The Observer
Sunday September 11, 2005
All eyes on Halliburton as contacts turn into contracts
Reconstruction work after Katrina is going to be costly - and
highly lucrative.
Oliver Morgan reports
Laptop Battery With the floodwaters still high in New Orleans last week, with
25,000 body bags on their way to the city, with the Gulf of Mexico
oil industry crippled - 160 platforms and 16 rigs still evacuated,
oil refineries shut down - there was one group of people who,
nevertheless, could see some good coming out of the wreckage. Who?
Halliburton shareholders.
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Thinkpad The Houston-based company - once headed by vice-president Dick
Cheney, who was dispatched by George Bush to survey the damage -
has been a star performer on the markets since the storm hit the
Gulf. Its shares have risen by more than 10 per cent to $65. It has
out-performed the Dow Jones Industrial Average, which itself
recovered last week.
- Price of the plan is based on the total sales price of the desktop and peripherals. (1) Single Peripheral (single printer, single scanner); Only one laptop or desktop computer per contract; Multiple brands covered per contract; • To initiate a laptop repair, a box is express shipped to your location, express shipped to a certified repair facility, and then express returned to you.
Microsoft Concerns in the US are mounting that Katrina could prompt a
round of 'pork barrel' contracts - rewarding
companies with strong links in
the area such as Louisiana engineer Shaw Group - which last week
won a federal rebuilding deal. Meanwhile firms known for their
close links with the White House are winning work.
California-based contractor Bechtel won work from the Federal
Emergency Management Agency to provide short-term housing, in
the form of 'trailer' accommodation, to the homeless.
The allegations mainly involve the Army's secret, dollar contract for oilfield repairs in Iraq to Halliburton, based company. The objections were raised publicly last year by Bunnatine Greenhouse, then the chief contracts monitor at the Army Corps of Engineers, the government agency that handled the contract and several others in Iraq.
Laptop Computers But eyes will be most closely fixed on Halliburton.Other
companies have attracted attention for potential work in the
southern states - including some outside the US - Aggreko, the
UK-owned supplier of generators, and Wolseley, the plumbing group,
for example. But Halliburton has shone in the markets partly
because it is expected to do well out of the catastrophe. It has
outperformed competitors in servicing oil infrastructure and
engineering and construction work, such as Schlumberger and Fluor
(which has also won work).
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Laptop Computer According to experts, Katrina was almost the perfect storm for
Halliburton. Estimates of the cost of rebuilding the city range as
high as 100 billion (54bn). On 2 September, Congress voted $10.5bn
for emergency relief. Last week the White House asked for $50bn
more. Poe Fratt, analyst at AG Edwards in St Louis, says: 'Oil
field services groups will get work on repairing the
infrastructure. Halliburton would expect to win contracts on
refineries and production facilities.' Fratt estimates that some
$1bn will initially be spent on oil infrastructure.
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Desktop Computer 'Other oil service groups don't have any engineering or
construction like Halliburton's KBR subsidiary, which will benefit
from the broader picture,' says Fratt. 'And the construction
companies don't have oil services.'
Notebooks But these observations will be of secondary importance to US
politicians and the growing industry of Halliburton watchers. Many
expect that Halliburton will use its legendary lobbying power and
close relationship with the White House, via Cheney and others, to
win big. The shadow of the last big win - Iraq - is already
looming. Last week Bush was criticised for underspending on flood
defences in New Orleans because of overspending in Iraq - and Iraq
has made Halliburton an enormous amount of money.
Lenovo Before war was even declared over, Halliburton was awarded, a
non competitive contract to put out oil well-head fires. Along with
this, it had a long-standing rolling cost-plus deal to supply the
army with support from food to accommodation, known as LogCap. The
oil contracts were extended to fuel supply. Halliburton reported
making $10.7bn from Iraq work in 2004-05.
Hard Drive But there was controversy, not only because of how Halliburton
won the contracts, but that it overcharged the army for food and
inflated the price of fuel it bought in from Kuwait. Leading the
barrage of criticism heaped on the company critics was Democrat
representative Henry Waxman, a member of the Congressional
Committee on
government reform, who last week
wrote a 17-page letter savaging the federal response.
