The US army should withhold 15 per cent of future payments to Halliburton for work in Iraq due to billing disputes, a government auditor said today, a move that could cost the contractor tens of millions of dollars.
Mr Stuart Bowen, special inspector general for Iraq reconstruction, said in a memorandum to Army auditors and commanders he believed US contract laws requiring a 15 per cent withholding if certain conditions were not met should be imposed on Halliburton unit Kellogg Brown and Root.
Run by Vice President Mr Dick Cheney from 1995-2000, Halliburton has been bogged down in a long-running billing dispute with the US military, and government investigators are looking into whether the company overcharged for work.
The Houston-based company is the US military's biggest contractor in Iraq with the potential to earn up to $18 billion for multiple contracts there, with tasks ranging from cooking meals for troops to rebuilding Iraq's oil industry.
Mr Bowen said based on their "limited audit work," he supported military auditors' proposals last August for the Army to implement the withholding. Documents then indicated the company had not provided enough details to support at least $1.82 billion out of $4.3 billion of logistical work.
"We agree with US Army Materiel Command and DCAA (Defense Contract Audit Agency) positions (on the withholding issue)," said Bowen in the memorandum.
In August, the US Army backed down from a recommendation to dock some payments for KBR's massive logistics contract serving US troops in Iraq and Kuwait and said it was trying to resolve billing problems with the company.
Ms Linda Theis, a spokeswoman for Army Field Support Command in Rock Island, Illinois, said late Tuesday no decision had been taken yet on whether to withhold 15 per cent.
Halliburton did not immediately respond to questions about Mr Bowen's memorandum but in the past the company has strongly defended its work in Iraq and says it has been targeted for political reasons because of its former ties to Mr Cheney.