Army revises contracting testimony

The Army has taken the unusual step of recanting the testimony of a senior officer who contradicted a Senate committee examining an Iraq war contract, but stopped short of admitting it improperly paid $99 million to the defense contractor handling the work.

Claude Bolton, the Army's senior acquisition official, said in a letter obtained Friday by The Associated Press that a two-star general "did not provide an accurate response" in April when he testified that the payment had not been made to defense contractor KBR Inc.

Sen. Carl Levin, D-Mich., chairman of the Senate Armed Services Committee, had challenged the 2005 payment for temporary living quarters after Pentagon auditors found KBR had bought the trailers from high bidders instead of going to companies offering lower rates.

When Levin asked why the Army had paid the bill, Maj. Gen. Jerome Johnson, then head of the Army agency administering the contract, said the senator's information was wrong.

After the April hearing, the Army sought to clarify Johnson's response. Bolton's Dec. 6 letter is a "correction for the record," a more serious step.

Even though the auditors said KBR's charges couldn't be justified, Bolton did not acknowledge the payment was out of line. He attributed the flaws in Johnson's testimony to the complexity of the multibillion dollar combat support contract, known as LOGCAP III. Johnson has since moved to another assignment at Army Forces Command, Fort McPherson, Ga.

Bolton's letter ends the argument between the Army and Levin's committee because there is no way to recoup the money. But the dispute adds another tarnished chapter to the LOGCAP arrangement, which has been a huge source of revenue to KBR since it won the deal in 2002.

The contract, formally known as the Logistics Civil Augmentation Program, has existed in various forms since 1992. As the military reduced in size following the end of the Cold War, it looked to the private sector to provide the food, housing, laundry services and transportation that American forces would need when deployed.

Since the 2001 invasion of Afghanistan and the subsequent war in Iraq heightened the demand for these services, the value of the contract has escalated, making it one of the most hotly contested among companies that provide logistics support. The work is now shared by KBR and two other companies who were selected earlier this year to work on what is now a $150 billion, 10-year contract.

Democrats in Congress have been critical of KBR, a former Halliburton Co. subsidiary based in Houston. They've claimed KBR benefited from ties to Vice President Dick Cheney, who once led Halliburton, the Houston-based oil services conglomerate. Levin and others have cited a series of government reviews faulting KBR for poor record keeping and failing to properly justify hundreds of millions of dollars worth of work.

Bolton's letter was delivered to the committee prior to a Dec. 6 hearing on Army contracting at which Bolton and other service officials testified on broader issues related to improving Army contracting operations.

"We made a mistake. And General Johnson made a mistake," Bolton said when Levin raised the subject. "We apologize for not providing you the right answer."

Bolton has announced his resignation and will leave his position Jan. 2. Senior Army officials have said there is no connection between Bolton's departure and the Army's well-publicized contracting problems.

Kathryn Condon, a civilian executive with Army Materiel Command at Fort Belvoir, Va., said the payment to KBR was made as part of a larger settlement in which the Army withheld $55 million in other charges related to the temporary housing purchase. Roughly half that amount has since been paid to KBR after the company provided the proper paperwork to support the fees.

When Levin pressed for more details, Condon said she would have to get back to him.

"That's a huge amount of money to pay which we don't owe," Levin said.