KBR's Editorial Submission to the New York Times in response to the May 23 'KBR Does it Again' Editiorial

The following was issued by KBR's Interim President of Government and Infrastructure William C. Bodie in response to the New York Times editorial 'KBR Does it Again' published May 23, 2009:

The May 23 'KBR Does it Again' editorial contains several plainly false statements. The piece demonstrates a lack of understanding of the electrical issues in Iraq and KBR's level of involvement and responsibility.

Most notably, the editorial states that "Pentagon investigators linked faulty KBR wiring to the electrocution of four soldiers intent on relaxation." That assertion is absolutely false. There is no "link" between "faulty KBR wiring" and electrocutions, nor is KBR aware of any Pentagon investigation that has made such a link.

Contrary to many false reports and innuendo in the media, KBR did not wire every building in the whole of Iraq. KBR has not been performing electrical work at every military camp at all times since the Iraq invasion.

While The Times did not name the soldiers whose deaths were purportedly "linked" to "faulty KBR wiring," the allegation appears to be that KBR's work was connected to the deaths of Army Specialist Chase Whitham, Army Specialist Marcos Nolasco, Navy Petty Officer 3^rd Class David Cedergren, and Army Staff Sergeant Ryan Maseth.

None of these incidents were caused by "faulty KBR wiring."

The incident involving Specialist Whitham occurred in 2004, in a swimming pool in Mosul. KBR did not wire the pool, and KBR had no maintenance or other responsibility for the pool at the time of the incident. As such, any report that KBR wiring caused or even contributed to this electrocution is baseless and false.

The incident involving Specialist Nolasco occurred in 2004, in a shower in Bayji. KBR has been told that the shower was wired by Iraqi contractors unrelated to KBR. After the incident, the military contracted with KBR to fix the electrical problems caused by the other contractor's installation.

The incident involving Petty Officer Cedergren occurred in 2004, in a shower at Iskandariyah. KBR did not wire the shower, and in fact KBR did no work whatsoever at this site until 2006, almost a year-and-a-half later.

The incident involving Staff Sergeant Maseth occurred in 2008, in a shower at the Radwaniyah Palace Complex. The military had directed KBR to perform only limited maintenance on Staff Sergeant Maseth's building, which was a pre-existing, Iraqi-constructed building. KBR did not wire the building. Further, KBR notified the military on multiple occasions that the building--and many other Iraqi-built structures at the camp--lacked proper grounding. A representative of Army Contracting Command testified before Congress that the military's decision to forego such repairs was based on risk assessment and resource trade-offs, which are inherent in any military operation.

It is truly tragic that these young men died while serving their country in Iraq. However, it is offensive that the Times and other media outlets are now using their deaths as statistics in a politically-driven campaign against KBR. KBR, and these soldiers, deserve better.

The Times also relies on incorrect information regarding KBR's wiring work in Iraq. The facts are that, working at the direction of the military, KBR is conducting electrical inspections and grounding and bonding of electrical systems for facilities throughout Iraq. KBR has completed work on approximately 25,000 facilities to date and turned them over to military inspection teams. The military has passed all but 4 of those facilities. KBR continues to work diligently to complete its efforts as quickly as possible.

In addition to these false allegations, the record needs to be set straight on the issue of "bonuses." The term bonus is factually inaccurate. Award fees (not bonuses) are awarded under LOGCAP III. The US government's award fee structure is based on a grading system that scores a number of criteria, including performance, quality, schedule, cost control and management support of all KBR's work in theater. This work includes operation of dining facilities and morale, welfare and recreations centers, mail delivery to the troops, as well as KBR's electrical activities. Our customer, the US Army, remains satisfied with our work, as evidenced by our award fee board scores that have consistently ranged from good to excellent. KBR disputes the amount of $83mm awarded for work performed in Iraq after January 2008. KBR was awarded $2.8mm in award fees in June 2008 for the award fee period ending February 2008 for services performed in Afghanistan.

KBR has worked and continues to work with the government on this issue. We have pledged full cooperation and provided information requested of us. The repeated assertion that KBR has conducted its business in any way to the contrary is not true and further is of great disrespect to the dedicated men and women who work in Iraq for KBR. They work in austere, unpredictable conditions, at great sacrifice to themselves and their families. To date, over 800 KBR personnel and subcontractor workers have been injured or killed from hostile action while working in theater.

Finally, I would like to respond to the assertion that a "flat denial" from KBR was insufficient in this instance. KBR was not invited to attend the hearing at which these allegations were made, nor was KBR offered an opportunity to respond to the allegations in a similarly wide-reaching forum. Hundreds of media stories have attacked KBR based on pure innuendo and no facts.

KBR remains committed to engaging in a fact-based dialogue on this issue and remains committed to providing our customer, the U.S. Army, with safe, high-quality and cost-effective service.

CONTACT:
Corporate Communications
713-753-3775

or
Director, Investor Relations
Rob Kukla, Jr., 713-753-5082
investors@kbr.com