Randy King, an army spokesman, told the Washington Post that Halliburton had done "an outstanding job", as the chief defence contractor in Iraq, but Pentagon chiefs had decided that they did not want "all our eggs in one basket".

He said the Texas-based company, the US military's biggest contractor in Iraq, will be replaced when its contract comes up for renewal at the end of September.

After that the work will be split among three companies with a fourth hired to oversee the work of the other three.

Through its subsidiary Kellogg, Brown and Root Services Inc (KBR), Halliburton is the US military's main contractor in providing food, shelter and communications to its troops in Iraq and Afghanistan. It also handles most of the US reconstruction effort in Iraq.

Accountability

King said multiple contractors would offer better prices, more accountability and greater protection should one of the contractors fail to perform.

The paper said Halliburton would be allowed to bid on the new contracts, which are expected to attract large companies including weapons makers Lockheed Martin and Northrop Grumman.

Democrats have alleged that Halliburton, once managed by Cheney, received preferential treatment for government contracts, and that it overcharged.

The company and Cheney have rejected the allegations.

Another army spokesman, Dave Foster, said contracts for reconstruction work would be allowed to finish but would not be extended after September.

"The Iraq reconstruction effort is winding down ... so there is no need for new contracts to replace the existing [ones]," he said.

After that, he said, the Iraqi government was expected to do its own contracting work.

The US army paid $7 billion to KBR for its logistics work, The Washington Post said, quoting private consulting firm Eagle Eye Inc.