Posted on 9-5-2002
Terrorism's
Corporate Gravy Train
By Pratap Chatterjee*, Special to CorpWatch www.corpwatch.org
Queenstown, Vogaria, West Africa -- On July 16, 2000, United
States Army
scrambled to deploy troops at the request of the embattled Vogarian
government in a top secret mission code named Operation Restore
Order.
Political and economic instability, factional fighting outside
the capital
of Queenstown created large numbers of displaced civilians.
Large-scale
famine and disease were feared. In five days the U.S. Army teamed
up with a
private company in Texas to deploy and assemble a military camp
out of a
pre-fabricated kit known as Force Provider to assist the Vogarians.
Vogaria, of course, is a fictional country but the military
exercise --
which took place at Fort McPherson, Georgia and the Diamond
Reserve Center
in Louisiana -- could not be more real. The Logistics Civil
Augmentation
Program's War Fighter Exercise 2000 was the first ever Department
of
Defense simulation of civilian contractors assisting the army
in rapid
response assembly of military bases in a war situation.
The U.S. military has always relied on private contractors to
provide some
basic services such as construction, dating back as far as the
Civil War.
But today as much as 10% of the emergency U.S. army operations
overseas are
contracted out to private companies run by former government
and military
officials. These private companies operate with no public oversight
despite
the fact that these contractors work just behind the battle
lines. The
companies are allowed to make up to nine percent in profit out
of these war
support efforts. And experience so far has shown that the companies
are not
above skimming more profits off the top if they can.
Brown & Root Joins the War on Terrorism
Employees of Brown & Root, a subsidiary of Vice President
Dick Cheney's
former company, Halliburton Corporation of Dallas, Texas, are
set to arrive
at the Bagram airbase in southern Afghanistan in late April
or early May
2002 (the exact date is classified) to take over the support
services a
Force Provider camp. They are also scheduled to arrive at the
Khanabad
airbase in Uzbekistan, one of the main military support stations
for the
war in Afghanistan, to run three Air Force Harvest Eagle camps
(an earlier
version of Force Provider) for the 1,500 U.S troops based there
since
October, according to Daniel McGinty, a spokesman at the Defense
Contract
Management Agency.
Brown and Root will take charge of support services including
base camp
maintenance, laundry services, food services, airfield services,
and supply
operations, among others. Gale L. Smith, a spokesperson for
the U.S. Army
Operations Support Command in Alexandria, Virginia refuses to
confirm or
deny whether Brown & Root would be working on similar bases
in Manas,
Kyrgyzstan or other sites in Afghanistan and Pakistan to support
Operation
Enduring Freedom. The new job is one of the first examples of
a lucrative,
new ten-year contract that Brown & Root won from the Pentagon
on December
14, 2001 titled Logistics Civil Augmentation Program (LOGCAP).
The contract
is what the Pentagon calls a "cost-plus-award-fee,
indefinite-delivery/indefinite-quantity service," which basically
means
that the federal government has an open-ended mandate and budget
to send
Brown & Root anywhere in the world to run humanitarian or
military
operations for profit.
The Revolving Door
Halliburton, Brown and Root's parent company, is a Fortune 500
construction
corporation working primarily for the oil industry. In the early
1990s the
company was awarded the job to study and then implement privatization
of
routine army functions under Dick Cheney, then secretary of
defense.
When Cheney quit his job at the Pentagon, he landed the job
as chief
executive of Halliburton, bringing with him, his trusted deputy
David
Gribbin. The two substantially increased Halliburton's government
business
until they quit in 2000 when Cheney was elected vice-president,
taking
multi-million dollar golden parachutes with them. Since then,
another
former military office and Cheney confidante, Admiral Joe Lopez,
former
commander in chief for U.S. forces in southern Europe, took
over Gribbin's
former job of go-between the government and the company, according
to Brown
& Root's own press releases. Other close friends include
Richard Armitage,
the assistant secretary of state, who worked as a consultant
to Halliburton
before taking up his present job.
Critics charge that this is a classic example of the revolving
door between
government and big business . Bill Hartung, senior research
fellow at the
World Policy Institute in New York, says: "Cheney gives new
meaning to the
term revolving door. If he does not get elected president next,
I have no
doubt he will return to Halliburton when he leaves the White
House."
And Harvey Wasserman, author of The Last Energy War, says the
Brown & Root
contracts are a scandal. "The Bush-Cheney team have turned the
United
States into a family business. That's why we haven't seen Cheney
-- he's
cutting deals with his old buddies who gave him a multi-million
dollar
golden handshake," says Wasserman. "Have they no grace, no shame,
no common
sense? Why don't just have Enron run America? Or have Zapata
Petroleum
(George W. Bush's failed oil exploration venture) build a pipeline
across
Afghanistan?"
