Source: AP

WASHINGTON — The Army's primary support contractor in Iraq is being warned by Pentagon auditors to cut its work force there or face nearly $200 million in penalties for keeping thousands too many on the payroll.

The Houston-based KBR Inc., responsible for everything from mail and laundry to housing and meals, has increased employee levels while U.S. troops steadily leave the country after more than six years of war, the audit says. As a result, the U.S. government is paying far more in labor costs in Iraq than it should as military resources are shifted to Afghanistan.

"Each day that passes without taking action results in continued overstaffing and inefficiency," the report from the Defense Contract Audit Agency says.

The Oct. 26 audit, obtained by The Associated Press, opens a window into a behind-the-scenes battle over KBR's billing and management practices. The company provides crucial battlefield services under a $33.8 billion, 10-year deal signed in 2001.

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