US lawmakers challenge US Army decisions on KBR

WASHINGTON, March 3 Wed Mar 3, 2010 7:29pm EST

WASHINGTON, March 3 (Reuters) - Lawmakers in the U.S. Senate and House of Representatives on Wednesday questioned the Army's continued use of KBR Inc (KBR.N) for logistics work in Iraq in the face of confirmed reports of poor past performance.

Representative Edolphus Towns, who heads the House Oversight Committee, wrote to Defense Secretary Robert Gates to question the Army's decision to award KBR a new contract valued at up to $2.8 billion despite a wide array of problems.

Towns, citing problems with KBR's maintenance of electrical systems at bases where U.S. troops were fatally electrocuted and "numerous allegations of waste, fraud, and abuse," asked Gates to provide the committee with a wide array of documents about the KBR contract by March 17.

"It seems inconceivable to me that the Defense Department would award this new contract to KBR in Iraq," Towns said, citing the company's "poor past performance."

"When multiple deaths of U.S. service men and women are not enough to preclude the award of a new contract, it makes me wonder what it takes for a contractor to be fired."

Towns asked Gates to cooperate with a committee investigation by providing documents about the KBR contract, including copies of all task orders, modifications, and performance work statements, as well as documentation about how the company's work and past performance had been evaluated.

KBR won the new contract last week, a day after the company told shareholders it lost about $25 million in award fees because of flawed electrical work in Iraq.

Senator Byron Dorgan, the North Dakota Democrat who chaired several Senate hearings on electrocutions of soldiers in Iraq resulting from shoddy contracting work by KBR, said the Army's past LOGCAP, or logistics, contracts had produced "the greatest waste, fraud and abuse perhaps in the history of our country."

He said he was considering adding an amendment to the fiscal 2011 defense appropriations bill that would force the Army to reassess the current policy to "essentially contract everything out instead of doing it in the service," everything from producing food to buying towels or moving water to bases.

Dorgan, who held 20 hearings on these issues for the Senate Democratic Policy Committee, said the Government Accountability Office and other organizations had confirmed reports of contaminated water, shoddy wiring that led to electrocutions and countless incidents of wasteful spending.

"All of those things suggest to me that there's been something fundamentally broken in the procurement process and the contracting process," Dorgan said at a hearing on the Army budget by the Senate defense appropriations subcommittee.

Army Secretary John McHugh said the service had taken steps to reform its use of private contractors to provide logistics services and increase oversight, but acknowledged that the new contract form "may not be the perfect answer."

He agreed that the outsourcing had gone too far, and said the Army had already brought back in house, or insourced, 900 core capabilities that have provided the Army and the taxpayers $41 million in savings.

He said the Army had a goal to insource another 4,000 capabilities by the end of 2015. (Reporting by Andrea Shalal-Esa; Editing by Steve Orlofsky)

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