Jennifer Millerwise, a spokesperson for Cheney's office, denies
that there
was any contact help from the White House. "The vice president
did not
discuss this with anybody from Halliburton or any subsidiary
of
Halliburton. Nor does he comment on Halliburton's policies since
he doesn't
work there any more," she said.
The Business of War
Last year Brown & Root took in $13 billion in revenues,
according to its
latest annual report. Currently Brown and Root estimates it
has $740
million in existing United States government contracts, approximately
37%
of their global business, most of which are in addition to the
LOGCAP deal.
For example, in mid-November 2001 Brown & Root was paid
$2 million to
reinforce the United States embassy in Tashkent, Uzbekistan,
under contract
with the State department. More recently Brown & Root was
paid $16 million
to go to Guantanamo Bay, Cuba, in March 2002 to build a 408-person
prison
for captured Taliban fighters under a contract with the U.S.
Navy,
according to Pentagon press releases.
That's by no means all -- Brown & Root employees can be
found back home
running support operations for the U.S. Army in Fort Knox, Kentucky
to the
U.S. Naval Base in El Centro, California.
And it is snapping up contracts with American allies also --
in September
2001, the company signed on to a $283 million project for Russia's
Defense
Threat Reduction Agency to eliminate liquid-fueled ICBMs missiles
and their
silos. In November 2001 Brown & Root won a $100 million
order from the
Philippines to convert the former ship repair facilities of
the U.S. Navy
in Subic Bay into a modern commercial port facility and in December
it won
a $420 million contract from the British Army to support a fleet
of new
mammoth tank transporters, according to company press releases.
Brown & Root is no stranger to the business of war. From
1962 to 1972 the
Pentagon paid the company tens of millions of dollars to go
to South
Vietnam, where they built roads, landing strips, harbors, and
military
bases from the demilitarized zone to the Mekong delta. The company
was one
of the main contractors hired to construct the Diego Garcia
airbase in the
Indian Ocean, according to Pentagon military histories.
Running services at military camps is a relatively new chore
for Brown &
Root that began in 1992 when the Pentagon, then under Cheney's
direction,
paid the company $3.9 million to produce a classified report
detailing how
private companies (like itself) could help provide logistics
for American
troops in potential war zones around the world. (see related
article) Later
in 1992, the Pentagon gave the company an additional $5 million
to update
its report.
That same year, Brown & Root won its first five-year logistical
support
contract from the U.S. Army Corps of Engineers that would send
them into
work alongside G.I.s in places like Somalia, Haiti, Kosovo,
Bosnia, and
Saudi Arabia. The Balkan contract has been the most profitable
for Brown &
Root -- the General Accounting Office (GAO) estimates that the
company made
$2.2 billion in revenue during the U.S. military operations
there building
sewage systems, kitchens, and showers and even washing underwear
for the
20,000 U.S. soldiers stationed there.
Kudos from the Army, Criticism from Outside
Army staff and their supporters have nothing but praise for
Brown & Root.
The Logistics Management Institute, a military think-tank, claims
that
LOGCAP contractors employed 24 percent fewer personnel and were
28 percent
less expensive.
But other government agencies are more skeptical. "It is convenient
to
contract a lot of this work out. The problem is that the government
doesn't
do the best job of oversight," says Neil Curtin, director of
operations and
readiness issues at the defense capabilities and management
team at the GAO.
Policy analysts say that it is simply a matter of time before
something
goes wrong. "Suppose a local Afghani contractor gets kidnapped
or used for
mischief? This has not been thought through at the policy level
or opened
up for public debate," notes Thomas Donnelly, deputy executive
director of
the Project for the New American Century in Washington DC.
In fact some of the cost cutting is managed by hiring local
workers at
lower wages than U.S. soldiers would be paid, a controversial
practice that
has its drawbacks. In 1994 United Nations troops armed with
batons and tear
gas had to be brought in to quell protests by workers that Brown
& Root
dismissed at the end of its engagement in Somalia. In Saudi
Arabia, the
army was alarmed when it discovered that locally contracted
drivers were
firing up portable propane tanks to cook meals out in the desert
while
transporting high explosive ordinance weapons, according to
a student
report published by the Air University at Maxwell Air Force
base in Alabama.
Independent agencies are still skeptical. For example a February
1997 study
by the GAO showed that an operation that was estimated at $191.6
million
when presented to Congress in 1996 had ballooned to $461 and
a half million
a year later. Examples of overspending included flying in plywood
from the
United States at a cost of $85.98 per sheet (the cost in the
United states
was $14.06) and billing the Army to pay its employees income
taxes in Hungary.
