Nation Builders for Hire

[Yoshie Furuhashi <furuhashi.1@xxxxxxx>]

*****   New York Times   June 22, 2003
Nation Builders for Hire
By DAN BAUM

...Representative Henry Waxman, a Democrat from California, is in
high dudgeon lately, suggesting that Vice President Dick Cheney's
former chairmanship of Halliburton gave KBR the inside track on the
Iraqi oil-fields contract, which could be worth as much as $7
billion. But the reality is subtler: KBR didn't need any help. It is
by now so enmeshed with the Pentagon that it was able essentially to
assign the contract to itself.

KBR was founded in 1919 as Brown & Root, and quickly acquired a
reputation for taking on the kinds of projects that tend to recall
the building of the pyramids. It constructed the gigantic Mansfield
Dam in Texas, New Orleans's 24-mile Lake Pontchartrain Causeway,
Colorado's Eisenhower Tunnel and the Johnson Space Center, among many
other mega-projects. Halliburton acquired it in 1962, and in 1998
merged it with the petrochemical company M.W. Kellogg to form Kellogg
Brown & Root. KBR now accounts for almost half of Halliburton's
annual $12.5 billion annual revenue.

The Army says KBR got the Iraqi oil-field contract without having to
compete for it because, according to the Army's classified
contingency plan for repairing Iraq's infrastructure, KBR was the
only company with the skills, resources and security clearances to do
the job on short notice. Who wrote the Army's contingency plan? KBR.
It was in a position to do so because it holds another contract that
is poorly understood yet in many ways more important, and potentially
bigger, than the one to repair the oil fields: the Logistics Civil
Augmentation Program, or Logcap, which essentially turns KBR into a
kind of for-profit Ministry of Public Works for the Army. Under
Logcap, which KBR won in open bidding in 2001, KBR is on call to the
Army for 10 years to do a lot of the things most people think
soldiers do for themselves -- from fixing trucks to warehousing
ammunition, from delivering mail to cleaning up hazardous waste. K.P.
is history; KBR civilians now peel potatoes, and serve them, at many
installations. KBR does the laundry. It fixes the pipes and cleans
the sewers, generates the power and repairs the wiring. It built some
of the bases used in the Iraq war.

Writing the oil-field contingency plan was only one of a thousand
things KBR did for the Army last year under Logcap. (KBR has a
similarly broad contract with the Navy, under which it built, among
other things, the cages for suspected terrorists at Guantanamo Bay.)
The technical term for Logcap is ''cost-reimbursement,
indefinite-delivery/indefinite quantity,'' or ''cost-plus,'' meaning
KBR spends whatever it believes necessary to get a job done, then
adds from 1 to 9 percent as profit. There's practically no limit on
how lucrative Logcap can be, and as the awarding of the Iraqi
oil-field contract -- by KBR, to KBR -- demonstrates, Logcap can
become a generator of yet more contracts. Nothing like it exists
elsewhere in government. That KBR wrote the oil-field plan wasn't
considered by the Army a disqualifying conflict of interest -- in
fact, just the opposite. ''They were the company best positioned to
execute the oil-field work because of their involvement in the
planning,'' said Lt. Col. Gene Pawlik, an Army spokesman.

The military has relied on civilian contractors ever since George
Washington hired farmers to haul supplies for the Continental Army,
and the use of mercenaries is as old as time. But the KBR-style
blending of corporations into the fabric of the military is
relatively recent. Its genesis is one of the unsung but seminal
ideological documents of the Reagan era, a revolution-on-paper that
goes by the dry title Circular No. A-76. Issued in 1983 by the budget
director, David Stockman, A-76 mandates that government should ''rely
on commercial sources to supply the products and services the
government needs.''

Circular No. A-76 wasn't written specifically for the Defense
Department, and the military was slow to adopt the approach. It took
the end of the cold war for the Pentagon to discover the benefits of
outsourcing. The times demanded that the military shrink -- remember
all the talk about a ''peace dividend''? Oddly, though, the end of
the cold war uncorked a froth of conflicts from Africa to the Balkans
that the military had to monitor and, in the case of the former
Yugoslavia, fight. By one count, the Army has deployed soldiers more
than three times as often in the 14 years since the cold war ended
than in the cold war's four-decade history, even though it is today
down to only two-thirds the size of its cold war peak.

Downsizing the military not only meant doing more with less; it also
meant that a lot of former soldiers, sailors, airmen and officers
were suddenly on the street looking for the kind of work for which
their particular skills would be valuable. The Pentagon still needed
those skills. So the downsized warriors joined a constellation of
corporations that sold those skills -- everything from data
processing to interrogation to bomb disposal -- back to the military
at private-sector prices.

