The Defense Department had originally announced it would withhold 15 percent of payments to Halliburton subsidiary Kellogg, Brown and Root (KBR) from April 1 while final prices were negotiated.
But the withholding order, affecting an estimated 300 million dollars in payments to KBR contractors, would now be postponed for an initial 30 days, and possibly another 30 days after, Halliburton said.
The freeze was originally recommended by the Defense Contract Audit Agency after it concluded in January that that KBR's estimates of its subcontractors' costs were inadequate.
An investigation by the Pentagon auditors found that KBR had overstated subcontractors' costs for providing food to US troops at seven sites in Iraq (news - web sites) by 67.3 million dollars.
But the Army Material Command agreed to postpone the withholding order because it had already asked KBR to re-estimate work in the Middle East to match a smaller budget, Halliburton said.
Drawing up new estimates would slow down the separate price negotiations, Halliburton said.
KBR provides the army with a vast range of services from construction to cooking meals in the Middle East region under a 4.4-billion-dollar contract called Logcap III.
Halliburton, run by Vice President Dick Cheney (news - web sites) from 1995 to 2000, said it did not believe the payments should be withheld.
But in any case, if the Pentagon eventually went ahead with the freeze, only KBR subcontractors would be affected, in accordance with its contractual agreements.
"KBR will continue to receive full payment for its direct services billed," it said.
Halliburton said it was confident about resolving the matters "in a cooperative manner."
"At the end of the day, we do not believe this will have a significant or sustained impact on liquidity," said Halliburton chief financial officer Cris Gaut.
"KBR's working capital investment in Iraq now exceeds 1.2 billion dollars. There are very few companies in the world that could or would adapt this quickly while, at the same time, finance an operation of this magnitude."
