Halliburton Contracts in Iraq: The Struggle to Manage Costs

[grok]

http://www.nytimes.com/2003/12/29/international/middleeast/29CONT.html

New York Times
By JEFF GERTH and DON VAN NATTA Jr.
Published: December 29, 2003

....
The estimated price of another KBR project, the replacement of damaged pipelines over the Tigris River, also grew significantly over the course of a few weeks. In July, KBR estimated that the cost would be $29.8 million for the job, included in a list of 220 tasks to be completed in Iraq. But by fall, the cost had more than doubled, to $70 million.

Both Mr. Dowling, the spokesman for the corps, and Ms. Hall said the price grew because the scope of the project and the method of repair had changed. Ms. Hall said the company had tried to get the lowest price from its subcontractors. In addition, Halliburton and government officials note that the violence in Iraq increases the cost of security and adds to the cost of all reconstruction contracts.

So far this year, Halliburton's profits from Iraq have been minimal. The company's latest report to the Securities and Exchange Commission shows $1.3 billion in revenues from work in Iraq and $46 million in pretax profits for the first nine months of 2003. But its profit may grow once the Pentagon completes a formal evaluation of the work. If the government is satisfied, Halliburton is entitled to a performance fee of up to 5 percent of the contract's entire value, which could mean additional payments of $100 million or more.

The nonpublic way in which KBR was selected for the job in Iraq remains a political flashpoint, especially among Democratic presidential contenders, in part because Vice President Dick Cheney served as Halliburton's chief executive officer from 1995 to 2000.
...

Damn, the NET profit level seems to be less than from a decent money market fund. If they start losing money, they are going to have to rely on that 5 percent satisfactory performance fee just to recoup losses.

How are we going to be able to claim profiteering and cronyism (via Cheney)if the bastards/idiots can't even turn a decent profit?

Grok

[karnac]

1. Those net profit figures have to be wrong

They just have to be. Does anybody else here have any other net profit figures for Halliburton? Where are the huge profits from Cheney's old company that there were supposed to be?

[Snazzy]

2. Cash flow and subcontractors

And a ton of unaccounted for cash. A billion here, a billion there, and sooner or later you are talking about real money. Turning a profit is for chumps. Cash is king and tells the story.

Interesting that this article was a freeper talking point du jour. How they love it that NYT didn't wag a finger in this article.