Halliburton and KBR's military contracting operations in Iraq

International Business

Halliburton Involvement in Iraq

This is paper on Haliburton's involvement in Iraq. There are ten references used for this paper.

Lately, the Halliburton Oil Company has come under fire for its Iraq involvement. It is important to examine the services it provides to those in Iraq and exactly why its practices have been questioned.

Halliburton Oil

Halliburton Oil is a "service firm for the oil and gas industry that currently has more than 24,000 employees and subcontractors in Iraq (Comerford)." The company, which was established in 1919, is based in Houston, Texas and "describes itself as one of the world's largest providers of products and services to the petroleum and energy industries (unknown, 2003)."

The company was "headed by Vice President Richard Cheney before he accepted Bush's invitation to be his running mate in the 2000 presidential election. Cheney is credited with dramatically expanding Halliburton's operations by bringing in billions of dollars in new contracts, but has repeatedly denied any role in company operations after his departure. (unknown, 2003)."

Providing Services

Halliburton has various subcontractors currently providing services in Iraq. These include "Chicago-based Boeing Company which is providing satellite phone services for an estimated $35 million (Comerford)."

Kellogg, Brown and Root

One of Halliburton's more widely known subsidiaries in Iraq is Kellogg, Brown and Root (KBR). This group provides a "wide range of engineering, construction, operations and maintenance, logistics and project management services to three markets: upstream, downstream and government and infrastructure. The upstream sector includes oil and gas production facilities, pipelines, gas processing and liquefied natural gas production facilities and receiving terminals, while the downstream includes oil refining, petrochemicals, synthetic gas and fertilizer production facilities. Infrastructure includes a wide range of facilities and services; including roads, airports, railroads and buildings, and coordinating and planning major events (KBR, (www.halliburton.com)."

Private Over Military

The Defense Department is "contracting out more and more jobs traditionally done by military personnel in order to focus its mission and save money to private companies (Miller)," and currently Halliburton Oil is considered the most prominent private company in Iraq.

In December 2001, KBR bid for, and was awarded, a military contract known as LOGCAP III, which is a "10-year Task Order contract, with a one-year base period and nine one-year options. The contract requires the contractor to deploy within 72 hours of notice and to deliver Combat Support and Combat Service Support (CS/CSS) for 25,000 troops within 15 days. KBR must be ready to furnish these warfighter services 24 hours a day, 7 days a week, 365 days a year under anycondition ((Halliburton successes, (www.halliburton.com)."

KBR improves the quality of life for the soldiers in Iraq by "changing the conditions in which they must live. Instead of lying on the ground and eating MREs, the soldiers are provided with shelter, sleep on cots, and have hot food prepared for them (Halliburton successes, (www.halliburton.com)."

Since winning the contract, Halliburton has proved to be an invaluable asset to the "war effort by delivering soldiers' mail, washing their clothes, providing them with food, toilets and bunks, shipping fuel for tanks, and building conference rooms for generals (Miller)."

In early 2004, Halliburton was also "awarded a $7 billion no-bid contract to help rebuild Iraq (unknown, Halliburton Ties)."

Fighting Fires

In March 2003, the Defense Department awarded KBR the "contract to oversee any firefighting operations at Iraqi oilfields after any U.S.-led invasion (http://www.freerepublic.com/focus/f-news/860023/posts)." This was due to their reputation among those in the oilfield services field and Halliburton's "extensive logistic support work for the U.S. military (http://www.freerepublic.com/focus/f-news/860023/posts)." Boots and Coots International Well Control Inc., an oilwell firefighting company, proved to benefit from this deal due to a 1995 alliance with Halliburton.

The Price of Danger

Iraq is such a dangerous place to work and do business, that companies are finding their basic costs increasing at an enormous pace. "Industry estimates indicate death and dismemberment insurance is up 20 to 40%, and insurance against sabotage is up as much as four fold. Halliburton is offering drivers and other workers $80,000 tax-free for working in Iraq for a year, or up to $120,000 with overtime. A company official said it is continuing to send workers abroad, but the inflated payrolls are part of the price of doing business (Comerford)."

