The footprint of the Wonder World Drive extension starting from Hunter Road, which runs left to right at the top of the photo. The City of San Marcos has hired KBR to work on this road and at least four other projects in the last five years.
By SEAN BATURA
A company engaged in road design work for the City of San Marcos and Hays County has long been the subject of controversy in its role as a major contractor for governments worldwide.
KBR, a Houston-based engineering, procurement and construction firm, pleaded guilty last week to bribing Nigerian government officials between 1995 and 2004 in exchange for contracts worth more than $6 billion.
The bribery scheme involved KBR corporate executives who, according to the U.S. Department of Justice (DOJ), “took actions to insulate themselves from the reach of US law enforcement.” KBR agreed to pay the U.S. government $402 million, the “largest fine ever in (a Foreign Corrupt Practices Act) prosecution,” according to the DOJ.
“Under the terms of the plea agreement, KBR agreed to retain an independent compliance monitor for a three-year period to review the design and implementation of KBR’s compliance program and to make reports to KBR and the Department of Justice,” the DOJ said. “KBR also agreed to cooperate with the Department in its ongoing investigations.”
But that’s just the most recent finding against KBR, which is under contract with the county for work on FM 110 and with the city for work on the Wonder World Drive extension.
Plaintiffs in cases pending in the U.S. court system allege KBR engaged in human trafficking; purposely sent unarmed employees into a dangerous combat zone that resulted in a 2004 incident called the “Good Friday Massacre;” knowingly exposed employees and national guardsmen to large amounts of carcinogenic sodium dichromate; covered up evidence of rapes of its employees and knowingly exposed thousands of people at Joint Base Balad in Iraq to unsafe food, water and hazardous fumes from an incineration pit.
KBR has also been accused of using political influence to secure lucrative contracts with the U.S. government, doing business with authoritarian regimes and using its subsidiary companies in the Cayman Islands to avoid paying U.S. payroll taxes.
By accounts from several federal agencies, KBR overcharged taxpayers in excess of $70 million and bribed foreign officials with more than $180 million. Eight of the company’s employees working in Iraq and Afghanistan have been convicted of such offenses as fraud, money laundering, fraud conspiracy, bribery, and breaking anti-kickback laws. KBR’s former CEO, Albert Stanley, pleaded guilty in September to violating the Foreign Corrupt Practices Act.
Though KBR is under criminal investigation by the U.S. government in the electrocution deaths of at least two U.S. soldiers in Iraq, the Pentagon recently awarded the company a $35 million contract involving major electrical work.
A March 2008 Defense Department Inspector General report found that “on three separate occasions KBR did not meet the established requirements for quality monitoring and maintenance of nonpotable water,” which resulted in water quality that “may have degraded to the point of causing waterborne illnesses among US forces.”
The Special Inspector for Iraq Reconstruction (SIGIR) found that KBR’s failure to rebuild a pipeline crossing bombed out in the 2003 invasion “may have been instrumental in losing more than $1.5 billion in potential oil revenues critical to the Iraqi government.” The project had been a component of a no-bid contract awarded to KBR in 2003.
“Because the government and contractor failed to adequately research, plan, design, and manage the project, $75.7 million allocated to the project was exhausted while only 28% of the drilling scope was completed,” said a report released by the office of SIGIR. “The (horizontal directional drilling) project was discontinued in August 2004 and replaced with a contract awarded to Parsons Iraqi Joint Venture (PIJV) at a cost of $29.7 million; the Special Inspector for Iraq Reconstruction (SIGIR) considers this the cost overrun for the project.”
KBR offered survivors of the Good Friday Massacre, in which six drivers were killed and 14 wounded, the opportunity to be considered for the Pentagon’s Defense of Freedom Medal, given to workers who sustained injuries in Iraq. In order to be considered for the citation, KBR asked its employees to sign a form providing the Pentagon with the necessary personal medical records. Paragraph number 9 of the form absolved KBR of all legal liability and forbade the employees from suing even if the company’s criminal negligence caused the injury.
Hays County recently hired KBR to do design work for construction improvements on FM 110/San Marcos Loop, which lies within Precinct 1, represented by County Commissioner Debbie Ingalsbe (D-San Marcos), who served on the selection committee that chose KBR from among about 16 other firms.
“All of the references I spoke to spoke very highly of them and felt they were very easy to get along with, always available, that they moved projects along as quickly as possible,” Ingalsbe said. “So that is important to us. If there were some issues, I wish I was aware of those, but from the references that I was able to talk to, I didn’t hear anything like that.”
Ingalsbe said she would have taken into account KBR’s involvement in the Nigerian bribery scheme, the investigations into the electrocution of soldiers and the Good Friday Massacre lawsuit before selecting the company to do work for the county.
“I’m not saying that would keep me from hiring them, but it’s certainly something that I would have liked to have known,” Ingalsbe said. “But I was not aware of that at all. This is actually the first time that the county, I believe, would have ever used KBR.”
