The Center for Public Integrity

The oil services company Halliburton, largely through its subsidiary Kellogg, Brown & Root, has received more revenue from government contracts in the last year than from 1998 through 2002. In 2003, when the company had record revenue of $16.3 billion, Halliburton received contracts from the Department of Defense worth $4.3 billion, while in the previous five years it obtained less than $2.5 billion from the military, according to an analysis by the Center for Public Integrity.

Although figures are not yet available for 2004, government revenue is bound to increase as a result of the contracts the company has won for work in postwar Afghanistan and Iraq, which so far potentially totals $11.4 billion. Some of that work was actually awarded earlier; many of the company's contracts extend for multiple years.

In 1998, Halliburton's total revenue was $14.5 billion; that year, the company got contracts from the Pentagon worth $284 million. Two years later, revenue had dropped to just under $12 billion while work under DoD contracts more than doubled. In 2002, DoD awarded Halliburton tasks worth $485 million while the company's revenue was $12.6 billion.

Of the more than 150 American companies that together have received U.S. government contracts potentially worth more than $51 billion for postwar work in Afghanistan and Iraq, Halliburton is by far the largest recipient of contracts awarded in the two countries.

As part of its continuing Windfalls of War project, the Center for Public Integrity has been compiling information on contracts awarded by the U.S. government for support in Operation Enduring Freedom and Operation Iraqi Freedom. The Center has compiled its list of contractors and contract awards through information obtained from 95 requests and appeals filed under the Freedom of Information Act or through official government and company sources.

The Center for Public Integrity has obtained the 11 work orders worth $66.2 million awarded to CACI International Inc., the company at the heart of the Abu Ghraib prison abuse scandal in Iraq. Details of the work orders did not come to light until last April, when reports emerged of U.S. interrogators allegedly abusing prisoners at the notorious Baghdad prison.

In Iraq, Virginia-based CACI provides "interrogation support and analysis work for the U.S. Army in Iraq," according to the company. Job descriptions obtained by the Center show that CACI employees performed a variety of tasks in Iraq. Contractors were tasked with missions such as "debriefing of personnel ... intelligence report writing/quality control, and screening/interrogation of detainees at established holding areas." These contractors worked closely with military personnel. For example, those hired as interrogators were assigned to "coordinate and work in conjunction with [Military Police] unit and [Military Intelligence] interrogation units assigned to support operations of the Theater/Division Interrogation Facility."

First reported by The New Yorker, an Army investigation led by Major General Antonio M. Taguba, accused a CACI employee of being complicit in the physical abuse of prisoners. There have been several government investigations into the role of CACI and its employees surrounding the prison scandal. The firm says it is cooperating with the government's probes and has denied any wrongdoing.

Over a period of six months, the contracted value of one Iraqi task order of Halliburton subsidiary Kellogg, Brown & Root grew by a multiple of 36 and was modified 21 times, according to previously classified documents obtained by the Center for Public Integrity.

The task order, which was part of the March 8, 2003, no-bid Iraqi oil restoration contract awarded by the Army Corps of Engineers to KBR, increased from its original ceiling of $24 million to $887.37 million. Under task order 0005, which originally had a performance period of 90 days, KBR was responsible for importing fuel to Iraq. KBR did not break the $7 billion ceiling that had been specified for the sole-source contract, but the frequent modifications to the task order, which lays out specific work requirements under the contract, have some questioning the process.

The General Accounting Office, which did not specifically investigate the KBR oil contract, expressed concerns about revisions to contracts and task orders for work in Iraq. "Task orders were frequently revised. These revisions generated a significant amount of rework for the contractor and the contracting officers. Additionally, time spent reviewing revisions to the task orders is time that is not available for other oversight activities," David M. Walker, the comptroller of the General Accounting Office, told a June 15 Congressional hearing on contracting and the rebuilding of Iraq. "While operational considerations may have driven some of these changes, we believe others were more likely to have resulted from ineffective planning."

More than 150 American companies have received contracts worth up to $48.7 billion for work in postwar Afghanistan and Iraq, according to the latest update of the Center for Public Integrity's Windfalls of War project.

This figure represents an increase of 82 companies and more than $40 billion since the Center first released its study of contracts awarded to U.S. companies for postwar work in Afghanistan and Iraq on Oct. 30, 2003.

