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Bush expects Halliburton to repay overcharge on contract

WASHINGTON—President Bush said Friday that he expects Halliburton, a company formerly run by Vice President Dick Cheney, to reimburse the federal government if it overcharged on a gasoline contract in Iraq.

"I appreciate the Pentagon looking after the taxpayers' money. They felt like there was an overcharge issue," Bush said at the White House. "We're going to watch. We're going to make sure that as we spend the money in Iraq that it's spent well and spent wisely.

"And if there's an overcharge, like we think there is, we expect that money to be repaid," Bush warned.

A Pentagon probe found that Halliburton might have overcharged the Army by $1.09 per gallon, or up to $61 million, for almost 57 million gallons of gasoline, Defense Department officials said.

The Halliburton contract—which went to its subsidiary Kellogg, Brown & Root—initially came under fire because it was awarded to the company without competitive bidding.

The Pentagon justified the move by saying there was a need for speed and confidentiality during the war and its immediate aftermath.

Defense Department officials revealed Thursday that internal auditors have uncovered at least two potential problems in two Halliburton contracts, which are worth up to $15.6 billion.

In one, the auditors believe KBR, as the Halliburton subsidiary is known, didn't adequately evaluate the cost for the gasoline, and the "potential overpricing could be as high as $61 million," a senior Defense Department official said on condition of anonymity.

KBR subcontracted the supplying and transporting of the gasoline to a Kuwaiti company. The cost for the unleaded gasoline, including transportation, was $2.27 a gallon. A similar contract for gasoline from Turkey came in at $1.18 a gallon.

The other problem involves a $67 million discrepancy between the price that KBR proposed to charge the Defense Department for cafeteria services and the cost that a subcontractor agreed to charge KBR to provide the service.

Auditors didn't accuse KBR of trying to gouge the U.S. taxpayers but said that the KBR head office in Houston wasn't aware of the subcontracted price when it made the proposal. The Pentagon rejected the proposal and asked KBR for a new one.


(c) 2003, Knight Ridder/Tribune Information Services.