Yesterday, the Department of Justice announced it has filed another False Claims Act lawsuit against KBR. This one alleges false billing for the use of unauthorized private armed security in Iraq under the Logistics Civil Augmentation Program (LOGCAP) III contract.
The government alleges that KBR and more than 30 of its subcontractors used and billed the government for unauthorized private armed security for their employees between 2003 and 2006. According to the complaint, “except for a few possible minor exceptions,” KBR never obtained the required authorization when it hired private security companies (including Triple Canopy) to protect its executives or when it awarded subcontracts to companies that employed their own private armed security. It is alleged that KBR even armed four of its own employees without authorization. KBR is also accused of violating a Coalition Provisional Authority (CPA) directive by failing to register the private security contractors at issue with the Iraqi Ministry of the Interior.
What’s more, the government claims it has e-mails from KBR contract managers showing that, as early as 2004, the company knew it was on legal thin ice. In fact, the complaint notes, in 2004 KBR and the Army discussed modifying LOGCAP III to allow the use of private armed security for convoys and the arming of KBR personnel. It never came to pass because, ironically, KBR was concerned about its potential liability.
Now, it has to worry about its actual liability. The government doesn’t provide an exact dollar amount for the false billings, only noting that one particular dining facilities subcontractor incurred “significant costs” for unauthorized private armed security, which KBR passed on to the Army “plus associated fees.”
POGO recently wrote a letter to the Army expressing concern that it was moving too slowly in transitioning from the monopolistic LOGCAP III to the competitive successor contract, LOGCAP IV. Yesterday’s announcement is further confirmation that, by keeping LOGCAP III alive, the Army is putting taxpayers at great risk.
The history of KBR’s performance in Iraq is rife with examples of actual and alleged overbilling, kickbacks (see also here and here), waste (and more waste), exposing troops to hazardous water, ground, air and daily living conditions, and sexual assault. This is in addition to KBR’s misbehavior throughout the rest of the world, as exemplified by last year’s historic settlement of charges related to a bribery scheme in Nigeria.
There were many signs since 2003 that KBR had issues, but KBR was too big to fail and was the only contractor that could do the job – that is in the minds of the Army. The Army knew that KBR was getting higher prices, but they felt it was worth it because we were at war and no other contractor could do the job. You have to understand that the Army and many contracting officers are focused on delivering the product, cost does not matter. They get too close to the contractor and lose objectivity. DCAA reported numerous cost issues very early and were ignored and are still being ignored. But KBR is not the only example where the Government looked the other way on cost in the interest of getting the product. Most large contractors such as Boeing, Lockheed, [General Dynamics] have benefitted from the mentality that all that matters is getting the product.
-- Neil Gordon