a spokeswoman for Halliburton, said on Monday the company gave the auditors all of its necessary records.

She also pointed out that the fuel was delivered "in a wartime environment".

KBR has maintained it was forced to use Altanmia by the Kuwaiti government.

However, the report - dated October 8 - criticised the basis on which KBR had worked out its costs.

"It is not reasonable to use prices negotiated in only a few days, under extremely difficult circumstances, for the entire period of performance which extends for almost a year (229 days)," the report said.

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