A subsequent GAO report, issued in September 2000, noted that
army
commanders in the Balkans were unable to keep track of contracts
as they
were typically rotated out after six months, erasing institutional
memory.
For example the GAO pointed out that many of the Brown &
Root contract
employees were idle most of the time despite the fact that offices
were
being cleaned four times a day. The GAO also faulted Brown &
Root in its
over-zealous purchase of power generators at great expense and
employing
far more firefighters than necessary.
Allegations of Fraud
In February this year Brown & Root paid out $2 million to
settle a lawsuit
with the Justice Department, which alleged that the company
defrauded the
government during the closure of the Fort Ord military base
in Monterey,
California in the mid-1990s.
The allegations in the case first surfaced several years ago
when Dammen
Gant Campbell, a former contracts manager for Brown & Root,
turned
whistle-blower and charged that between 1994 and 1998 the company
fraudulently inflated project costs by misrepresenting the quantities,
quality and types of materials required for 224 projects. Campbell
said
that the company submitted a detailed "contractors pricing proposal"
from
an Army manual containing fixed prices for some 30,000 line
items.
Once the proposal was approved, the company submitted a more
general
"statement of work" which did not contain a detailed breakdown
of items to
be purchased. Then, according to Campbell, Brown & Root
intentionally did
not deliver many items listed in the original proposal. The
company defends
this practice by claiming that the "statement of work" was the
legally
binding document, not the original "contractors pricing proposal."
"Whether you characterize it as fraud or sharp business practices,
the
bottom line is the same, the government was not getting what
it paid for, "
explained Michael Hirst, who litigated the case for United States
Attorney's office in Sacramento. "We alleged that they exploited
the
contracting process and increased their profits at the government's
expense," Hirst added.
Meanwhile, Campbell's attorney, Dan Schrader, was pleased with
the
settlement but he wondered why the company was so eager to compromise.
"If
the company was indicted, I suspect that it might have been
far more
difficult for them to get new government contracts," he said.
Indeed the recently issued 2001 annual report says precisely
that, in its
notes on the settlement of the lawsuit: "Brown & Root's
ability to perform
further work for the U.S. government has not been impaired."
Adds Hirst:
"Brown & Root was very cooperative and eager to settle.
They said they
wanted to maintain a good relationship with the government."
Brown & Root will have a harder time milking the contract
in Afghanistan
because the government is now dispatching auditors from the
Defense
Contract Management Agency to monitor all purchases but it still
stands to
make at least a profit on whatever it can bill. The contract
allows for the
company to charge up to a 9% mark up on supplies.
And if the "war on terrorism" expands to the size of the Balkan
operations
that could add up to a few hundred million dollars in profits.
In addition
to the bases in Uzbekistan and Afghanistan, the Army recently
started
dispatching Force Provider units to the Manas airbase in Kyrgzstan,
as
recently as January 2002, to support up to 3,500 soldiers. Whether
or not
Brown & Root will follow them there, the Army has yet to
tell the public.
At the time of writing Brown & Root kept its mouth shut
about potential
work in Afghanistan or Uzbekistan. "Brown & Root has not
deployed nor been
tasked to provide support in either country," said Zelma Branch,
a
spokesperson for the company, refusing to give any more details
about the
current LOGCAP contract. When provided with evidence that the
company was
indeed going to both countries, she emailed this response: "We
can not
elaborate at this time. Recommend you contact the Army."
The Pentagon, on the other hand, is considering considerably
expanding the
role of the private sector to do a variety of services from
refueling
fighter jets and bombers in mid-air to running the missile tracking
systems.
Rumors are swirling that the Defense Security Cooperation Agency
(DSCA) is
considering hiring private contractors to train the new Afghan
police and
army, which it has done in the past in places like Croatia where
it hired a
private company to train the military.
David Des Roches, a DSCA spokesman, denied that the Pentagon
had a proposal
on the table at the moment but did not rule out the future possibility.
"A
lot of people have said, 'Ding ding ding, gravy train'. But
in point of
fact, it makes sense. They're probably better at doing these
sorts of
missions than anyone else I could think of," he said.
Bill Hartung of the World Policy Institute disagrees. "This
is a company
which has more experience with insider dealing and corruption
than with
efficiency, " he explained. "During the Second World War, there
was a
Senate committee on war profiteering. Personally I think we
should set it
up again and investigate Brown & Root."
* Pratap Chatterjee is a freelance journalist based in Berkeley,
California. In 1994-1995 he reported on the World Bank and the
International Monetary Fund for Inter Press Service, a Third
World News
Service, in Washington D.C.
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