Vice (23 page)

In the
run-up to
the Iraq War, the Bush-Cheney administration also turned to Halliburton. KBR was paid $1.9 million to draw up a contingency plan to extinguish the oil well fires Saddam Hussein's troops were expected to ignite. The proposed
Restore Iraqi Oil (RIO)
plan was worth as much as $2 billion to the company that would win the contract. The Defense Department was inviting Halliburton to follow the course it charted ten years earlier: Draw up a contingency plan on which contractors would bid, then join the competition in bidding on the contract. If so, the process put Halliburton squarely in conflict with procurement guidelines at the U.S. Army Corps of Engineers, which was issuing the big Iraq contracts. USACE (and most other) procurement protocols do not allow a company that drafts a contingency plan to bid on the contracts the plan creates. It's a logical prohibition: knowledge of the scope and budget of a plan provides a competitive advantage. Yet Pentagon officials waived the rule. Halliburton drafted the contingency plan, then bid on the contract.

That odd arrangement caught the attention of Bunnatine Greenhouse, the PARC, or Principal Assistant Responsible for Contracting, at the Corps of Engineers. It was not only that KBR was bidding on a proposal it had drafted; "Bunny" Greenhouse sensed something more was afoot when a large contingent of Halliburton contractors filed into a meeting at which the contract was to be discussed. The date was February 26, 2003. The United States was very close to invading Iraq. And the Pentagon secure room where the bid was to be discussed was crammed full of Halliburton executives. Greenhouse was so disturbed by the presence of KBR executives that she discreetly asked the lieutenant general chairing the meeting to order them to leave the room.

Greenhouse agreed to accept the
"compelling emergency"
logic, which would permit awarding the contract to the contractor that had prepared the contingency plan. The compelling emergency was evident. Two days earlier, the United States,
Spain
, and Britain had submitted a resolution to the U.N.
Security Council
asking for authorization to use military force in Iraq. But Halliburton was being awarded a five-year sole-source contract worth $7 billion. Greenhouse wasn't buying into a five-year emergency with a guaranteed 2 to 5 percent profit margin. She insisted the contract be limited to one year, which would allow the government to evaluate Halliburton's performance and possibly reopen the contract for competition at the end of the year.

She was the lone dissenter in the room and knew she couldn't stop the contract. But the five-year term bothered her enough that she included an addendum to her signature, as she had done on other contracts about which she had reservations. "I caution that extending this sole source effort beyond a one-year period could convey an invalid perception that there is not strong intent for a limited competition." The one-line protest, squeezed in between her signature and that of Lieutenant General
Robert Flowers
, would ultimately, it is alleged, cost Greenhouse her management position. After she added that cautionary note to the KBR contract, Greenhouse received the first negative evaluation in her tenure at the Corps of Engineers, where she had climbed from a lowly G-5 to the apex of the management pyramid. Following the poor evaluation, she was demoted, stripped of her oversight responsibilities, and moved into a small office. Rather than dismiss her for challenging the contract, her supervisors claimed Greenhouse was not doing her job.

Bunny Greenhouse
didn't know just how compromised the procurement process was—even if her instincts were right. And she was no match for Michael Mobbs, who was moving the contract through the bureaucracy. Mobbs is an example of the hybrid vigor that results from the Bush-Cheney administration's inbreeding. In the late eighties, Mobbs was at the
Feith & Zell
law firm, where Bush's future undersecretary of state Douglas Feith was a name partner. Mobbs left Feith & Zell to work as a transactional lawyer in Moscow in 1990, when Western business interests saw Russia as a perpetual boom economy. When the inevitable bust came at the end of the 1990s, Mobbs was part of the great American business-class flight from Moscow. He got back to the United States as George Bush and Dick Cheney were staffing up for war and got a DOD gig because his former colleague from Feith & Zell brought him in. At the time Halliburton's deal with the Army Corps of Engineers was consummated, Mobbs was a special assistant to Undersecretary of Defense Feith.

