Dollars, Not Sense: Government Contracting Under the Bush Administration. United States House of Representatives, Committee on Government Reform - Minority Staff, Special Investigations Division

8 Years of Fleecing the American People by the Bush Administration.
The US Special Inspector General past investigations into reconstruction contracts revealed that, in some contracts, overhead expenses accounted for more than half of the costs that Kellogg, Brown, and Root (KBR) billed the federal government. A recent audit report, “Review of Administrative Task Orders for Iraq Reconstruction Contracts,” found that relatively high overhead costs were charged, and that these costs were significantly higher than work performed by other companies in Iraq. For these contracts, overhead costs ranged from 11% to 55% of projected contract budgets. For example, the SIGIR found that in five KBR projects, administrative costs outdistanced the costs of the projects alone. For example, the report cites a project where administrative costs totaled about $52.7 million, while the actual project costs were about $13.4 million. In another case, the combined administrative costs for five contractors totaled about $62 million, while the direct construction costs totaled $26.7 million. The SIGIR found that overhead expenses accounted for more than half of the costs KBR billed the federal government.



Overhead fees can also result as a part of fees passed from one contractor to another. One such example is the case of Blackwater Security Firm’s contract for private security services in Iraq. Blackwater’s contract paid workers who guarded food trucks a salary of $600 a day. The company added overhead costs and a 36% markup to its bill, then forwarded the bill to a Kuwaiti company. The Kuwaiti company then added costs and profit, then sent the bill to the food company. The food company did the same, and finally sent the bill to KBR. KBR passed its cost to DOD. Yet the U.S. Army stated in a congressional committee hearing that it had never authorized KBR to enter into a subcontracting relationship with Blackwater. The matter remains pending.