While a Pentagon audit of Halliburton, the firm once run by Vice President Dick Cheney, found the company may have overbilled the government, defence officials added that Halliburton's subsidiary, Kellogg Brown and Root (KBR), may have been overcharged by a Kuwaiti sub-contractor by $US61 million.

Halliburton's involvement in Iraqi reconstruction has been under constant scrutiny after the company was awarded a no-competition contract worth billions of dollars. The contract was supposed to be replaced by two competitively bid contracts to rebuild Iraq's oil sector, however the tender process has been repeatedly postponed.

The current audit has focused on the company's fuel supply contract into Iraq for which it has been charging the government around $2.65 per gallon, almost three time the market rate.

In September two Democratic congressmen, Henry Waxman of California and John Dingell of Michigan, wrote to the White House to demand an explanation for why the United States was paying the excessive price for oil, which was then sold on to Iraqi consumers at four to 15 cents a gallon.

"The US government is paying nearly three times more for gasoline from Kuwait than it should, and then it is reselling this gasoline at a huge loss inside Iraq," the congressmen said in a letter to Condoleezza Rice, the National Security Adviser. "Whether this is due to incompetence, malfeasance, or some other reason, the waste of taxpayer dollars must be stopped."

Democratic Senator Frank Lautenberg added: "Halliburton is looting the U.S. Treasury and this administration seems to be happy to help them."

Under another KBR 10-year contract to provide logistical support for troops, the auditors found what they deemed a $US67 million overcharge for dining facilities throughout the region.

The Defense Department said KBR is not suspected of improperly pocketing any taxpayer funds in either case but may have failed to ensure its subcontractors performed as required.

Halliburton has so far generated about $US4 billion in business from the two contracts, which range from domestic services such as delivering mail to doing laundry for US troops.

Chris Lehane, a spokesman for Democratic presidential hopeful Wesley Clark, said: "George W. Bush is a president for Big Oil, of Big Oil, and `buy' Big Oil. He is more concerned about the success of Halliburton than having a success strategy in Iraq."