Cleaning up the mess on your own dime

DOJ warns of fallout in Army-KBR contract dispute

Awarded to KBR in 2001, LOGCAP III — the Logistics Civil Augmentation Program III — has resulted in 160 task orders for everything from dining services for U.S. troops to in-theater delivery of housing. The outcome of a court battle between the Army and KBR over the final stages of LOGCAP III, the largest government services contract in U.S. history, could affect tens of thousands of federal contracts while creating “enormous uncertainty” for vendors and the government alike, according to the Justice Department.

The warning, delivered in the footnote of a recent U.S. Court of Federal Claims pleading, marks the latest development in a dispute to decide how to close out the 12-year-old, $38 billion military logistics contract supporting military operations in Iraq. In explaining the potentialimpact, lawyers speculated that if closeout activities had to be performed during the performance period of a contract, then the government could be forced to end deliveries to accommodate the closeout.

“For example, if an existing contract was for five years of performance, and closeout is estimated at one year, the government would need to direct the contractor to cease deliveries by year four to ensure that sufficient time exists to perform closeout,” the Justice Department filing stated.

While the Army has pushed to change the LOGCAP III pricing structure to a firm, fixed-price basis, KBR has sued to keep the closeout work under the existing cost-reimbursable arrangement. The company says the cost-reimbursable model is better because neither the company nor the Army can estimate the scope or duration of closeout work. “Legal, administrative, compliance, audit response, vendor issues, subcontract close-out and dispute resolution, to name a few, are all unknowns,” the company told the Army in a letter last summer.

KBR lawyers argue that LOGCAP III ended in December 2011 without any provisions to close out the contract. When the Army requested a proposal in 2013 for closeout activities under a firm fixed-price basis, the request was “unquestionably a solicitation for a new contract,” KBR argued.