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What would the U.S. military do without KBR, its largest logistical contractor?

That's not something the military ever wants to find out. The U.S. occupation of Iraq would collapse within days without KBR, which provides food, fuel, and potable water along with critical services ranging from complex engineering to cleaning out the port-o-potties.

And KBR knows it. A story on the front page of today's New York Times lays bare the leverage that KBR holds over the U.S. military.

In short, KBR can charge the U.S. government anything it wants under the implicit threat that the firm will halt logistical services to troops in Iraq. If the military doesn't pay up in full, KBR has warned, "it would reduce payments to subcontractors, which in turn would cut back on services."

That's according to Charles M. Smith, the senior civilian overseeing the multibillion-dollar contract with KBR during the first two years of the Iraq war. Smith, speaking out for the first time, said he was ousted from his job after he tried to question KBR's massive billing.

The Army itself admits to the Times that it really had no choice but to pay KBR.

"You have to understand the circumstances at the time," said Jeffrey P. Parsons, executive director of the Army Contracting Command. "We could not let operational support suffer because of some other things."


Smith said that he was forced from his job in 2004 after informing KBR officials that the Army would impose escalating financial penalties if they failed to improve their chaotic Iraqi operations.

As chief of the Field Support Contracting Division of the Army Field Support Command, he was in charge of the KBR contract from the start. Mr. Smith soon came to believe that KBR's business operations in Iraq were a mess. By the end of 2003, the Defense Contract Audit Agency told him that about $1 billion in cost estimates were not credible and should not be used as the basis for Army payments to the contractor.

"KBR didn't move proper business systems into Iraq," Mr. Smith said.

Along with the auditors, he said, he pushed for months to get KBR to provide data to justify the spending, including approximately $200 million for food services. Mr. Smith soon felt under pressure to ease up on KBR, he said. He and his boss, Maj. Gen. Wade H. McManus Jr., then the commander of the Army Field Support Command, were called to Pentagon meetings with Tina Ballard, then the deputy assistant secretary of the Army for policy and procurement.

After Smith was pushed out, the Defense Department hired a contractor to approve KBR's billing. (The department's own auditors had agreed with Smith that KBR was not properly documenting its billing.)

U.S.-paid contractors now outnumber U.S. troops in Iraq. Many contractors are recruited from poor Asian countries and paid far less than Americans would demand.

We've heard before about the "profound systemic problems" with KBR's billing. But Smith's account is the first time we've heard about an implicit threat to cut off services to troops.

KBR doesn't have the best record of providing troops' services. The company was criticized in March for making troops sick by failing to provide clean water. And top military officials have given false statements to Congress to quell controversy over the company.

But there's not much the military can do about it. Installing another company with the infrastructure inside Iraq needed to provide the same services would be an all-but insurmountable undertaking. So Smith's account should really come as no surprise.

"In the end," Mr. Smith said, "KBR got what it wanted."

56 Comments

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Kick KBR out, and the whole occupation of Iraq ends overnight.

Watch "No End In Sight" and weep.

That first link for NYT goes to a story about a TX court denying a stay of execution. That intended???

I believe this is the correct link.

Mind-blowing story.

We are finding out the details of why we went to war. KBR, Harliburton, BlackWater are the true beneficiaries of our dear soldiers dying. And they try to give us that BS of taking democracy to the middle east.
Why haven't they sent an army of even 5000 to Darfur where millions are displaced, dead and raped?

It's very disgusting to see that McWar is so close in the polls w/ Obama. There are still idiots out there that will vote for him even after reading this.. Scary thought!

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In time to come, these corporations will be hired by the American government/military and patrolling the streets of America against American citizens.

It's coming.

You don't have to be a blind conservative not to see it, just an ignorant one to deny it.

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Holy fucking shit. Why isn't such a threat by KBR regarded (and prosecuted) as treason?

They used this as an excuse to loot the treasury. Unreal.

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Stuff happens.

You fight a war with the corrupt, criminal thugs that you have, not the ones that you wish you had.

