David Phinney has an interesting post on a Blanket Insurance Waiver for Iraq reconstruction:
I have a curious memo, "Blanket Insurance Waiver," which apparently allows Halliburton/KBR to waive insurance requirements -- read cut the "costs" -- to potential subcontractors working under Halliburton's sweeping military logistics contract, known as LOGCAP.
It was approved November 26, 2002, by four top-level KRR managers. It apparently grants sweeping discretion to KBR contract officers in the field, i.e., Iraq, to disregard Defense Base Act insurance requirements when subcontractors claim they can't find a suitable insurance carrier.
One contracting insider believes that KBR's contracting officers routinely used the waiver to help non-US businesses land multi-million-dollar contracts under the logistics deal.
This insider notes that because insurance coverage for workers is mandatory on Pentagon contracts, the waiver grants great liberties to a contracting officer who waives the requirement.
"In 2004-2005, coverage was running from $27 to $35 per $100 of wages. Essentially, providing a waiver to foreign firms gives them an automatic 27-35% price advantage on Labor Contracts over honest American entities," the insider says.
A prominent attorney working on Iraq contract fraud tells me that this memorandum may be cause for crying foul on every contract that received the waiver.
"There is a potential False Claims Act claim here. It's would be a little difficult to pin down the Government's damages, but clearly, if KBR must require subcontractors to obtain insurance, and it's not doing so, then every invoice certifying contract compliance is a false claim." (See qualifying analysis below.)
Another prominent government attorney tells me he's not so sure, but regardless of the blanket legal interpretations, allowing a private contract officer the personal discretion to waive insurance requirements opens the door to some handy favoritism that could potentially be rewarded with generous kickbacks.
That's one reason why numerous sources tell me the special inspector general charged with investigating Iraq contracting is looking hard at the hidden layers of subcontractors working underneath Halliburton/KBR.
Halliburton/KBR has now billed $16 billion since the war on terror began largely from its business in coordinating camp construction and maintenance, food services and supply convoys in Iraq and Afghanistan. (That's my rough estimate on the Pentagon's tab.)
Much of that work has been handed out to subcontractors, while KBR tacks on a percentage surcharge for awarding and coordinating the contracts. (Imagine a pyramid of contractors with Houston-based KBR sitting at the top.)
The four KBR managers who signed the memo are:
-- Tod E. Nickels, senior procurement and materials manager
-- John Downey, project general manager (LOGCAP) project
-- Bob Herndon, vice president, operations maintenance and logistics
-- Tom Crum, chief operating officer.
David's post includes, besides the above, a response from an attorney regarding the waiver that's worth reading. The plot thickens on the fiasco known as reconstruction that contributed more to the insurgency than most have yet to acknowledge.