The Most Dangerous Job

Since March 2003 when operations were established, 45 employees of Halliburton or its subcontractors have been killed in Iraq. The most dangerous job is that of "driving a truck. Of the 18 U.S. citizens killed in Iraq while working for Halliburton, 11 were truckers. Recently, Halliburtons' convoys have been taking hits every day on some routes (Miller)."

Some of the dangers that truckers must face on a daily basis are "sniper fire, car bombs, roadside explosions and rocket-propelled grenades. Iraqi insurgents mount ambushes to pick off trucks from behind, while also throwing bricks and dropping 8-foot-long steel pipes from overpasses into the cabs (Miller)."

The drivers must travel through "a landscape of violence and fear, during which they will take fire from Iraqi insurgents, pass through blinding black smoke from roadside fires and be stuck for tense moments on a stretch of highway famous for its ambushes (Miller)."

While the pay is enticing, many of Halliburton's employees are choosing to return home due to dangers they have faced while in Iraq. Drivers have found their trucks literally "blown out from under them (Comerford)," making them vow to never return to the area upon reaching American soil.

High Turnover

Halliburton's employee turnover is high in Iraq, with few making it to the one year mark. It is estimated that of every 20 truckers who sign on for a year of work, only three will last for the year. While the truckers are committed for a year of service, "company policy is to send anyone home who wants out of their one-year contract, no questions asked - but no tax benefits, either (Miller)."

Code of Business Conduct

Halliburton Oil has a strict Health, Safety, and Environmental policy concerning business conduct. The policy "establishes and communicates the Company's policy concerning the protection of the health and safety of the Company's employees and other persons affected by the Company's business activities and protection of the environment with respect to the Company's business activities and operations (http://www.halliburton.com/about/hse.jsp)."

Chow Billing

In April, Halliburton billed the Pentagon "$141 million for feeding U.S. troops in Iraq (unknown, 2004)." Originally the invoices had been delayed due to questionable billing practices by the company, but military auditors were eventually convinced by Halliburton to allow the expenses.

Questions arose when "Pentagon auditors began asking questions about the company's method for predicting how many soldiers might show up to eat. The auditors had questioned bills generated by Saudi subcontractor Tamimi Global Company, which last July billed for 42,042 meals daily at a U.S. base outside Kuwait City, while only serving up 14,053 meals a day (unknown, 2004)."

While the military agreed to pay the invoices in April, a "Pentagon spokesman said officials with the Defense Contract Audit Agency would continue to evaluate the costs incurred and billed by KBR, which is providing logistical support for U.S. troops in Iraq (unknown, 2004)."

Overcharging for Oil

In October of 2003, Halliburton was "accused of overcharging U.S. taxpayers for gasoline it is importing into Iraq. There are reports that the company is overcharging the U.S. government between 65 and 75 cents for every gallon of gasoline it sells in Iraq (unknown, overcharging)." Halliburton, however, maintains it is innocent of these charges.

War for Profit?

Many critics accuse President Bush of starting the war in Iraq just to boost the profits of some United States companies. This scenario could be deemed plausible as Vice-President Cheney's former company, Halliburton Oil, has been awarded contracts worth billions of dollars since the start of the war. In contrast, others state "it is rather heavy to accuse Bush of destabilizing the world just to serve his economic interests, which is also the interests of the United States, as he sees it (unknown, D-Day)."

Conclusion

Halliburton, its subsidiaries and subcontractors play a prominent role in Iraq. They are responsible for a wide range of services, including fighting oil fires, pumping oil, providing soldiers with hot meals, shelters and beds, and transporting materials across dangerous stretches of road. The company has also received contracts in which it will help with the rebuilding of Iraq. While the company offers incentives for employees to work in Iraq, it is experiencing a high rate of employment turnover due to the dangers many employees face on a daily basis.

Although the company has come under scrutiny in recent years due to its involvement with Vice-President Chaney and its accounting practices, it has still managed to win billion dollar military contracts due to its expertise in the oil service industry. The company shows every indication that it will continue to be a strong force in Iraq for years to come.