On April 1, 2010 the Department of Justice (DOJ) announced that it had filed suit against LOGCAP contractor KBR, alleging violations of the False Claims Act.  Unfortunately for KBR, this was no April Fool’s Day joke.  According to the DOJ press release—

The government’s lawsuit alleges that some 33 KBR subcontractors, as well as the company itself, used private armed security at various times during the 2003-2006 time period. KBR allegedly violated the LOGCAP III contract by failing to obtain Army authorization for arming subcontractors and by allowing the use of private security contractors who were not registered with the Iraqi Ministry of the Interior. The subcontractors using private security are alleged to have also violated subcontract terms requiring travel only in military convoys. The government’s lawsuit further alleges that at the time, KBR managers considered the use of private security unacceptable and were concerned that the Army would disallow any costs for such services. KBR nonetheless charged the United States for the costs of the unauthorized services.

According to this article by the Washington Post

In a statement, KBR said the Army was aware of the private security costs. ‘Nothing in KBR's contract with the Army prohibits KBR or its subcontractors from using private security to fulfill its mission to support America's troops,’ the company said. The company added that the Army breached its contract responsibilities ‘by repeatedly failing to provide the necessary force protection and, in fact, frequently left KBR, its employees and its subcontractors unprotected.’ KBR said it had had taken that issue to the Armed Services Board of Contract Appeals in 2008.

This Business Week article quotes KBR as saying that “it believes the costs incurred by it and subcontractors ‘were reasonable, necessary and appropriate under the contractual arrangement between KBR and the Army.’”

We reported recently on the tension between using Government personnel versus private security personnel to support military operations. In that article, we discussed the GAO’s report to Congress, in which it concluded that, in some instances, use of private contractors was saving the State Department more than 10 times what it would have paid for equivalent Government personnel.  Unfortunately DOD was unable to provide GAO with sufficient information to support a meaningful analysis.  Nonetheless, we were struck by the enormous cost savings the Government received via use of non-governmental personnel to support military operations.  Sure, that point is not dispositive in the matter of whether KBR billed DOD for costs expressly prohibited by its contract, or whether DOD breached its duty to protect KBR employees in the Southwest Asia Area of Operations.  But it’s an interesting point, nonetheless—and one that we believe is not getting sufficient play in the “mainstream media.”

Meanwhile, this article by the Indianapolis Star reported that 47 National Guardsmen have refilled a lawsuit against KBR in a Houston District Court.  This lawsuit is one of many filed by “hundreds” of members of the National Guard who provided security for KBR personnel at the Qarmat Ali water-pumping station near Basra, Iraq—according to the report.  The Star reported that—

The plant the KBR employees were rebuilding was vital to restoring oil production in the area. The site initially was covered in an orange, sand like dust, the remnant of an anti-corrosive chemical that had been spread around, according to the suit. It contained heavy concentrations of a carcinogen called hexavalent chromium. … The possible exposure has inspired legislation in Congress that would create a registry of affected service members and extend their access to health care.

We have noted a spate of recent KBR-related “issues” over the past few months.  For instance, the Franken Amendment reportedly originated with a KBR employee’s rape at the hands of her fellow co-workers.  In another article, we discussed allegations that KBR billed DOD for excessive levels of maintenance staff.  And of course, like all other LOCAP contractors, KBR spends its fair share of time before the Commission on Wartime Contracting, getting grilled on staff drawdown, DCAA audit issues, and alleged deficiencies in its “business systems.”

One might argue that “where there’s so much smoke, there must be fire.”  But another point of view might be that these are complex matters involving disputed facts and circumstances, and that it will take a wise trier of fact to determine where fault lies.  We favor the latter interpretation.