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KBR Demands Rights to Sue U.S. For More Money Following No Bid Contracting

Kellog Brown & Root (“KRB”) has requested that the Supreme Court review the Federal Circuit’s refusal to rehear KBR’s appeal seeking more than $41 million in unpaid charges for dining services supplied to troops in Iraq.

The military contractor has already received $11.8 million in payments for these services pursuant to its no-bid contract; and KBR claims it is entitled to more from the US taxpayers.

KBR’s contract with the U.S. government was signed and initiated before the 2003 invasion of Iraq. The agreement required KBR to provide operational and dining services for 50,000 troops upon short notice. However, as the Army’s efforts grew and intensified, the demand did also, requiring support of 200,000 troops across 56 sites, according to the company.

KBR claims that in response to the frenetic pace of the contractual requirements, the company hired subcontractors without obtaining approval through their internal mechanism for approving subcontracts (meaning no bidding processed was used). The federal judge faulted KBR negotiators for not obtaining competitive prices before awarding its subcontracts.

The agreement in dispute is a cost-reimbursement contract, which runs the risk of providing government contractors a blank check, paid for by the American taxpayers. These agreements allow contractors to rack up costs as long as the expense is one that could be considered “un-expected,” covering things such as research and development, national security work, and even food it seems, as in this situation.

KBR suggests that since its efforts to feed hundreds of thousands of U.S. troops at short notice were “unprecedented” then this risk should be the responsibility of the government.

In 2012, the Federal Circuit determined the government has “considerable flexibility” in rejecting a large portion costs claimed due to an auditor’s finding that the project was unreasonably expensive.

KBR claims this “dubious calculation standard” allows the government to pay only dimes on each dollar spent. However, and according to the government, the US must be permitted to  audit and protect the taxpayers from unreasonable costs, and even penalize contractors who run up cost without consideration of its effect on the American people.

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