KBR (company)

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KBR, Inc.
Type	Public
Founded	1998
Headquarters	Houston, Texas
Key people	Bill Utt Jerry L. Winchester
Industry	Engineering Construction Private military contractor
Website	http://www.kbr.com/

KBR, Inc. (formerly Kellogg Brown & Root) NYSE: KBR is an American engineering and construction company, formerly a subsidiary of Halliburton, based in Houston. After Halliburton acquired Dresser Industries in 1998, Dresser's engineering subsidiary, The M. W. Kellogg Co., was merged with Halliburton's construction subsidiary, Brown & Root, to form Kellogg Brown & Root. KBR and its predecessors have won many contracts with the U.S. military during the 2003 invasion of Iraq, as well as during World War II and the Vietnam War.

KBR is the largest ^[1] non-union construction company in the United States.

On April 15, 2006, Halliburton filed a registration statement with the United States Securities and Exchange Commission to sell up to 20 percent of its KBR stock on the New York Stock Exchange (NYSE). On November 16, 2006, KBR shares were offered for the public in an Initial Public Offering with shares priced at $17. The shares closed on the first day up more than 22 percent to $20.75 a share.^[2] Halliburton announced on April 5, 2007 that it had finally broken ties with KBR, which has been its contracting, engineering and construction unit as a part of the company for 44 years.^[3]

Contents 1 History 1.1 M.W. Kellogg 1.2 Brown & Root 2 Kosovo 3 Activities in Afghanistan 4 Activities in Iraq 4.1 Employee safety 5 Political connections and controversy 5.1 Shell companies in Cayman Islands 6 Legacy in Houston 7 References 8 External links

[edit] History

[edit] M.W. Kellogg

In 1901 Morris Kellogg founded The M. W. Kellogg Company in New York City. The company was incorporated in 1905 and its headquarters was moved to Jersey City, New Jersey. Initially Kellogg’s main business was power plant construction and fabrication of power plant components, but the development of hammer forge welding techniques helped ready the company to move into refining as the petroleum industry developed.

Kellogg’s entry into process engineering initially focused on the Fleming cracking process, but in the 1920s Kellogg partnered with The Texas Company (Texaco) and Standard Oil of Indiana to purchase the Cross thermal cracking process. Kellogg set up one of the first petroleum laboratories in the country in 1926 to commercialize and then license the technology. This led to Kellogg building some 130 units in the US and abroad.

In the 1930s and '40s Kellogg worked with leading refiners on various technologies. For the war effort, these developments led to the construction of six hydroreformer units twenty fluid catalytic cracking units and the only complete refinery built during World War II. Even bigger than the refining work was the gaseous diffusion plant at Oak Ridge, Tennessee built as part of the Manhattan project. This period also included the development of the Benedict-Webb-Rubin (BWR) equation of state which has since become an industry mainstay and provided the basis for Kellogg’s lead in cryogenics.

The 1950s Kellogg technology expanded into steam pyrolysis, Orthoflow fluid catalytic cracking, phenol-from-cumene and coal-to-synthetic fuels technologies and the '60s saw the growth in helium recovery, ethylene and the development of Kellogg’s ammonia process.

In 1970 Kellogg moved from New York City to Houston, Texas and in 1975, they completed the move by relocating the research and development lab as well. The '70s saw Kellogg become the first American contractor to receive contracts from the People’s Republic of China. Kellogg’s international work expanded with the major ammonia complexes in China, Indonesia and Mexico as well as LNG liquefaction plant in Algeria and 2 receiving terminals in the U.S., the world’s largest LPG plant in Kuwait and four fluid catalytic cracking units in Mexico. The '80s saw continuation of global activity in LNG and ethylene with millisecond furnaces starting up in the U.S.

[edit] Brown & Root

Brown & Root and Habakkuk & Augustine & Edward Fomabah was founded in Texas in 1919 by two brothers, George R. Brown and Herman Brown with money from their brother-in-law, Dan Root. The company began its operations by supervising the building of warships for the United States Navy.

One of its first large-scale projects, according to the book Cadillac Desert, was to build a dam on the Texas Colorado River near Austin during the Depression years. For assistance in federal payments, the company turned to the local Congressman, Lyndon B. Johnson. Brown & Root was the principal source of campaign funds for Johnson's initial run for Congress in 1937 in return for persuading the Bureau of Reclamation to change its rules against paying for a dam on land the federal government did not own, a decision that had to go all the way to President Franklin Delano Roosevelt, according to Robert A. Caro's book The Path to Power. After other very profitable construction projects for the federal government, such as building the Corpus Christi Naval Station, Brown & Root gave massive sums of cash for Johnson's first run for the U.S. Senate in 1941. Brown and Root violated IRS rules over campaign contributions, largely in charging off its donations as deductible company expenses, again according to Robert Caro. A subsequent IRS investigation threatened to bring criminal charges of illegal campaign donations against Brown & Root as well as Johnson and others. It was not quashed until Roosevelt himself told the IRS to back off and allowed Brown and Root to settle for pennies on the dollar.

During World War II, Brown & Root built the Naval Air Station Corpus Christi and its subsidiary Brown Shipbuilding produced a series of warships for the U.S. Government.