Unlike some of the administration's other crony hires, Mobbs was not without qualifications. He is an accomplished international trade lawyer with experience in arms control negotiations in the Reagan administration. He is fluent in Russian, and by all accounts a genuinely decent guy. If he was ill suited to the Iraq civil administration director's position Feith eventually slid him into—a failed performance in a hopeless situation—at least he was adept at negotiating contracts, such as Halliburton's deal with the Corps of Engineers. His pedigree and CV—undergraduate degree at Yale, University of Chicago Law School, undersecretary of state during the Reagan administration, partner at Feith & Zell, high-profile positions at several other law firms—made him a formidable adversary for Bunny Greenhouse. Greenhouse grew up in a rigidly segregated Louisiana cotton town and worked her way through the bureaucracy to become the first African American to have the final say on procurement at the Army Corps of Engineers— a civil servant earning $137,000 a year. Mobbs is part of the permanent government, men who move effortlessly from the public to the private sector and are always at ease with their authority. (Greenhouse's story, however, might hold considerable appeal for the jury hearing her whistleblower lawsuit in Washington, D.C.—where even the most skillful practitioners of voir dire can't purge juries of African Americans and bureaucrats.)

Bunny Greenhouse had no idea that the Halliburton contract was a done deal when she sat down in that Pentagon secure room on February 26. An e-mail written by a Corps of Engineers official discloses that the process had already been completed by February 5. The names of the correspondents are redacted, though it was later established that one of them was
Stephen Browning
, director of the South Pacific Division of the Army Corps of Engineers. The language indicates that the contracting decisions had been run through Cheney's staff, with the president standing in line to sign off on whatever was acceptable to the Office of the Vice President.

Accompanied OHRA [Office of Reconstruction and Humanitarian Aid] leader to get release of declass and authority to execute RIO [the Restore Iraq Oil program]. DepSecDef sent us to UnderSecPolicy Feith and gave him authority to approve both. Douglas Feith approved, contingent on informing the WH [White House] tomorrow. We expect no issue, since action has been coordinated with VPs office.

To keep pace with the administration's relentless war schedule, Mobbs had folded the Iraq contract into something known as the Logistics Civil Augmentation Program. LOGCAP is based on the system Halliburton devised in 1992, when Cheney was in charge at Defense. It is an open-ended monopoly contract through which a private company becomes the government quartermaster, providing services to the U.S. military. The Pentagon had rebid it again in 2001, and Halliburton/KBR had won a ten-year LOGCAP contract to supply meals, mail, and laundry service to troops in the field. Using the contract for Iraq oil infrastructure work and extinguishing oil well fires was a stretch. The career staff counsel at the Army Materiel Command objected, as did the deputy counsel to the Army. The Defense Department's general counsel, who answered to Doug Feith, overruled both lawyers. Feith was orchestrating the entire deal from the top.

There was even a backstory to the backstory. At a "Deputies' Committee" meeting of top level administrators in October 2002, Mobbs told the vice president's chief of staff, Scooter Libby, that Halliburton was getting the sole source contract. Mobbs had already contacted three companies— Halliburton,
Bechtel
, and Fluor—and determined that all three were capable of completing work in Iraq. He decided that Halliburton was better positioned because it was familiar with the military's operational plans. The entire Restore Iraq Oil deal was done before it was announced. The February 26, 2003, meeting Bunny Greenhouse had attended in a secure room at the Pentagon was a sham. The decision had been made at least four months earlier—with the assent of the vice president's chief of staff.

There was even a role for Paul Wolfowitz, the deputy secretary of defense and the principal architect of the Iraq War and the larger plan to remake the Middle East. Wolfowitz, who first handed Secretary of Defense Cheney the Iraq smackdown plan in 1992, wrote a December 2003 order eliminating competitive biding from non-coalition partners overseas for $18 billion in Iraq reconstruction projects, essentially shutting out Halliburton's foreign competitors by restricting contracts to members of Bush's "Coalition of the Willing." With Libby, Wolfowitz, and Feith's former law partner Michael Mobbs connected to the
Halliburton deal
, contract talks might as well have been done at a neocon poker night.

