Officials admit private security firm was hired under Iraq logistics contract

Army officials acknowledged Wednesday that a private security firm was hired under a contract for Iraq logistical support that explicitly bars their use, as lawmakers assailed the lack of transparency that arises from layered subcontracts like those employed in Iraq.

In an opening statement at a House Oversight and Government Reform Committee hearing, Tina Ballard, a senior Army procurement official, said North Carolina-based Blackwater USA had been paid to provide armed guards under the Army's Logistics Civil Augmentation Program, or LOGCAP, contract. That contract, which was awarded competitively in 2001 and serves as an umbrella under which Halliburton subsidiary KBR provides military support work, bars contractors from carrying weapons without explicit approval, instead stipulating that they use military protection.

In the past several months the Army has repeatedly denied that security firms have been used under LOGCAP, citing assertions by KBR officials that they had never directly hired armed guards and were not aware of any inappropriate subcontracts. But a Tuesday letter from Army Secretary Francis Harvey confirmed that Blackwater had provided protection under a subcontract for military dining facilities.

Harvey said private security was used by ESS Support Services, a subsidiary of Compass Group, for its dining contract primarily to protect managers as they moved within Iraq and to transport cash for paying vendors and employees.

In a deeply layered chain, KBR apparently subcontracted to ESS, which paid a Kuwaiti company called Regency Hotel and Hospitality, which in turn subcontracted with Blackwater to provide security.

KBR officials have said they were unaware of the ESS subcontract. Rep. Christopher Shays, R-Conn., delved into the Defense contracting framework that resulted in government officials and a prime contractor lacking knowledge of the activities taking place under subcontracts.

"I think this has really set the stage for a very real dialogue about a lot of things," Shays said. "I just didn't know the disinterest of one contractor of the government contracting out, and then subcontracts, and the further down the chain you get, you have such a degree of disinterest either by the original contractor or the government, in my judgment, and that concerns me."

Despite the assertions of no knowledge by top KBR officials, committee Democrats presented a June 2004 e-mail message from James Ray, lead LOGCAP contract administrator for KBR, addressing the subject.

"Our subcontracts state the subcontractor will use the [military] convoys.… We should not attempt to effect a material change in our contract with the government by hiring a company that we know uses armed escorts," Ray wrote. "That company is an agent of KBR, and if anything happens, KBR is in the pot with them. Even with lipstick, a pig is a pig. This decision is something to address squarely. Dancing around it will only weaken our position with the government."

Ray recommended against proceeding with the option in question without senior management approval. It was not immediately clear what job titles the four named recipients held, nor the full context of the message.

Ballard testified Wednesday that "the U.S. Army will take appropriate steps under the terms of the contract to recoup any funds paid for those [security] services."

Rep. Tom Davis, R-Va., pointed out that if the security services were provided under a fixed-price contract, then Army officials would not have the breakdown necessary to separate out costs and reclaim payments for just that portion.

The Army's Ballard agreed. But hours later in the marathon hearing, she announced that a contracting officer had, the day before, taken steps to remove $19.6 million from KBR payments in association with the Blackwater contract. The Army did not respond Thursday to a question on how that amount was derived and whether other action will be taken.

During the hearing, committee Democrats also published an e-mail exchange showing that a Blackwater official appealed to company leaders for better equipment shortly before four contractors were abused, killed and their bodies put on display in Fallujah, Iraq, in 2004.

The exchange took place between Tom Powell, Blackwater's Iraq operations manager at the time, and other officials from Blackwater and Regency, which had contracted for the security.

In a message sent the day before the attack titled "Ground Truth," Powell described situation reports from Regency on conditions as "very misleading" and "bogus on the surface."

"I'm still unsure of the contractual who's responsible for what and, frankly, it's out of my lane," Powell wrote. "But guys [are] in the field with borrowed stuff and in harm's way with the client, to which I'm very uncomfortable." He requested new vehicles to replace failing ones in Baghdad as well as communications equipment, ammunition, weapons and "all the client body armor you got."

He wrote that requests for "hard cars" with reinforced sides were still pending, and said it was not enough "to sustain the appearance of gear/operational capability."

A Regency official replied that client body armor was not covered and hard cars were not in the contract, but said some of the issues would be addressed. "We are counting on you to draw the line when it is not safe or prudent to conduct operations in unreliable vehicles or in an unsafe manner," he said.

Relatives of the men presented emotional testimony at Wednesday's hearing accusing Blackwater of failing to adequately equip the employees, and lawmakers questioned Blackwater General Counsel Andrew Howell about the circumstances surrounding the incident.

Asked if Blackwater had met its responsibilities under the contract, Howell said it had.

While expressing sympathy for the witnesses, several Republicans said it was inappropriate that the families and company representatives be called to testify since they are engaged in litigation about the event.