In a letter to KBR, the Defense Contract Management Agency said a review had found its purchasing system's "policies and practices are effective and efficient, and provide adequate protection of the government's interest."

KBR, which has a logistics contract with the Pentagon worth 13 billion dollars to feed and house US troops abroad, has been a target of allegations of overcharging for food service. The company has denied the allegations.

The DCMA reviewed KBR's purchasing system in 2003, but conducted another review of the system this year "due to the unprecedented level of support KBR currently provides the military in Iraq and Kuwait," Halliburton said in a statement.

"While expected, this is clearly good news," said Andy Lane KBR's president and chief executive officer.

It will allow KBR to place certain subcontracts without having to gain prior approval.