Halliburton 'Over Billing' Controversy
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Case Details:
Case Code : BECG042
Case Length : 15 Pages
Period : 1997-2004
Pub. Date : 2004
Teaching Note :Not Available Organization : Halliburton Company
Industry : Oil and Energy
Countries : US, Iraq
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This case study was compiled from published sources, and is intended to be used as a basis for class discussion. It is not intended to illustrate either effective or ineffective handling of a management situation. Nor is it a primary information source.
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"The Pentagon audit confirms what we've known for months: Halliburton has been gouging taxpayers, and the White House has been letting them get away with it." 1
- Henry Waxman, Democrat Elected from State of California, US.
"No company is busier in Iraq than Halliburton. And no company in Iraq is as busy battling to clear its name." 2
- James Cox, Journalist, USA Today.
The Allegations
On March 20, 2003, the US led coalition forces attacked Iraq in pursuance of 'Operation Iraqi Freedom.'3 The war ended in two months.
For all the various requirements of the pre-war and post-war period, the US government declared that it had awarded no-bid contracts4 to Halliburton Company (Halliburton)5 Analysts and media reports questioned the US government's decision to award contracts to Halliburton.
They said that the company had a tainted past and was infamous for its unethical business practices. The major opposition came from the Democrats (the leading opposition party of the Republican government in the US). They alleged that the contracts had been awarded to Halliburton mainly because of the ties that the Vice President Dick Cheney (Cheney)6 had with the company.
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However, Kellogg Brown & Root (KBR), the engineering and construction subsidiary of Halliburton that was supposed to carry out the military contracts denied these allegations. KBR said that it had bagged the contract because of its excellent track record and expertise. The company mentioned, "KBR was selected for this award based on the fact that KBR is the only contractor that could commence implementing the complex contingency plan on extremely short notice."7
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Dave Lesar (Lesar), the CEO of Halliburton said, "We are proud of our record and of our employees who serve the military. We receive contracts to make omelets and build infrastructure because of our unique skill sets."8 In August 2003, the Department of Defense (DoD) of the US complained that the food that was cooked and served to the US troops in Iraq was done so in an extremely unhygienic conditions. A report9 mentioned that the food was cooked with 'rotting meats and vegetables' and with 'blood all over the floor,' and was served in 'dirty pans,' 'dirty grills,' and 'dirty salad bars.' Moreover, the DoD also charged KBR with over billing of oil that it imported to Iraq. The DoD said that KBR had overcharged to the tune of $61 mn. The auditors with DoD alleged that the company charged $1.09 per gallon more for gasoline. |
Halliburton 'Over Billing' Controversy
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