Staff for the City of San Marcos reported that the city hired KBR for at least five different projects in the last five years. KBR is doing design work for the Wonder World Extension and the city’s portion of phase two of the McCarty Lane project.
“They are a huge company and I would like to see the city spread its business as long as the quality isn’t compromised,” said San Marcos Councilmember Kim Porterfield. “I would like to see more regional and local companies used when possible. But I don’t really have anything against KBR.”
In 1992, the Pentagon under Secretary of Defense Dick Cheney commissioned KBR, then a subsidiary of Halliburton, to do a study to determine whether private contractors ought to take on more work traditionally reserved for the military. After the KBR study found that more privatization was ideal, Cheney awarded the first Logistics Civil Augmentation Program contract (LOGCAP) to KBR.
Cheney became the CEO of Halliburton three years later. During Cheney’s stewardship, Halliburton’s U.S. government contracts almost doubled, from $1.2 billion to $2.3 billion. KBR lost the second LOGCAP contract after the General Accounting Office (GAO) reported that KBR had exceeded its estimated costs in the Balkans by 32 percent.
The GAO published another report in 2000 alleging the Army had not controlled its costs, though KBR won the third LOGCAP contract a year later. After the US government ended LOGCAP III, KBR, DynCorp, and Fluor Corporation were awarded LOGCAP IV contracts, under which the three firms would compete for work.
The U.S. government has awarded KBR contracts for work in Iraq and Afghanistan worth at least $3.9 billion.
City of San Marcos Capital Improvements Department Interim Director Sabas Avila, who was in the selection committee that chose KBR for the city’s Wonder World Drive Extension project, said he does not remember any concerns over KBR’s ethical history during the selection process.
“The typical criteria is, what is the firm’s project experience, what’s the project manager’s experience, what’s the team’s experience – because they usually subcontract out with other firms for different portions of the project – what’s the firm’s understanding of the project?” Avila said. “Those are typically the categories that we use…we check references, but ethics we don’t go too much into. It’s not something that’s a standard criteria.”
The scoring criteria used by the County selection committee in choosing a firm for the FM 110/San Marcos Loop project included comparable experience and availability of the project manager (35 points), comparable team experience and availability of key personnel (25 points), prime firm and sub-provider firm comparable experience (20 points), team structure (10 points), and references provided by the firm (10 points). Ingalsbe awarded KBR 90 points and gave scores of 83, 83 and 85 points, respectively, to the three other firms considered by her selection committee.
Texas State University philosophy Professor Dean Geuras, who is certified to teach in the school’s graduate program in professional ethics, said city and county scoring criteria may be flawed if the “ethical history of the company” is not a factor considered in the selection process.
“If a company has a history of breaking laws and doing unethical things, somebody who employs them on behalf of the public, I think, needs to take that into account,” Geuras said. “They’re dealing with the public’s money and they’re making decisions for the public. And I think the public is concerned about the ethics of the people they hire.”
Members of the city council and commissioners’ court who use a company’s ethical history as a sole hiring criterion for design work would be violating Texas law, as the Local Government Code prohibits competitive bidding for professional services and requires cities and counties to use “demonstrated competence and qualifications,” and only consider professional fees that do “not exceed any maximum provided by law.”
For construction services, cities and counties must use competitive bidding and select the “lowest responsible bidder.” In determining who is a responsible bidder, a city or county may take into account the safety record of the bidder if the city or county “has adopted a written definition and criteria for accurately determining the safety record of a bidder,” and if “the determinations are not arbitrary and capricious.” Criteria including a construction company’s past ethical history may or may not be considered “arbitrary and capricious.”
“You have leverages,” Avila said. “You can always terminate the contract. We always have a stipulation that either party can terminate this contract with 30 days notice … for any reason. For any reason, any party can terminate this project with written notice.”
Avila said the city has terminated contracts in the past, but always for reasons directly related to the project work, though it is possible for council members to order a contract cancelled after being forced by state law to hire a company with which they have ethical concerns.
“Theoretically, yeah, they can do that, but realistically and practically, I’ve never seen that happen, and I doubt that it would,” said Avila.
Indonesia Corruption Watch included KBR among companies using collusive, corruptive and nepotistic practices in business deals with the family of President Suharto, who ordered the invasion and occupation of East Timor, resulting in more than 80,000 deaths. KBR’s Nigerian bribery scheme involved the illegal procurement of contracts with Sani Abacha’s regime, which killed Ken Saro Wiwa and eight other human rights activists the same year Cheney became CEO of KBR’s parent company.
Hays County Precinct 2 Commissioner Jeff Barton (D-Kyle) said he knew about KBR’s early history, and recommended a book called The Path to Power, which tells of the company’s ties to former President Lyndon Johnson’s rise to power.
“I’ll say when I first saw the packet it raised my eyebrows because I’m just aware that some people have some concerns about them,” Barton said. “I don’t know enough to pass judgement. And again, you had staff and the commissioner recommend it for what seemed to be good reasons – that they’re already out there and familiar with the project, so I don’t have any objection to our hiring them.”Email | Print