Travelstar Waxman's staff say it is too early in the reconstruction effort
to decide if there has been any impropriety, but they confirm the
committee will be keeping a very close eye on it.
Gateway There are differences from Iraq. For example, KBR, the
subsidiary that did much work there, is now up for sale. As Fratt
says: 'If they win a lot of work, it will help the price they
finally get for it.'
Laptop Parts The oil contracts will mostly be competitively tendered for by
private companies owning the assets in the Gulf of Mexico. For
non-oil contracts, instead of a single, shambolic agency, the
Coalition Provisional Authority, acting as a central administrative
point, there is likely to be a plethora of overlapping federal,
state and local buyers.
Software According to Fema, which has born the brunt of criticism for the
response, there are about 30 agencies currently involved. 'They are
likely to be streamlined,' said a Fema spokesman. So far, the lack
of clarity has been exacerbated by squabbling between the White
House, the state government, and the New Orleans city
authorities.
Hard Drives Will Halliburton benefit from such confusion? To date, there has
been little major reconstruction work done while Fema has
concentrated supplying water, ice, food and shelter.
Electronics Last week helicopters dropped sand bags and containers on the
breached levees that allowed the city to be flooded. The work was
overseen by the US Army Corps of Engineers (ACE), and carried out
by local contractors Boh Brothers and CR Bittman. ACE is also in
charge of contracts for removing storm debris. In Louisiana and
Mississippi, this will be carried out by US contractor Ashbritt,
and in Alabama by another, Phillips and Jordan.
Canon ACE was the agency that offered Iraqi contracts. Earlier this
year a ACE whistleblower, Bunnatine Greenhouse, criticised the
contracts between Washington and Halliburton, saying the
relationship between the company and ACE, was too close. She
pointed to a revolving door, through which army employees moved
over to Halliburton. And she called the oil contract 'the most
blatant improper contract abuse I have witnessed in the course of
my career'.
Desktop Pc It is unclear how much work will be handled by ACE and how much
will be done through the LogCap contract. In either case,
Halliburton is highly likely to be a beneficiary. Charlie Cray, an
advisor to Halliburtonwatch.org, a website that details the
company's contracts in Iraq, says: 'If they have the relevant
experience, they are well placed, because they certainly have the
inside track.'
Desktop Computers Halliburton also has strong connections with Fema. Joe Allbaugh,
formerly chief of staff to Bush when he was governor of Texas and
manager of the Bush-Cheney campaign in 2000, was appointed a
director of Fema in 2001. According to Senate records, Allbaugh's
Washington-based lobbying company, registered KBR as a client in
March. Cray says: 'He is very close to Bush. This guy is the Karl
Rove of contracting. It is unclear how much work will go through
Fema, but having this guy lobbying for you is going to get all your
calls answered.'
Think Pad So far, the work Halliburton has done after Katrina has come
from neither of these sources. The US Naval Facilities Engineering
Command has awarded $17m of repair work at three naval stations in
the region. This was part of a $500m contract with the Navy known
as Concap - similar to LogCap - used for
natural disaster recovery work.
Repair According to Pratap Chatterjee of Washington-based
CorpWatch: 'This is a large amount of work. It is under the ConCap,
which is similar to LogCap. It shows Halliburton is in there
already.' Chatterjee believes that whichever agencies end up
running the reconstruction, the company will be able to take
advantage.
Data Recovery Committees and watchdogs will be looking out for other
key names. Some, such as Bechtel, the privately owned construction
company that is close to Bush, are well known. Bechtel's work for
Fema is not governed by a formal contract. There is a 'letter
agreement', while Bechtel determines the scope of the work needed.
In the meantime Fema is issuing instruction, or 'task orders', as
the situation evolves. The value 'changes frequently' according the
the comp[any. It could not say if these are cost plus agreements or
not. According to Chatterjee, other, less recognisable, names are
worth following for evidence of 'revolving door' syndrome. HNTB, an
engineering company recently hired Lt-General Robert
Flowers to head its federal
services subsidiary - the part of the group that would bid for
government work. 'If HNTB bids and wins, it will show that if
you have the right connections, you get the work,' says
Chatterjee.
Cisco But for the time being, as Chatterjee concedes, all eyes
will be on Halliburton.
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