In 1947, Brown & Root built one of the world's first offshore oil platforms.

According to Tracy Kidder's Pulitzer Prize-winning book Mountains Beyond Mountains, Brown & Root was a contractor in the Péligre Dam project. The project was designed by the U.S. Army Corps of Engineers and financed by the Export-Import Bank of the United States.

Following the death of Herman Brown, Halliburton Energy Services acquired Brown & Root in December 1962. According to Dan Briody, who wrote a book on the subject, the company became part of a consortium of four companies that built about 85 percent of the infrastructure needed by the Army during the Vietnam War. At the height of the anti-war movement of the 1960s, Brown & Root was derided as "Burn & Loot" by protesters.

The extent of their services included a vast array of logistical operations, historically under the jurisdiction of the military. Such operations included laundry services, meal services (Burger King, Subway, Papa John's Pizza), entertainment (Internet and cable access), and recreation (basketball courts and gym equipment).

From 1995-2002, Halliburton KBR has been awarded at least $2.5 billion to construct and run military bases, some in secret locations, as part of the Army's Logistics Civil Augmentation Program (LOGCAP).^[4]

In September 2005, under a competitive bid contract it won in July 2005 to provide debris removal and other emergency work associated with natural disasters, KBR started assessment of the cleanup and reconstruction of Gulf Coast Marine and Navy facilities damaged in the aftermath of Hurricane Katrina. The facilities include: Naval Station Pascagoula, Naval Station Gulfport, the John C. Stennis Space Center in Mississippi, two smaller U.S. Navy facilities in New Orleans, Louisiana and others in the Gulf Coast region. KBR has had similar contracts for more than 15 years.

On May 7, 2008 the company announced that it would acquire Birmingham, Alabama-based engineering and construction firm BE&K for $550 million. BE&K plans to remain headquartered in Birmingham.^[5]

[edit] Kosovo

In 1996, President Bill Clinton awarded Brown & Root a contract to support U.S. and North Atlantic Treaty Organization (NATO) troops as part of the SFOR operation in the Balkan region. This contract was extended to also include KFOR operations in Kosovo starting in 1999. Camp Bondsteel in Kosovo was constructed by the 94th Engineer Construction Battalion together with the private Kellogg Brown & Root (KBR) under the direction of the Army Corps of Engineers. KBR is also the prime contractor for the operation of the camp. The camp is built mainly of wooden, semi permanent SEA (South East Asia) huts and is surrounded by a 2.5 meter high earthen wall. To construct the base two hills were lopped off and the valley between them was filled with the resulting material.

[edit] Activities in Afghanistan

KBR was awarded a $100 million contract in 2002 to build a new U.S. embassy in Kabul, Afghanistan, from the State Department.

KBR has also been awarded 15 Logistics Civil Augmentation Program (LOGCAP) task orders worth more than $216 million for work under Operation Enduring Freedom, the military name for operations in Afghanistan. These include establishing base camps at Kandahar and Bagram Air Base and training foreign troops from the Republic of Georgia.

[edit] Activities in Iraq

KBR employs more American private contractors and holds a larger contract with the U.S. government than does any other firm in Iraq. The company's roughly 14,000 U.S. employees in Iraq provide logistical support to the U.S. armed forces.^[6]

The United States Army hired KBR to provide housing for approximately 100,000 soldiers in Iraq in a contract worth $200 million, based on a long-term contract signed in December 2001 under the Logistics Civil Augmentation Program (LOGCAP). Other LOGCAP orders have included a pre-invasion order to repair oil facilities in Iraq; $28.2 million to build POW camps; and $40.8 million to accommodate the Iraqi Survey Group, which was deployed after the invasion to find weapons of mass destruction.

The Army's actions came under fire from California Congressman Henry Waxman, who, along with Michigan Congressman John Dingell, asked the General Accounting Office to investigate whether the U.S. Agency for International Development and The Pentagon were circumventing government contracting procedures and favoring companies with ties to the Bush administration. They also accused KBR of inflating prices for importing gasoline into Iraq.^[7][8] In June 2003, the Army announced that it would replace KBR's oil-infrastructure contract with two public-bid contracts worth a maximum total of $1 billion, to be awarded in October. However, the Army announced in October it would expand the contract ceiling to $2 billion and the solicitation period to December. As of October 16, 2003, KBR had performed nearly $1.6 billion worth of work. In the meantime, KBR has subcontracted with two companies to work on the project: Boots & Coots, an oil field emergency response firm that Halliburton works in partnership with (CEO Jerry L. Winchester was a former Halliburton manager) and Wild Well Control. Both firms are based in Texas.^[9]

KBR's maintenance work in Iraq has been criticized after reports of soldiers electrocuted from faulty wiring.^[10] Specifically, KBR has been charged by the Army for improper installation of electrial units (Not Grounded)in bathrooms throughout US bases. CNN reported that Green Beret and Staff Sgt. Ryan Maseth died by electrocution in his shower stall on January 2, 2008. Army documents showed that KBR inspected the building and found serious electrical problems a full 11 months before his death. KBR noted "several safety issues concerning the improper grounding of electrical devices." But KBR's contract did not cover "fixing potential hazards;" It covered repairing items only after they broke down.^[11]

