When Is "At All Costs" Too High A Price To Pay?

Here is an interesting scenario. You have the fuel you need to keep things moving in Iraq but it is in Kuwait and in order to get it to the troops and Iraqi people that need it, you will lose lives and spend 150% more in travel costs as than you would if there was no security risk involved.

Iraq needed fuel. Halliburton Co. was ordered to get it there quick. So the Houston-based contractor charged the Pentagon $27.5 million to ship $82,100 worth of cooking and heating fuel.

In the latest revelation about the company's oft-criticized performance in Iraq, a Pentagon audit report disclosed Monday showed Halliburton subsidiary KBR spent $82,100 to buy liquefied petroleum gas, better-known as LPG, in Kuwait and then 335 times that number to transport the fuel into violence-ridden Iraq.

Pentagon auditors combing through the company's books were mystified by this charge.

"It is illogical that it would cost $27,514,833 to deliver $82,100 in LPG fuel," officials from the Defense Contract Audit Agency noted in the report.

This looks bad for KBR. The numbers simply don't add up. But are we looking at these number in context?

Halliburton spokeswoman Wendy Hall said the figures were taken out of context.

"The implication is definitely misleading," Hall said. "Transporting fuel into Iraq was a mission fraught with danger, which increased the prices that firms were willing to offer for transportation."

Halliburton has seen 61 of its workers and subcontractors die in Iraq and Kuwait, many while delivering fuel.

Army officials were desperate to get fuel into Iraq, fearing the lack of such basic necessities as cooking and heating fuel would lead to greater unrest and support for the insurgency.

But efforts to truck in fuel were hampered by repeated attacks on fuel convoys, delays organizing military escorts, supply route closures and changing delivery points, company officials said. Security was so dicey, in fact, that tanker trucks were lucky to make two round trips per month.

And because neighboring Kuwait had few trucks available to transport fuel, Halliburton had to bring in trucks from neighboring countries and contract for a barge, Hall said.

So although the numbers still don't add up, it is hard to say for sure that Haliburton/KBR spent more money than was necessary based on the risks involved at the time.

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