Fox means that Halliburton’s KBR has a no-bid contract to be the sole supplier of certain services to the US military in Iraq.
It’s unclear whether you just do not know about monopoly suppliers, or you have other, relevant input (you didn’t provide it). If you have it, why not spill it?
If you know more, why be obtuse?
Yes, that’s exactly what the strategy would be, it seems to me. In fact, I’m sure this kind of strategy - achieve monopoly power in certain private-public joint endeavors - is one reason Cheney why was hired in the first place (another may be Cheney’s quasi-‘rainmaker’ status, or his ability to garner the public-side contacts necessary to such work).
[quote=“Fox”]It might also just be experiencing cash flow problems due to its billing disputes. Transfer pricing would be another issue inside Haliburton to reduce profits inside that sector for the reasons mentioned above.
Or of course, it could be just stuffing up.[/quote]
Yes, it’s already reported by the WSJ that the billing dispute with the Pentagon has led to cash flow problems. And of course artificially inflated transfer prices would do the trick, but of course there are things like TINA, FAR and DFAR, and CAS regulations. It’s likely the Pentagon’s contract with KBR is cost-plus, and if that’s the case then lots of very famous room exists to jigger prices, and absolutely no incentive exists to hold down costs.
If it’s covered by FAR Part 15 regs then this may allow the CAS standards to be distorted (i.e., transfer prices could, indeed, be inflated in order to jigger KBR’s gross margin, from there to allow a narrow gain to flow to its EBIT). (
I have relevant work experience in this area, although I admit to a certain lack of a life!
)
Please see above; again, if you have knowledge of something different, why be obtuse about it?
The reason this whole thing stinks so badly is that, under Cheney’s direction, Halliburton bought Dresser Industries in 1999, despite the fact that Dresser was then current with an enormous asbestos/silica liability on the books. In 2000 Cheney resigned to become VPOTUS, putting his compensation from Halliburton out of reach. In 2002 it was announced that KBR, through a long-standing contract with the US Army Corps of Engineers, would be the sole supplier of nation-building services in Iraq; further, Halliburton set aside $4.2 billion to fund a plan it hopes will get it through the asbestos/silica settlement. This set-aside is being funded in part by Halliburton stock, but certainly it threatens Halliburton’s current accounts (i.e., assets, including cash) as well.
It seems at least possible that Cheney thought that, as VPOTUS, he could minimize the damage to Halliburton done by Dresser’s liability (deposing Saddam Hussein was a publicly unstated priority for the administration from day one; it’s likely one of the reasons Cheney decided to join Bush - after Danforth didn’t make the cut in 2000 - was because he liked the idea of cleaning up business he left unfinished as Bush 41’s SOD in 1991). To be clear, I am saying it seems possible that Cheney bought Dresser at a price discounted to reflect the asbestos/silica liability and in 2003 saw a way to help both the US war effort and Halliburton (i.e., the opportunity to use taxpayer dollars, through KBR’s increased revenue in a cost-plus pricing contract, as a way to fund Dresser’s liability).
fred smith finds where the Heritage Foundation is defending Halliburton despite KBR’s poor accounting (how could they thus ‘vindicate’ Halliburton?), and it seems to begin to smell a little - maybe.
Halliburton is under Chapter 11 protection now (since July) to reorganize in order to adequately fund its liability set-aside; some analysts say Halliburton’s net worth is in serious jeopardy in the short run. KBR’s accounting system is too FUBAR to pass a government audit, according to the Pentagon. The Pentagon decided to release about $2 billion in disputed compensation (i.e., US taxpayer dollars) to Halliburton anyway. Getting US taxpayer dollars now (as a kind of ‘good faith’ downpayment on compensation for services rendered) will certainly help Halliburton’s cash flow situation in the short run.
In short, the whole thing kinda stinks because (1) it’s not transparent, (2) it’s a classic case of quasi-private company in a huge transaction with the Pentagon at war, and (3) it may be that KBR is providing the assets necessary to fund Halliburton’s liability set-aside illegally. Since KBR’s accounting system is FUBAR, who can know without more transparency?
