Hi Don,

Thanks for the link which seems to be fairly clear that:

1. Brown & Root, latterly Halliburton and their subsidiary KBR have a long track record of doing work for the US Armed Forces through Pentagon contracts, dating back to 1940. Taking those 63 years of association, the Pentagon and the military in general have been pleased with the services provided.

2. That management, or oversight of contracts by the military is poor.

I daresay your comparison of fuel prices locally did factor in transportation costs. But I would venture to suggest that the situation is somewhat different - delivering fuel locally within the United States of America, and delivering fuel in a war zone (I think the supplier lost something like 7 trucks, one driver killed, others injured).

Reports on this over hear include comments by GAO officials confirming that they did not believe that KBR had profitted unduly from the deal, or that the deal had been brokered with the intention of making increased profit. They also reported that this particular contract was short term (less than 3 months) which was why the price quoted for fuel from Turkey could not be applied, the $1.18 price being for a minimum 12 month supply contract.

Bobert, go back and read what I said with regard to Halliburton - the contract under discussion at that time was the contract to extinguish oil-field fires and to repair war damage to Iraqi oil installations - i.e. the first contract awarded. Do not try and transfer what I specifically said about that to cover anything else.

As to having to consult web sites regarding contracts Bobert. It is a matter of record and fact that the current Frame Agreement Contract that Halliburton holds with the Pentagon was won against competitive tender. Therefore if any subsequent work that fell within the remit of that Frame Agreement came up and it was not given to Halliburton, then Halliburton would be in a position to sue the Pentagon for breach of contract.

Just quoting the figures does not portray the full picture. On that I will give you an example. This was a contract to be awarded by an integrated management organisation. On what was to be installed the manufacturer was decided by product characteristics, the manufacturer offered a supply and install proposal, which on examination contained some 57 qualifications, 39 of which had identifiable potential schedule impact that they could not quantify and 27 of which had identifiable commercial impact that they would not quantify. From our side of that integrated management organisation we stated that to award the installation contract under such circumstances would be like presenting this supplier with a blank cheque. That suppliers installation cost was rationalised at 240 million. We pressed for and got the job put out to competitive tender, the supplier came back with an installation cost of 150 million, the contract was awarded to another contractor whose price was 75 million.

When the job was finally finished, total installation cost came in at 190 million. Sounds like someone took a real bath in doing the work going by the figures. Similarly looking at the figures, it looks as though the evaluation team who awarded the contract got things badly wrong. That is what the figures suggest, but what those figures cannot do is provide reasons for the escalation in contract price.

The reasons in this particular instance related to Company (Integrated Management Organisation) delays and resultant changes, that caused the installation contractor to effectively install the items twice, forced him to change his installation spread and methodology (hence he had to re-engineer the job) and forced an installation window at a time of the year when weather would cause delay compared to the time of year for installation stipulated at time of contract award - 98% of the escalation in price was driven by the customer, purely by circumstance, 1.6% of the escalation was caused by product supplier induced changes, 0.4% was generated by the installation contractor. The installation contractor did an absolutely superb job - installation contractor was Brown & Root Energy Services (Halliburton)

From experience over this side of the pond, the Government and particularly the military, are notorious for setting specifications for work, awarding contracts for the work - then introducing changes - its the changes that escalate the costs, and they have nothing whatsoever to do with the contractor.