The Corps of Engineers made one attempt to create a bidding process—or at least the illusion of a bidding process. The agency was responding to prodding by Henry Waxman and embarrassing accounts of Halliburton's cost overruns under the existing contract. Five months after the February meeting that allegedly cost Bunny Greenhouse her position, the Corps of Engineers reopened some of the Iraq oil contract work for competitive bidding, informing contractors that $2 billion in work would be made available. The bidders' conference was held in Dallas on July 14, 2003, and 184 contractors signed in. "It was a farce," says
Sheryl Elam Tappan
, who prepared Bechtel's proposal. "The Iraq work plan was posted on the Internet on a Friday afternoon. I read it Saturday morning and it was crystal clear to me that it was all signed by U.S. government and Iraqi Ministry of Oil people who had agreed to commit to Halliburton." Tap-pan, a consultant who had written contract proposals for Bechtel for twelve years, was so offended by the process that she wrote a self-published (and career-ending) book entitled
Shock and Awe in Fort Worth.
In her book, and in an interview, Tappan makes a good case that the game was over before it began. Her title itself poses an interesting question. Why was such a big contracting process run out of the Corps's regional offices in Fort Worth instead of Washington?

As bidders gathered in Dallas, Halliburton was already on the ground in Iraq, with more work in the pipeline—as a result of the contract that Bunny Greenhouse had protested. Tappan ran the numbers on a ten-page spreadsheet and concluded that 82 percent of the $1.144 billion for which Bechtel executives believed they were competing was already assigned to Halliburton by default. The work in Iraq was scheduled to be completed by December 2004. The Corps of Engineers wouldn't announce "the two winners" to emerge from the Dallas conference until October 15. In the end, it didn't wrap up the process until January. Many of the projects that bidders believed they were bidding on were already under way or even completed.

Tappan wasn't the only skeptic. As the Dallas meeting concluded,
Sandy Davis
from Fluor Engineering stood up and raised the question most in the room wouldn't touch:

Just for the record, the last question. One of our worthy competitors you already have under contract over there and have had for a number of months. It happens that they've already performed all of the tasks that you ask for in the sample projects and can pull that information obviously off the shelf. So the direct question is, has the government performed a conflict-of-interest determination and convinced yourself that there's no competitive advantage to the incumbent?

The Corps of Engineers' lawyer responded that
Team RIO
, representatives of the agencies working on the Iraq oil projects, had written the contract in Baghdad and vetted it for conflicts. He didn't mention that Halliburton had participated in the Team RIO planning. Tappan, however, figured that out. She followed a paper trail to a Baghdad meeting held July 6, a week before the Dallas bidders' conference. Of the 184 competitors in the room in Dallas, only one had been in the room in Baghdad. Halliburton's RIO contract director had flown in from Baghdad to attend the Dallas meeting. "Nobody in that room believed the process was fair," Tappan says. "But contractors are like a big dysfunctional family. They keep quiet and take the abuse. If they get a reputation for speaking out in public, they fear they will lose work later."

Tappan called the head of the sales division at Bechtel and suggested they withdraw because the game was rigged. Bechtel withdrew its bid, though it competed for other work in Iraq. Bechtel's withdrawal from a bidding process in which they already had a substantial investment is an indictment of the system the Corps of Engineers was using. An executive at another company involved in the bidding agrees. "It was evident that we were competing for far less than what the Corps of Engineers said was available," he says. Tappan says the public blames the contractors, adding that "the government is supposed to manage and oversee the process."

In the three years since Bechtel and
the
others got shut out in Dallas, KBR emerges as the biggest and perhaps the only winner in the disastrous war in Iraq. The victory might be short-lived, not unlike the vice president's approval ratings. The war has obviously been better to KBR than it has to the vice president, whose public support is somewhere under 20 percent. But because the war didn't go quite as Cheney intended, when he predicted Iraqis would be greeting Americans with flowers, KBR's revenue stream is drying up. American and Iraqi money intended for rebuilding Iraq has been siphoned off to provide security in a
civil war
precipitated by the American invasion. KBR's declining fortunes are spelled out in its 2006 prospectus: