Halliburton

(HAL) - Get Report

sank Tuesday after the Army chose not to extend a deadline for the company to explain its billing in Iraq.

The company had until Sunday -- a deadline already twice extended -- to justify its billings or risk losing 15% of its payments. On Monday, Halliburton said it expected to gain another extension. But on Tuesday, Halliburton said in a press release that "it was advised this morning that the Army Materiel Command has refused to grant an extension."

The move came as the Houston oil services giant faces increasing criticism for its well-compensated work supporting the war in the Middle East. Tuesday's development means the Army will withhold 15% of future payments from the company's Kellogg Brown Root unit under the so-called Logcap III contract.

The news comes just a week after a Pentagon audit took issue with Halliburton's billing practices.

"The audit found that KBR's 'internal control policies' are 'inadequate for providing verifiable, supportable and documented cost estimates that are acceptable for negotiating a fair and reasonable price,'"

The Wall Street Journal

reported last Wednesday, citing a nonpublic report. "Pentagon officials said that no defense contractor has had its estimating system ruled 'inadequate' in years."

Halliburton continues to claim the dispute has been blown out of proportion by political considerations. The company said Tuesday that the impact on its finances would be mitigated by the company's decision to withhold 15% of its own payments to subcontractors.

"At the end of the day, we do not expect this will have a significant or sustained impact on liquidity," said finance chief Cris Gaut.

Halliburton fell $1.07 to $26.72.