Missing the Halliburton Story

[From Katrina, currently in Iraq, doing contractual oversight work, including billing reviews, for a U.S. contractor rebuilding Iraqi water, oil, electrical, and irrigation systems at waterside facilities and branch systems.]

Take for instance this delectable write up from the Wall Street Journal on Halliburton.

Now, I know what it actually means. I've got plenty to do on behalf of the government and Halliburton down the line. But so does Halliburton, and for that matter, the Pentagon. I love 'em, but of everyone involved here, the DOD is the most notorious for not having their ducks in a row. That means that their own internal structure is horribly slow in reporting their own contracts and change orders.

The military just moves, expects everyone to respond immediately, then two years later gets around to making a note of their own changes to their own bean counters. Throw in associated work from other US agencies and you've got even more to deal with. The reason doing business with them is so difficult, is because you're basically doing half of their work for them. So while I expect some cost overruns to be declined, I firmly expect the majority of charges to be eventually accepted.

I must compliment the Journal on at least working some detail into the story, though judging from their own words, the emphasis was mostly on getting a story first. What is going unmentioned though, is perhaps the most important part of the whole story. While much is made of KBR's estimating, the reporter fails to point out what cost basis the Pentagon is comparing KBR's estimates to. In fact, the primary source for these costs comes from KBR itself.

Pentagon audits for most projects largely consist of producing pricing estimates from other suppliers after the fact and then comparing them to those actually used. This would be a little like purchasing a car from an automotive dealership based on his price quote, taking delivery, then returning to the dealership later and refusing to complete payments because you saw the same car at another dealer for less, and blaming it on the dealer. Strange, but this is exactly how it works.

The Pentagon doesn't have to delve into why one supplier costs less than another, or even if the cheaper one could have actually delivered the product as specified. The burden for that falls on the contractor. It's a little like going to court to get paid, and is one of the reasons why most companies don't, and won't do business with the US government. The money is good enough. But you're saddled with more than just the normal expenses of running your own company. You're running part of the government as well, and you're supposed to be doing that part for nothing. (Which is exactly why people hire the company I work for)

On the good side of things, Halliburton is a much better-run ship than is the US government. On the bad side, the complexity of the contractual relationships within various departments of the US government, Halliburton, its subsidiaries, and assorted contractors, as well as newly created contractual agreements modifying those created during the term of the Coalition government, mean that details will take substantial time to work out.

The point is, Halliburton = Cheney, so Halliburton + money question = great political pile-of-doo story.