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perfect

Exactly. KBR, TAMERLANE, you get the idea.

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So why hasn't the Pentagon made some effort to foster competition with KBR, instead of constantly handing out no-bid contracts to them? Shouldn't it be considered a threat to national security to have the armed forces so completely dependent on a single private corporation?

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How right you are. A private firm holds our troops hostage by threatening to cut off food, water and services, and DoD has no recourse but to pay the ransom?

PEACE

It's OK, though . . . the CEO, COO, and CFO of KBR all have their American Flag lapel pins on, so we know they're patriotic.

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And those pins are going for a low, low $5000 each!

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Two words: Dick Cheney.

Once upon a time, militaries, including ours, provided their own "food, fuel, and potable water along with critical services ranging from complex engineering to cleaning out the port-o-potties."

It's like this Administration only had one criterion for making military decisions. If asked "should we do x?", the civilian leadership asked, "I don't know. Tell me, are there were patently obvious disastrous consequences that will occur within a timeframe of a few years?" If the answer was, "yes sir, there certainly are," then the answer was "Great! Full speed ahead!"

As Hmmmm noted just above your post, two words:

Dick

and

Cheney

Josh, excellent Monty Python reference in your main-page post! :D

It is classic Republican trickle down economics: Redistribution of wealth from the middle class tax payer to the wealthy corporate elite so they can pay off their Chinese loans while creating more jobs overseas.

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Just another reason to end the war. We are being blackmailed, hijacked, and ransomed by our own corporate giants.


Fund KBR and the war continues.

Buyout KBR and the war ends.

I wonder if they include the string that pulls Dick Cheney's mouth in the buyout deal?

How "secure" is a nation who is this reliant on "contractors"? The armed services can't feed, and supply themselves? Considering the amount of money that is spent on the military in this country they (the armed services) should be embarassed and humilated. Even the most socialist of entities (the volunteer army) is nothing more than another system to line the pockets of a select few fat cats and bilk the tax payers of massive amounts of money. Just another example that our system is broken and needs to be bulldozed and a new foundation established. Time for a new New Deal.

The funny thing is that Halliburton recommended all this "privatization" bullshit- to save the military money.

Odd how that isn't working out isn't it?

but, but, but... the Free Market cures all ills!

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Lest we forget, the US military's current dependence on outside contractors was dreamed up by Dick Cheney way back when he was SecDef. Then he went into the private sector, at Halliburton (which owns KBR), from which he continues to draw a paycheck.

It would be foolish to look at it only in these terms, but the Iraq war has been an excellent make-work project for Cheney's company.

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If this had happened during WWI, Harry Truman would have jailed the CEO and every executive who had anything to do with this and thrown away the cell keys. The criminal malfeasance and coporate profiteering planned, executed and perpetuated by the Bush administration is the greatest financial rape of the American taxpayer this country has ever seen. Sustaining our country's military preparedness has knowingly been made dependent on profit making whores who aren't just betraying our military, they are betraying our nation's security in a manner that is not only unconscionable, it is treasonous! The fact that Bush/Cheney set all this up makes them even more treasonous than the greedy rotten bastards at KBR.

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I meant WWII!

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And herein we have the ultimate demonstration of the wisdom of privatizing vital public services. At some point, it always seems to end up being extortion.

Lest we forget the KBR is now headquartered in Dubai, UAE.

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Privatization, carried to its ugly extreme.

Aren't privatization and outsourcing of government services wonderful? Those Republicans are so clever!

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Osage, the entire "defense" establishment in our country is a make work project to keep the wealthy becoming ever more wealthy. We have spent nearly a trillion dollars (that is 1000 times bigger than a billion, which itself is 1000 times bigger than a million) on Bush's Iraq crimes. Virtually all of that went to the "defense" industry in this country. The part that didn't go there, went to Cheney's cronies and their personal crime syndicates.

We don't need all of this "defense". There isn't a single enemy of our country in the whole world that could begin to mount an attack on us. No other country in the world spends even a fraction of what we do on their defense. Do you see any other countries being attacked as a result of their weak defenses?

