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Total value of Halliburton's military contracts equals $21 billion

9 Dec. 2004

WASHINGTON, Dec. 9 (HalliburtonWatch.org) -- The total value of Halliburton's military contracts reached $21 billion in November, Wall Street advisory firm Merrill Lynch reported.

The $21 billion represents the total amount Halliburton currently expects to receive from military contracts awarded by governments around the world, including contracts for restoring Iraq's oil infrastructure and conducting military-related research at New Mexico's Los Alamos National Laboratory. Forty percent of the military business is from the U.S. Army's LOGCAP III contract, awarded to Halliburton's KBR subsidiary in December 2001.

Under LOGCAP III, KBR is responsible for providing supplies and services to the military. Typical civil logistics carried out under the contract include construction of military housing for the troops, transporting food and supplies to military bases and and managing and serving food at military cafeterias.

LOGCAP is the most valuable contract awarded by the Army and Halliburton's most lucrative government contract. At least 55 KBR employees have been killed in Iraq. Most of those employees were carrying out KBR's LOGCAP contract by driving trucks carrying military supplies.

The $21 billion represents only a current estimate of the total amount Halliburton expects to receive from its military businesses. But this amount could rise or fall in the future as war conditions escalate or diminish.

A report from Rep. Henry Waxman (D-CA) shows Halliburton has currently been paid $10 billion from the Army for work under the "LOGCAP" and "Restore Iraqi Oil" infrastructure contracts in Iraq.

Most of this money takes the form of reimbursements to KBR for expenses it incurs. KBR's profit is derived by charging the military a fee equal to a percentage of those reimbursements.

The contracts work like this: KBR purchases goods and services out of its own pocket to perform contracts, then it is reimbursed by the military for those expenses. It is then paid a fee (its profit) of one to seven percent of the value of those expenses.

This arrangement is known as "cost-plus" since the military reimburses KBR for its "costs," but then pays a percentage (the "plus") of one to seven percent ontop of that cost.

Critics say KBR has an incentive to artificially inflate costs in order to increase the amount of its fee paid by the military. The higher Halliburton's costs are, the larger its profits will be.

Halliburton's $21 billion in revenues is derived from the following sources:

U.S. Army's LOGCAP contract, 40 percent
United Kingdom's Ministry of Defense, 15 percent
U.S. Army's "Restore Iraqi Oil" (RIO) infrastructure contract, 12 percent
Balkans contract, 9 percent
United States Central Command (CENTCOM), 7 percent
U.S. Army's "Project Contracting Office" (PCO) oil infrastructure contract, 6 percent
"Other," 5 percent
Los Alamos National Laboratory, 4 percent
U.S. Navy's CONCAP contract, 2 percent

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