The Center has continued to file Freedom of Information Act requests with, among others, the Department of Defense, the State Department and the U.S. Agency for International Development in hopes of getting the complete picture of U.S. contractors involved with Operation Iraqi Freedom and Operation Enduring Freedom. As was the case with the Center's initial report, contractors and dollar values have only been included in the overall list if there was authoritative information from either an official government source or a company source.

Since the Center's first release in October 2003, there has been more scrutiny of these postwar contracts by Congress, the media and various government agencies. This was partly due to the revelation that employees of private contractors Titan Corporation and CACI were present during the alleged torture of Iraqi prisoners at the Abu Ghraib prison.

A private military company that has won contracts to assist the U.S. military in Iraq wrote the Pentagon rules for contractors on the battlefield.

Since 1997, Military Professional Resources Inc., which has two contracts (see the first for integration of Iraqi forces, and the second for linguists) worth a total of $2.6 million related to reconstruction in Iraq, has also produced Field Manual 100-21, also known as Contractors on the Battlefield. The manual "established a doctrinal basis directed toward acquiring and managing contractors as an additional resource in support of the full range of military operations," according to the company's Web site.

Michael B. Williams, the MPRI employee who is the primary author of the most recent edition of the manual, said the company started "with some basic guidelines" from the Army. "For the most part, however, this was a clean slate," he told the Center for Public Integrity.

The Army reviewed MPRI's draft, submitted revisions to the company and published the manual on January 3, 2003.

While the new manual contains detailed instructions on how deployed commanders should use contractors – from force protection measures to what kind of shoes contract employees should bring – it makes no mention of intelligence gathering or restrictions on contractor roles.

Reports on the use of contractors in Iraq have disclosed that private-sector employees have been performing sensitive intelligence work in and around combat zones. What's more, the report by Major General Antonio Taguba on the alleged abuse of prisoners at the Abu Ghraib Prison noted the involvement of civilian contractors at the Baghdad facility.

These revelations have raised questions about the efficacy and permissibility of using private contractors to perform military intelligence functions, but a three-and-a-half-year-old memorandum shows that the Army has been well aware of the risks of calling on contractors for intelligence work. On December 26, 2000, Patrick T. Henry, assistant secretary of the Army, dispatched a memo to the Army's assistant deputy chief of staff for intelligence declaring a policy that not only restricted the use of contractors, but also cautioned against the threats to national security posed by reliance on such workers in sensitive intelligence functions.

"At the tactical level," the memo declared, "the intelligence function under the operational control of the Army performed by military in the operating forces is an inherently Governmental function barred from private sector performance." In addition, Henry's memo noted, the "oversight exerted over contractors is very different from the command and control exerted over military and civilian employees. Therefore, reliance on private contractors poses risks to maintaining adequate civilian oversight over intelligence operations."

Even at the "operational and strategic level," the memo notes, "the intelligence function … should be exempted from private sector performance on the basis of risk to national security from relying on contractors to perform this function. …

Raytheon Aerospace, which changed its name to Vertex Aerospace in June 2003, and its related companies have received more than $2.7 billion in U.S. government contracts since 1990, and the company is currently in Afghanistan with a contract from the Defense Department worth at least $7.4 million involving aircraft repair and maintenance.

If Raytheon had its way, that might be all that is known about its work for the Pentagon.

Under a presidential directive signed by Ronald Reagan on June 23, 1987, known as Executive Order 12600, companies have potential veto power over Freedom of Information Act requests for copies of their contracts with the U.S. government.

To comply with the Executive Order, before releasing any contract, a FOIA officer must contact the company to ask whether there is any information that should be withheld because it constitutes confidential commercial information that could cause competitive harm if released. Withholding this information is allowed under Exemption 4 of the Freedom of Information Act, which states that records cannot be obtained if they contain "trade secrets and commercial or financial information obtained from a person and (are) privileged or confidential."

In trying to determine which U.S. companies received government contracts for work in post-war Iraq and Afghanistan, the Center for Public Integrity filed 73 FOIA requests and appeals with the State Department, the U.S. Agency for International Development and the Pentagon and its related uniformed services.

In an initial response in May, the Pentagon listed a $7,382,194 contract with Raytheon for work in Afghanistan. But requests for a copy of the actual taxpayer-funded contract remain pending.

