KBR vs. Army: On Largest Services Contract, 'Things Have Gotten Very Nasty'

May 5, 2013

Army contracting officer Robert Egan gave contractor KBR Inc. a rare ultimatum: Provide a firm, fixed price on remaining work to close out the largest government services contract in U.S. history. Or else, he added, he was finished talking.

“Until I see that FFP deliverable, I cannot enter further communication exchanges with your contracts team,” Egan told the company in aFeb. 26 email.

At issue is the final stage of the Army’s $38 billion Logistics Civil Augmentation Program (LOGCAP) III, the 12-year-old logistics contract that has supported virtually all U.S. military logistics operations in Iraq. The Army seeks to revise the pricing terms on the final work to be done on the contract to be firm, fixed price instead of cost-reimbursable. In response, KBR has filed a lawsuit seeking to keep to the existing cost-reimbursable terms.

At stake in the dispute is far more than varying interpretations of contracting procedures. By its own estimates, KBR says the closeout work on the contract will cost more than $500 million and take up to 13 years. The final decision on the closeout, as well as years of still-unresolved audits, could cost or save the government hundreds of million of dollars in additional costs.

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