KBR faulted for ineffective drawdown in Iraq

WASHINGTON (Reuters) - Houston-based KBR Inc could save the government at least $193 million by reducing its workforce in Iraq more quickly, in line with the drawdown of U.S. troops, the Pentagon's chief auditor said on Monday.

"In October 2009, we issued a report concluding that KBR's drawdown was ineffective and KBR could save the government at least $193 million by improving the staff management and aligning their labor drawdown with the military drawdown," April Stephenson, director of the Defense Contract Audit Agency (DCAA), said at a hearing on wartime contracting.

Stephenson was reassigned to a new Pentagon job last week amid sharp criticism from U.S. lawmakers, who have grown frustrated about the Pentagon's failure to hold contractors accountable for overcharges and poor performance. She is due to end her role as the Pentagon's chief auditor on Friday.

Even if KBR hit its projected 5 percent staffing reduction, the Pentagon agency estimates it will still be overstaffed by an average of 2,857 workers from January 2010 to August 2010, resulting in unnecessary payroll costs of $193 million.

Stephenson said DCAA had also rejected $103 million of private security costs requested by KBR, of which more than $60 million remained outstanding, and the Army was taking steps to collect the money.

"We understand that the Army is assessing the disapproval by DCAA and is in the process of initiating action to recoup the remaining costs," she told the hearing.

Members of the Commission on Wartime Contracting, set up by Congress in 2008, were critical about the pace of KBR's drawdown in Iraq and cited data that showed it lagged other companies hired by the Pentagon to provide a wide range of support services for the U.S. military.

KBR spokeswoman Heather Browne said her company received a copy of the audit late last week and was still reviewing it.

Browne said KBR continued to work with the government despite congressional concerns about the inadequacies of certain DCAA procedures and accounting performance.

The company "would hope that all relevant agencies keep current information and facts at the forefront of our discussions," she said.

(Reporting by Phil Stewart and Andrea Shalal-Esa; editing by Andre Grenon and Tim Dobbyn)