According to the Wall Street Journal on Tuesday, Halliburton's Kellogg Brown & Root unit - which provides food, mail, telephones and other basic services to US troops in Iraq - submitted an estimate to the Pentagon for expected spending in the year starting 1 May, based on a list of army requirements.
The company said its costs for the year could exceed $10 billion, the newspaper said.
But the army has budgeted just $3.6 billion to support the KBR-provided services during the same period, the newspaper said.
Since then, the newspaper said the army has been trimming its requests to close the gap.
The US army paid KBR $6.9 billion
for its services in Iraq in 2004
General George Casey told the Wall Street Journal that the difference had been reduced to closer to $4 billion. "To say that we're not worried would not be true. Someone has made some assumptions that have driven the costs through the roof," he told the newspaper.
Casey told the newspaper that he was trying to determine whether the spiralling costs reflected in KBR's estimate were due to a spike in proposed charges by KBR or a substantial increase in requests by the army.
He told the publication that a team of army experts was probing that question.
The Wall Street Journal article quoted Casey as saying the problem could lie within the government, as the army's needs for troop support far exceeded the Pentagon's budget ceiling for those services.
Halliburton declined to comment on Tuesday, but spokeswoman Wendy Hall had said in a statement that it would be inaccurate to compare KBR cost estimates with what the military actually ended up spending.
Since the inception of the current troop-support project, the newspaper quoted Hall as saying: "KBR has provided estimates to the Army of nearly $16 billion, while we have only been funded to perform $9.8 billion worth of work."
"KBR has provided estimates to the Army of nearly $16 billion, while we have only been funded to perform $9.8 billion worth of work"
The newspaper said that currently, the company operates more than 80 sites in Iraq, ranging from military bases to embassy compounds.
Last year alone, the Army paid KBR $6.9 billion for troop-support services in Iraq, the article said.
But Wall Street Journal said Pentagon auditors had had a series of disputes with KBR for well over a year, largely focused on what the auditors had described as KBR's sluggishness in fully accounting for past spending in Iraq.