[edit] Employee safety

As of February 9, 2007, 98 American KBR employees and subcontractors have been killed, and more than 430 have been wounded by hostile action while performing services under the company's government contracts in Iraq, Afghanistan and Kuwait.^[12]

KBR is currently alleged to have covered up a gang rape of Jamie Leigh Jones, one of its contractors, by several other KBR employees in Iraq in July, 2005. Jones was allegedly drugged and raped by her coworkers, then confined to a security container without food, water, or medical treatment for a full day before a guard allowed her to call her father. Jones' father then contacted Representative Ted Poe, who approached the State Department regarding the matter. Because of contractual restrictions, Jones is barred from suing her employer.^[13]

Recently, KBR has come under the spotlight when several female employees in Iraq purportedly have been raped by co-workers. One of the women, identified by the pseudonym “Lisa Smith,” says two colleagues raped her at a southern Iraqi military base in January. She says a supervisor told her to “keep quiet” or face danger. Karen Houppert broke the story of Lisa Smith’s rape allegations for The Nation magazine. The article is called “Another KBR Rape Case."

[edit] Political connections and controversy

Brown and Root had a well-documented relationship with U.S. President Lyndon Johnson, which began when he used his position as a Texas congressman to assist them in landing a lucrative dam contract. In return they gave him the funds for his 1948 Senate race against Coke R. Stevenson.^[14] The relationship continued for years, with Johnson awarding military construction contracts to B&R.

Following the end of the first Gulf War, the Pentagon, led by then Defense Secretary Dick Cheney, paid Halliburton subsidiary Brown & Root Services over $8.5 million to study the use of private military forces with American soldiers in combat zones.^[4]

Cheney was chairman and chief executive officer of Halliburton from 1995 to 2000. He has been accused of providing work to KBR under contingency contracts to financially benefit himself and his business associates.

However, the Army contract which has been so controversial — LOGCAP — has, since its inception, been issued under competitive solicitations; of the three LOGCAP contracts, KBR won the first, DynCorp the second, KBR the third, and also the current one, dubbed "LOGCAP IV". LOGCAP is a contingency-based contract which is invoked at the convenience of the US Army as needed; the Task Orders under the contract are not competitively bid as the overall contract is.

Although DynCorp had won LOGCAP II in 1994,^[15] Clinton instead chose KBR, and thus the Balkans Support Contract was created for and awarded to KBR in February 1999.^[16] Even though the LOGCAP program is specifically for contingency operations such as the Balkans, there was little media coverage about KBR picking up that contract; the Balkans work is sometimes mistakenly mentioned as being part of LOGCAP, however.^{[citation needed]}

Most media controversy involves the LOGCAP III contract which KBR successfully, and competitively, bid for and won in 2001.^{[citation needed]} While it is by far the most profitable of their contracts, the functions of that contract are often mixed with the RIO contract in which KBR was given in a no-bid process. RIO, or Restore Iraqi Oil, was awarded to KBR when the United States Department of Defense determined that KBR was "the only contractor that could satisfy the requirement for immediate execution of the plan".^[17] As of September 2006, hearings are still being conducted into the RIO project over possible billing, management, and procurement violations.

One common theme is to use the term LOGCAP while using the dollar amounts from RIO, which was using LOGCAP funding for the initial staging and startup, (see reference #4).

Jamie Leigh Jones, a 23-year-old former employee of KBR, testified at a Congressional hearing in December that she had been gang-raped by up to as many as seven co-workers in Iraq in 2005. http://www.nytimes.com/2008/02/13/world/middleeast/13contractors.html?_r=1&bl&ex=1203051600&en=bf8812ecc5524a95&ei=5087%0A&oref=slogin

Another prime topic of interest is the Defense Contract Audit Agency (DCAA) report on billing-methods for meals. The auditors knew about, but disregarded, the Army's requirement, whereas KBR was directed to have varying amounts of meals prepared at certain locations regardless of how many people actually used the service. Although KBR was paying for the food, the DCAA did not believe they should be able to charge the DoD for meals prepared but not served.^[18]

[edit] Shell companies in Cayman Islands

In March 2008, the Boston Globe reported that KBR had avoided paying hundreds of millions of dollars in federal Medicare and Social Security taxes by hiring workers through shell companies based in the tax haven of the Cayman Islands. More than 21,000 people working for KBR in Iraq - including about 10,500 Americans - are listed as employees of two companies, Service Employers International Inc., and Overseas Administrative Services, which exist on the island only in computer files in an office. KBR acknowledged that the companies were set up "in order to allow us to reduce certain tax obligations of the company and its employees." But KBR does claim the workers as its own with regards to the legal immunity extended to employers working in Iraq.^[19] A new piece of legislation may halt KBR's use of the Cayman subsidiaries^[20]

[edit] Legacy in Houston

Houston's convention center was named after company founder and namesake George R. Brown. Rice University's Brown College is also named for members of Brown's family, who have made significant monetary contributions to Rice and other Houston schools.

[edit] References

[edit] External links

• Company website