Instead look out for the 'rot from within' that did away with the "mighty" USSR.

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Make Dick Cheney and all of the the KBR executives shower in the foul water that gave the soldiers skin rashes. Better yet, make 'em drink it.

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When the grand empires of the past have shifted to dependence on mercenaries, they were all on their last legs.
Who will do the hiring when China invades in 40 or 50 years?

What a clusterfuck. That's the best word. The government, the Pentagon, US business. All are to blame on this.

If things get too bad in Iraq, I can see KBR bugging out, and our guys being left high and dry there. We'd have to fight out way out from Baghdad north to the Kurds. The poor bastards south of Baghdad would have to head for Kuwait, and I bet we'd lose hundreds of troops.

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In January, President Obama and the Democratic Congress should put an immediate hold on further payments to contractors until they provide an account of how all funds were spent in Iraq and Afghanistan. The honest contractors (assuming there are any) will be able to comply - those who cannot will have their contracts canceled. Then when KBR, Blackwater, etc. pack up and leave, there will be no alternative but to bring the troops home; we can't leave them unsupported.

and yet if the government says to KBR "you will continue to provide services for our troops, and better than they are now, at the prices we mutually agree on; or not only are you not permitted to contract with the U.S. government or businesses again, but should you or anyone from your firm set foot on U.S. soil again they will be detained and put on trial for extortion", i get the feeling KBR wouldn't be so high-handed.

rolling over in the face of corporate greed is what has gotten us in this situation to begin with. someone, somewhere, in a position of authority in our government has to break the cycle. Bush and Co. absolutely will not, that much we can count on.

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Enron is KBR's hero. Make sure they get all of KBR's investigation files and records in the next building they decide to destroy.

Our own military is being blackmailed by a foreign group of underpaid employees with profiteering bosses. Just pathetic.

Wouldn't it be cheaper in the long run to pay the troops more money to cover meals and cleaning services on their own rather than the billions it wastes on KBR and Blackwater. Stop privatizing our democracy and our government. Stop selling us off to the lowest bidder.

It is interesting the DoE, NASA and DoD can replace service companies onshore but can't do it offshore. Case in point, UC Berkley has lost many of its contracts for Sandia labs through a bid (ha) process. NASA bids for major maintenance and engineering operations for its many facilities such as Ames Research Center. I was going to say it was a big mistake to outsource all the services that KBR et al provide, but as others have posted here, it was deliberate. Whether the depletion of and hamstringing of auditors was also deliberate, only time will tell.

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Yeah, and you go to take a KBR shower and get electrocuted because they have the plumbing accidentally charged. Then KBR tells the grieving family that the service member took an electrical gizmo into the shower, that is why he died.

There have been 12? fatalities already just in the showers
http://seattletimes.nwsource.com/html/nationworld/2004294040_iraqshock20.html

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Lest we forget the KBR is now headquartered in Dubai, UAE.

That's true.
But keep in mind, now that KBR is in UAE, there's no SCOTUS issues with using GBUs on them.

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First, we need to void the contract with KBR. That will force the Bush administration to bring the troops home. Then we need to undo all the damage that conservative Republicans have done over the years by farming out our military supply lines to giant corporations. As part of this process, the executives of both KBR and Halliburton (including Dick Cheney) should be tried for treason based on the charges in this post. Holding the US military hostage for financial gain in a time of war is just that...treason.

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I've got a simple idea: Draft KBR.

From the CEO to the last laundry worker, draft them into the newly invented US Army Support Corps. All are subject to US military law, all are paid on military scale, all are in for the next 2 years minimum, and subject to whatever the term of art is for the perpetual servitude the Dick and the Bush are subjecting our REAL soldiers to, tour after tour.

No, it's not nationalization: it's a choice between patriotic service and treason for war profiteering.

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If Corporations are considered persnos for purposes of determining their rights before the law, I have no problem drafting corporations to serve in the Military. While we're at it, lets draft ExxonMobile as well.

