July 12 (Bloomberg) -- Halliburton Co.'s multibillion-dollar contract to feed and care for U.S. troops in Iraq and transport war supplies won't be renewed, an Army spokesman said.

The five-year-old contract with Halliburton's KBR unit will be put up for bids after its current phase ends later this year, Army spokesman Dave Foster told reporters today at the Pentagon. Investors said that won't disrupt the planned public offering for KBR, which also builds oil refineries, chemical plants and liquefied-natural-gas terminals.

``The Pentagon contracts are winding down and they're not a big money maker anyway,'' said James Halloran, who manages $33 billion at National City Private Client Group in Cleveland, including about 30,600 Halliburton shares. ``KBR is going back to building energy complexes, and there's going to be a lot of infrastructure built in the next several decades. That's why you'd buy the stock.''

Halliburton became the sixth-largest U.S. military contractor last year with its work in Iraq. The company drew criticism from Democrats in Congress, who said it received special treatment from the government because of ties to Vice President Dick Cheney, who headed Halliburton from 1995 to 2000.

Shares of Houston-based Halliburton fell 70 cents to $74.88 in New York Stock Exchange composite trading. The stock has risen 53 percent in the past year.

Public Offering

The company plans to sell almost 20 percent of KBR in an initial public offering this year and has said it may divest the remaining stake later. Chief Executive Officer David Lesar has said the unit, with narrow margins, is a drag on the company's share price and profits. KBR, which makes most of its money through engineering and construction of large energy projects, accounted for 44 percent of Halliburton's revenue and less than 10 percent of earnings in the first quarter.

The Army decision was ``neither unusual nor unexpected,'' Melissa Norcross, a spokeswoman for KBR, said in a statement. ``We have been open and forthcoming that this work may be modified or replaced at any time.''

Halliburton has received orders valued at $17.1 billion under a contract won in 2001 to provide services to the U.S. Army worldwide, according to the Army Field Support Command. That includes $15.4 billion for Iraq work.

KBR and Rebidding

KBR will be allowed to take part in the re-bidding of the contract, which is unrelated to the company's performance, Foster said. ``We are constantly in the review process of formulating how we can do things better in a more effective way,'' he said.

The decision not to renew the contract was first announced by the Washington Post.

``The Pentagon has talked about parceling out this contract in the past,'' Halloran said. `It doesn't mean that KBR won't wind up with significant parts of it.''

A formal contract solicitation will be released July 28 with an award scheduled for November, Foster said. The bidding will allow for more than one contractor to participate, he said.

The Army Field Support Command convened a two-day industry briefing in late March to outline its tentative plans for a revised ``LOGCAP IV'' contract, a one-year agreement with four, one-year options, Foster said.

To contact the reporters on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net; Jim Kennett in Houston at jkennett@bloomberg.net.

Last Updated: July 12, 2006 16:09 EDT