In 1992 the Defense Department, under Dick Cheney, hired Brown & Root
to write a classified report detailing how private companies could
help the military logistically in the world's hot spots. Not long
after, the Pentagon awarded the first five-year Logcap -- to Brown &
Root. Then Bill Clinton won the election, and Cheney, in 1995, became
C.E.O. of Halliburton, Brown & Root's parent company. A lot of
Halliburton's business depends on foreign customers getting loans
from U.S. banks, which are in turn guaranteed by the government's
trade-promoting Export-Import Bank. In the five years before Cheney
took the helm, the Ex-Im Bank guaranteed $100 million in loans so
foreign customers could buy Halliburton's services; during Cheney's
five years as C.E.O., that figure jumped to $1.5 billion.

''Clearly Dick gave Halliburton some advantages,'' a Halliburton
vice-president, Bob Peebler, told The Chicago Tribune in 2000.
''Doors would open.''

Doors continue to swing freely between the corporate boards of
companies like KBR, whose livelihood depends on U.S. energy and
military policy, and the upper echelons of government, where those
policies are set. In addition to its connection to Dick Cheney -- who
as vice president continues to be paid ''less than $180,000 a year''
in deferred compensation by Halliburton, according to a company
spokeswoman -- Halliburton has on its board former Secretary of State
Lawrence Eagleburger, who also sits on the board of Phillips
Petroleum alongside a former chairman of the Senate Select Committee
on Intelligence, David Boren. Among the vice presidents of Booz Allen
Hamilton -- another does-everything company that has received
millions in military contracts -- is the former Director of Central
Intelligence James Woolsey. Of the 30 members of the Defense Policy
Board -- the influential Pentagon advisory panel from which Richard
Perle was recently forced to resign -- at least nine are directors or
officers of companies that won $76 billion in defense contracts in
2001 and 2002, according to the Center for Public Integrity. Lieut.
Gen. Jay Garner, who served as chief civilian administrator of Iraq,
ran a subsidiary of L-3 Communications that makes missile systems
used in the Iraq war; and L. Paul Bremer III, who took over from
Garner, was plucked from a new unit of the insurer Marsh & McLennan
that was created a month after 9/11 to profit from the new concern
over catastrophic risk.

''I am unabashedly an admirer of outsourcing,'' Army Gen. Barry
McCaffrey told The Dallas Morning News three years ago. ''There's
very few things in life you can't outsource.'' McCaffrey now serves
on the boards of the weapons makers Raytheon Aerospace and Integrated
Defense Technologies, among others.

It's a relatively small club that has both guided U.S. military,
energy and Middle Eastern policies over the past three decades and
then run the corporations that benefit from those policies. And it's
a club that had a long history with Saddam Hussein. A sheaf of
declassified 1980's State Department cables demonstrate that in 1983
Secretary of State George Shultz -- former president of Bechtel --
sent Donald Rumsfeld to meet personally with Saddam Hussein several
times, in part to promote an oil pipeline to the Red Sea port of
Aqaba. (The accompanying State Department photo of the two men warmly
shaking hands is startling, given the recent vitriol between them.)
In the midst of negotiations with Rumsfeld, Hussein used poison gas
against the Iranian Army. While cables demonstrate the State
Department discouraged this, a memo to Eagleburger, then the under
secretary of state, noted it may have been American firms that sold
Hussein the gas, and outlined the need ''to avoid unpleasantly
surprising Iraq'' with public statements.

By July 2000, Cheney claimed on ABC's ''This Week'' that neither
Halliburton nor its subsidiaries dealt with Iraq at all. ''Iraq's
different,'' Cheney said at the time. ''I had a firm policy that we
wouldn't do anything in Iraq, even arrangements that were supposedly
legal.'' But in fact from 1997 to 2000, when Cheney was running
Halliburton, two of its subsidiaries sold Saddam Hussein's government
a total of $73 million in oil-field supplies. The deal didn't violate
U.S. sanctions because the subsidiaries, Dresser-Rand and Ingersoll
Dresser Pump Company, were foreign.

KBR/Halliburton, then, has rounded the bases when it comes to Iraq.
It got rich doing business with Iraq, it got rich preparing to
destroy Iraq and it's now getting rich rebuilding Iraq....

[The full text of the article is available at
<http://www.nytimes.com/2003/06/22/magazine/22BROWN.html>.]   *****
--
Yoshie

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