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The outrage continues.....

Isn't it time we all realized that it is THEIR world. We just live in it.

But, don't think this is new - (Lyndon Johnson had close ties with KBR, in the '60s; and KBR had a support role in Vietnam). It's just more blatant, now.

"Earmarks" are bad, because money is spent inside this country. But paying Billion$ more in tribute to blackamiling no-bid contractors is the normal course of business (war, disasters, etc).

This is America, the super power? Cheney was right in the '90s when he made the case for not going into Baghdad. Then he becomes VP and is all gung ho to invade Iraq? And what changed in between? Halliburton.

Extortionate tactics against the Army and to the detriment of our troops were detailed in the book Betraying Our Troops: The Destructive Results of Privatizing War, by Dina Rasor and Robert Bauman. Note -- please purchase books from bn.com, which makes more progressive political contributions than Amazon.

In 2005 I stumbled upon a meeting of KBR, Kellogg Brown & Root, Halliburton, KerMcghee and BANK OF AMERICA. I wanted to just sream "Shame on You" as they partied and celebrated at the Boca Raton Resort and Club in Boca Raton, Florida.

People were laughing at a large gathering, perhaps thirty at what had to be $300 a plate. I was amazed at the sheer arrogance, the sense of entitlement and detachment from everything going on around them. Five US Marines died this particular day. And when I tell you these people did not care...THEY DID NOT CARE. They do not care about anything or anybody other than themselves and their pursuit of money.

Since then Bank of America has reported "better than expected" earnings in their equity department, is lobbying for a change in the banking law to allow for expansion beyond 10% of branches in the country and is so cash rich that it can buy Countrywide Financial.

This is without a doubt the BIGGEST problem with the Bush adminisration and will be exactly the same big problem with McCain.

AND it's not just KBR - it't the whole unbid contract mess in Iraq - it's plain and simply war profiteering big time.

It's not ONLY completely non-consevative - it's completely criminal so why doesn't Nancy Pelsoi put impeachment BACK on the damn table?

Josh Marshall should keep these unbid contract BS front and center like he did with the fired US attorneys thing - because the MEDIA doesn't care about this very blatant evidence of GROSS war-profiteering going on in Iraq.

The NYT, WP, the TV media, they are hardling SAYING a damn word about it and yet we have those people telling congress on C-Span so truly horrible stories, one horrible act right after another about these unbid contractors.

This is why I don't buy the damn newspaper any more - I hope they go bankrupt because they are NOT doing their damn jobs anymore. They don't seem to be in for the money but the mis-information business.

If KBR isn't willing to pay back the over-charges, the United States government should take it out of their corporate hide and absorb the company wholesale.

It's based out of the UAE, sure, but how many of the executives live there? Where are the main offices? What is the citizenship of the management directing operations with the U.S. Armed Forces?

This would solve three problems with one move: re-integrate support services into the military, recover stolen U.S. money, and punish the perpetrators of what amounts to treason.

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U.S. govt has given KBR a monopoly without subjecting them to monopoly regulation.

Result: extortion.

Why is anyone surprised?

It's actually much much worse than is portrayed in this article. I worked as a contractor for KBR for three years and witnessed some pretty sketchy stuff. At the camp in Mosul, the sewage trucks would back right up to the river and dump what they had just sucked up from the porta-potties. Another time while on a fuel convoy, we needed to empty out the tanks so we could re-load with a different type of fuel. So the convoy-commander had us pull over on the side of the highway and just open up our outlet pipes. We were then told to drive along close to the side of the road. Hundreds of gallons of raw fuel (from multiple trucks) poured right out onto the soil.

Now these were just a couple of the shocking things I experienced myself. I can guarantee that much worse happened all over the place. It is still the case that the US can do pretty much whatever it wants anywhere in the country. The Iraqis know who is really running the show and just let us do what we want.

Yep, there're no issues privatizing government, except stuff like this of course.

I don't know why Repugs are really ashamed of themselves. KBR? What a maggot org.

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