Government contracting has always been a complex matter, thick with legal wrangling and bureaucracy, but the last decade has seen a radical change in how the U.S. government purchases goods and services.

At one time, federal agencies constructed buildings, built machines and cleaned offices themselves, or found another agency to do it. Today, the U.S. government spends some $200 billion a year buying everything from information technology services to pencils to advanced weapons systems from the private sector.

The Defense Department alone accounts for 75 percent of that spending. Following a series of scandals in the 1980s, where the Pentagon was revealed to have paid outrageous sums for commercially available products, Congress decided to overhaul government procurement. The result was the Federal Acquisition Streamlining Act of 1994, which simplified the maze of procurement regulations to make it easier for federal agencies to buy products from the private sector.

The new law dovetailed with former Vice President Al Gore's "Reinventing Government" initiative, which aimed to trim the federal workforce, and matched the realities of the Pentagon's shrinking budget. As a result, where the federal workforce has shrunk, the contractor workforce has grown. Paul Light, a scholar at the Brookings Institution, calls this workforce the "shadow government," and estimated its size in 1999 at 5.6 million.

More than half of all government contracting today is spent on services—an increase of about 24 percent since 1990—making it the largest spending category. "Twenty years ago, (the government) contracted for supplies, construction and services, in that order. Now it's services, supplies and construction, but services are what's driving the train," says Steven Schooner, associate professor and co-director of the government Procurement Law Program at George Washington University.

On May 22, the U.N. Security Council gathered in New York to approve a resolution lifting sanctions on Iraq, creating a Development Fund for the country and providing limited immunity to corporations involved in oil and gas deals there for the next four years. The resolution directed that proceeds from future sales of Iraqi oil and gas be placed in the development fund and allowed the U.S.-led Coalition Provisional Authority to disburse the funds in consultation with the interim Iraqi administration.

That same day at the White House, President George W. Bush signed Executive Order 13303, which appears to give immunity from any judicial process to every entity with direct or indirect interests in Iraqi petroleum and related products. "The threat of attachment or judicial process against the Development Fund for Iraq, Iraqi petroleum and petroleum products, and interests therein ... constitutes an unusual and extraordinary threat to the national security and foreign policy of the United States," reads the executive order. It continues, "… any … judicial process is prohibited, and shall be deemed null and void."

Executive Order 13303 went unnoticed outside the government until July, when it was spotted by the Institute for Policy Studies, a liberal think tank.

Since then, accusations have been flying over whether or not the Bush administration has given blanket immunity to the oil industry in Iraq. "The Executive Order is a blank check for corporate anarchy," Tom Devine, legal director of the non-profit Government Accountability Project, wrote in a July 2003 assessment of the order for the Institute. "Its sweeping, unqualified language places industry above domestic and international law for anything related to commerce in Iraqi oil."

"Translated from the legalese, this is a license for corporations to loot Iraq and its citizens," Devine added.

One of the more interesting Iraq contracts the Center uncovered involves a tiny firm called Sullivan Haave Associates.

Sullivan Haave is actually a one-man shop run by a government consultant named Terry Sullivan. Sullivan says his firm was hired as a subcontractor by Science Applications International Corp., one of the most successful and best politically connected government contractors doing work in Iraq.

Sullivan says his job was to spend four months in Iraq providing advice to various ministries being set up there by coalition and local authorities.

Sullivan has a much more intimate relationship with the Pentagon than his competitors, however. He happens to be married to Carol Haave, who, since November 2001, has been deputy assistant secretary of defense for security and information operations. And yes, Haave is the same person who appears in the name Sullivan Haave Associates.

Haave seemed surprised when contacted by the Center for Public Integrity at her Pentagon office about the contract.

She said she was no longer associated with the company in any way. She then said she had no knowledge of any work the company might be doing in Iraq.

When asked who the Center might speak with about the contract, Haave said that person was currently out of the country and unavailable. She said she would try to reach the person and have him call the Center.

A short time later Sullivan called.

He said the contract had only been for four months and he had completed it in July. He said he did not know what the total cost of the contract was. "They paid me for four months of my time," he said.

Sullivan then disclosed that Haave was his wife, but said the contract had nothing to do with her position at the Pentagon.

"We have been very sensitive to the issue of conflict for a long time," said Sullivan, who said his wife had signed everything involving the company over to him before she took her current job.