UPDATE 4-U.S. taps DynCorp, Fluor over KBR for Afghan work

* Five-year contracts worth up to $7.5 billion each

* DynCorp shares jump 14 pct; Fluor down 0.4 pct (Adds Sen. Dorgan comments, KBR response, last grafs )

By Jim Wolf

WASHINGTON, July 8 (Reuters) - DynCorp International Inc (DCP.N) and Fluor Corp (FLR.N) have been chosen over incumbent KBR Inc (KBR.N) for five-year contracts worth up to $7.5 billion each to support U.S. troops in Afghanistan, the U.S. Army said on Wednesday.

The deals involve one base year plus four option years to provide services such as laundry, dining and recreation, said Dan Carlson, a spokesman for the Army Sustainment Command in Rock Island, Illinois.

The base year, starting on Wednesday, is worth up to $1.5 billion, the Army said in a statement. DynCorp was awarded work in southern Afghanistan, while Fluor's work is in the north.

Houston-based KBR, the Army's biggest logistics contractor in Iraq, said it had requested a briefing on the selection process and left open the possibility it would formally challenge the Army's choice.

"No decision will be made on a possible protest until we have a chance to review that information," the company said in a statement. KBR was part of Halliburton Co (HAL.N) until two years ago. Former Vice President Dick Cheney served as Halliburton's chief executive from 1995 to 2000, when he became George Bush's running mate.

DynCorp said in a statement that the task order value is $643.5 million for the one-year base period.

Fluor said in a statement it would book awards as the task order is incrementally funded, with an initial undisclosed award expected to be booked in the third quarter of 2009.

Fluor's task order involves work for 74 operating bases, including construction, power, water, housing, base operations, sustainment services and logistics support.

DynCorp shares jumped almost 14 percent to close at $18.02 on the New York Stock Exchange. Fluor fell 0.4 percent to $46.16, while KBR shares fell 1 percent to $17.

The awards are the largest of their kind since the Logistics Civil Augmentation Program, or LOGCAP, was reshaped in April 2008 into an open competition pitting KBR, which won the original work in 2001, against DynCorp and Fluor for individual tasks.

A congressionally created commission on wartime contracting said in its first report last month that services provided by KBR under its LOGCAP contract -- with $31.4 billion funded from 2001 through March 20, 2009 -- could have been delivered for billions of dollars less if not for poorly defined work orders, inadequate oversight and inefficiencies.

Carlson said the army's latest selection was made on the basis of best value to taxpayers as part of the fourth in a series of such logistical contracts. The chief factors weighed were past performance, cost, and each company's proposal for the work, he said.

Sen. Byron Dorgan, who has chaired 19 oversight hearings on wartime contracting as head of the Senate Democratic Policy Committee, said the decision suggested the Pentagon was "finally beginning to give a contractor's past performance the consideration it deserves when awarding contracts."