June 14 (Bloomberg) -- Halliburton Co., the world's largest oilfield-services company, was ``properly awarded'' its open- ended contract to repair the Iraqi oil infrastructure, the U.S. General Accounting Office concluded in a report issued today.

The Army Corps of Engineers awarded the contract to the only company the Defense Department determined was in a position ``to provide the services within the required time frame given classified prewar planning requirements,'' the report read.

Democratic lawmakers have said Halliburton's contract, estimated to be $2.5 billion to $7 billion, violated federal rules and should have been subject to competitive bids. The GAO report found that of 25 new contracts in Iraq, representing about 80 percent of reconstruction appropriations, ``involved circumstances that the law recognizes as permitting other than full and open competition'' and met legal requirements.

Scrutiny over Halliburton's Iraq contracts won't diminish because this is an election year and Vice President Dick Cheney once ran the company, said James Halloran, an energy analyst at National City Private Client Group in Cleveland, which holds about 33,000 Halliburton shares. ``It's going to take a string of continued clearances and examinations of what went on over a period of time.''

The issue will receive further scrutiny on Tuesday at a hearing of the House Government Reform Committee, where GAO Comptroller General David Walker will testify.

At issue is Halliburton's involvement in helping the U.S. prior to the Iraq war assess the potential damage to Iraq's oil infrastructure and prepare a plan for rebuilding. Based on the company's involvement with the plan, it was later awarded as much as $2.5 billion in orders as of May 11 to begin rebuilding.

``We were chosen for this important work because we were the best qualified with a proven track record of the ability to perform,'' Halliburton spokeswoman Wendy Hall said.

Special Prosecutor

Senator Frank Lautenberg of New Jersey, Representative Henry Waxman of California and other Democrats have said Houston-based Halliburton was favored by the U.S. government because Cheney was chief executive from 1995 to 2000. Lautenberg called on Attorney General John Ashcroft to name a special prosecutor to investigate ties between Halliburton and the Bush administration.

He cited recent reports that Vice President Cheney's chief of staff, Lewis Libby, participated in talks regarding the contract, and an Army Corps of Engineers memo suggesting Cheney's office signed off on the deal.

``This in my view could be a major government scandal,'' Lautenberg said in a conference call arranged by the Democratic National Committee. ``Let the American people know exactly what's taking place.''

Lautenberg said he may offer a resolution on the floor of the Senate demanding an investigation if neither Ashcroft nor the Senate Republican leadership accedes to his request.

A report submitted to Congress by the U.S.-led Coalition Provisional Authority, which is running Iraq until the June 30 transition to an interim Iraqi government, showed that of the $18.4 billion Congress approved for non-military reconstruction in Iraq, only $2.3 billion had been spent through March 24.

To contact the reporters on this story: Jon Steinman at jsteinman@bloomberg.net

Last Updated: June 14, 2004 18:00 EDT