Contractor Could Lose $400 million

Military contracting giant KBR Inc. could be docked up to $400 million for improperly using private security companies in Iraq, the company disclosed this week.

The Army has already said it withheld about $20 million in payments to KBR's parent company, Halliburton, because the company's subcontractors used private security contractors, including North Carolina-based Blackwater USA. Army officials have said that private security companies were not allowed under Halliburton's main contract in Iraq and that the military was to provide security.

The Army began looking into the use of private security firms by KBR's subcontractors after a congressional investigation sparked by a series of stories in The News & Observer. KBR has won billions in contracts to provide troops in Iraq with basic needs.

In its annual report to the Securities and Exchange Commission on Wednesday, KBR said the Army was continuing to review its contract and that it would begin withholding more payments unless the company "can provide timely information sufficient to show that such action is not necessary to protect the government's interests." If KBR fails, it could lose $400 million in Army payments, although the actual losses could be lower, according to the report.

http://www.truthout.org/docs_2006/030307A.shtml