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Friday, May 7, 2010

Does being too wrong make it right?

As noted in a recent post, KBR is under investigation for possible procurement fraud conducted by its agents. The article in this post brings us up to date on the intriguing on-going story.

KBR to Get No-Bid Army Work as U.S. Alleges Kickbacks (Update1)
KBR Inc. was selected for a no-bid contract worth as much as $568 million through 2011 for military support services in Iraq, the Army said.

The lawsuit is the second government action this year against KBR. The U.S. sued the company on April 1, alleging that it used private armed security guards in Iraq between 2003 and 2006 in violation of its Army contract and then improperly billed for their services.

The Army announced its decision yesterday only hours after the Justice Department said it will pursue a lawsuit accusing the Houston-based company of taking kickbacks from two subcontractors on Iraq-related work. The Army also awarded the work to KBR over objections from members of Congress, who have pushed the Pentagon to seek bids for further logistics contracts.

he no-bid work order is unusual because the Army, at the insistence of Congress, has since April 2008 put all logistics orders to bid, pitting KBR against Falls Church, Virginia-based DynCorp International Inc. and Irving, Texas-based Fluor Corp.

The Army didn’t put this work out for bids because U.S. commanders in Iraq advised against it, saying that enlisting a new company would be too disruptive as the U.S withdraws, Army program director Lee Thompson said in an interview before the Justice Department action was announced.

The Army, in its statement yesterday, said putting to bid an order for 18 months’ work and making the transition to a new contractor would cost at least $77 million. The KBR work order will be awarded by Aug. 31, said Mike Hutchison, deputy director of Army logistics contracting.

COMMENT: I would note that this is somewhat akin to the situation a protesting bidder finds herself in when, proven correct in contesting an improper bid, the unlawful contract is nevertheless "ratified" in favor of the illegally awarded contractor. This has happened in an earlier mentioned Guam situation, as well as a case only reported today arising from the Guam Superior Court involving dueling telecommunications companies.

In this particular case, though, you have to wonder how inured the Army has become to "collateral damage"? At some unclear point, the convenience of the government (sometimes styled "the government's best interest", or "national security") must give way to the protection of the integrity of the procurement system, if the procurement system is to continue with even a facade of maintaining the high moral ground.

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