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KATRINA: Audit Faults KBR's Repairs of Hurricane Damage

Report by Pentagon Inspector General Cites Substandard Work, Overpayments

by Derek KravitzThe Washington Post
June 18th, 2008

Efforts by defense contractor KBR to repair hurricane-damaged Navy facilities were deemed shoddy and substandard, and one technical adviser alleged that the federal government "certainly paid twice" for many KBR projects because of "design and workmanship deficiencies," the Pentagon's inspector general reported in an audit released yesterday.

The Naval Facilities Engineering Command gave KBR, then known as Kellogg, Brown and Root, three repair contracts worth $229 million over five years in July 2004, according to the report. At the time, KBR was a subsidiary of Halliburton, the Texas energy company whose former chief executive is Vice President Cheney.

After Hurricane Ivan struck the Gulf Coast that September, and Hurricane Katrina a year later, KBR was given a number of tasks. They included removing water-damaged carpet and drywall; applying temporary roofing; removing debris; and building trailer parks for displaced families at naval air stations in Pensacola, Fla., and Gulfport, Miss., the Stennis Space Center in southern Mississippi and other facilities in the region.

The inspector general reported that its audit of KBR's work found:

The Navy entered into an illegal "cost-plus-percentage-of-cost" contract with the company. Higher costs meant more profit for KBR, which rewarded the company for "inefficiency and non-economical performance," the report said.

KBR paid $4.1 million for services and meals that should have cost $1.7 million, and it awarded sole-source or limited-competition subcontracts that overpaid hourly rates to roofers.

The company was paid nearly all contract amounts despite "marginal-to-average performance."

The inspector general recommended that the Navy try to recoup about $8.4 million in "excessive" equipment lease payments and material profits, and another $1.4 million for more than 110,000 meals that were paid for and thrown away over a 34-day period.

The audit report noted several unusual costs, including monthly employee cellphone charges of $540 during roof repairs, $720 per month in gas charges -- even as the Navy was already paying for work-site fuel expenses -- and expensive meals, including steak and eggs (full meal prices were redacted from the report).

As part of the Hurricane Katrina recovery effort, KBR was hired to build trailer parks for displaced Navy personnel. Each trailer was supposed to have 200-ampere electrical service and water piping, but the subcontractors hired by KBR gave each trailer 100-ampere service and did not lay piping at proper building-code levels. As a result, a second contractor was paid $200,000 to fix the problems, the audit said.

KBR "does not agree with many of the conclusions contained in the report," spokeswoman Heather Browne said in an e-mail. She said KBR will continue to work with the Navy to resolve any problems with the three contracts.

The inspector general's report was released after a Freedom of Information Act request.

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