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Blackmail

The Halliburton board knew what it was doing when it gave Dick Cheney $80 million he wasn't contractually entitled to as he moved from its executive suite to the White House.
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KBR Machinery Company had the Army over a barrel: if the Army refused to pay KBR's inflated bills (more than $1B in unjustified costs), KBR threatened to shut off payments to its subcontractors, which in turn would stop feeding the army in Iraq.

Of course, the fact that KBR was then a subsidiary of Halliburton didn't hurt its bargaining position either; the Halliburton board knew what it was doing when it gave Dick Cheney $80 million he wasn't contractually entitled to as he moved from its executive suite to the White House. But even a less-well-connected company would have had an intolerably powerful bargaining position vis-à-vis the army: the company could basically hold the troops hostage.

And KBR was able to squeeze more than money out of the Army; it also demanded and got high performance ratings, which helped it win a share of a contract for $150 billion just awarded for support functions in Iraq.

Hilzoy is right: time to de-privatize, or at least insist on always having a second source ready to take over, as any sane private company does when contracting out an essential function.

What a great issue for the Obama campaign!

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