Back in April it was briefly in the news that the United States Justice Department filed a lawsuit against Kellogg Brown & Root Services (KBR) alleging that it violated the False Claims Act.
The suit, filed in U.S. District Court in Washington, alleged that KBR knowingly included impermissible costs for private armed security in billings to the Army under the Logistics Civil Augmentation Program (LOGCAP) III contract. The LOGCAP III contract provides for civilian contractor logistical support, such as food services, transportation, laundry and mail, for military operations in Iraq.
The government’s lawsuit alleges that some 33 KBR subcontractors, as well as the company itself, used private armed security at various times during the 2003-2006 time period. KBR allegedly violated the LOGCAP III contract by failing to obtain Army authorization for arming subcontractors and by allowing the use of private security contractors who were not registered with the Iraqi Ministry of the Interior. The subcontractors using private security are alleged to have also violated subcontract terms requiring travel only in military convoys. The lawsuit further alleges that at the time, KBR managers considered the use of private security unacceptable and were concerned that the Army would disallow any costs for such services. KBR nonetheless charged the United States for the costs of the unauthorized services.
The ever intrepid Ms. Sparky posted the suit online and parts of it merit examination.
7. KBR performs a significant portion of its obligations under LOGCAP III through subcontractors. These subcontractors bill KBR for the costs of the services they provide pursuant to their subcontracts with KBR. KBR, in turn, bills the Army for its costs incurred under the subcontracts plus associated fees. The costs at issue here are those related to the provision of private, armed security in Iraq, from 2003 through .2006, not authorized under LOGCAP III, the Federal Acquisition Regulation, or other authorities incorporated by reference.
8. Under LOGCAP III, the primary responsibility for providing force protection to KBR, its employees, and its subcontractors is assigned to the Army, not to KBR.
9. In fact, under LOGCAP III and related laws and regulations incorporated by -2-reference, KBR and its subcontractors are absolutely prohibited from possessing or using privately owned weapons, unless explicitly authorized by the appropriate military command.
10. Except for a few possible minor exceptions, KBR never obtained the required military authorization for itself or its subcontractors to carry firearms.
11. Despite these restrictions and the lack of authority, KBR awarded subcontracts to three private security companies to provide armed personal security details for its executives and awarded additional subcontracts to more than 30 other companies that employed their own private armed security. In addition, KBR armed some of its own employees without authorization.
12. KBR presented claims for payment to the Army knowing that they included the costs of private, armed security services prohibited by LOGCAP III.
LOGCAP III and Related Restrictions on Private Armed Security
13. In a war zone such as Iraq, the military has an obvious and critical need to control the possession and use of weapons by its own personnel, as well as by the civilians working by its side. Military commanders need to know and contain who is armed and what weapons are being used. They need to be able to establish minimum qualifications and required training, and to ensure that those who carry weapons understand and abide by the rules for the use of deadly force. For these reasons, LOGCAP III and authorities incorporated by reference are very clear about the lawful use of firearms by contractor personnel in Iraq.
Now it is true that the prohibition against the use of privately owned firearms can be waived or modified, but only by the Deputy Commander in Chief, USCENTCOM, or his designee under General Order No. 1A, or the Deputy Commander and Chief of Staff, USCENTCOM, or his designee, under General Order No. 1B. The contracting officer is the only authorized official who shall increase, decrease, or alter the scope of work to be performed, and any orders or instructions interpreted by the contractor as impacting the scope or cost of the contract.
In November 2005, KBR and the Army executed Modification 00012 to the LOGCAP III contract to incorporate Defense Federal Acquisition Regulation Supplement {} .252.225-7040, which effectively allowed KBR and its subcontractors limited use of privately owned weapons. Consistent with USCENTCOM General Order No. 1 A, Modification 00012 clearly states that privately owned weapons can be used only if authorized by the Combatant Commander who, for Iraq, is the USCENTCOM Commander. Modification 00012 also required approval by the contracting officer. With possible minor exceptions; KBR never obtained such authorization or approval either for itself or for any of its subcontractors.
While USCENTCOM General Order Nos. 1A and 1 B, and LOGCAP III Modification 00012 address the use of privately owned weapons, LOGCAP III, Clause H-21, addresses the use of government furnished weapons. The permissible use of government furnished weapons, however, is no different in terms of authorization than the use of privately owned weapons. In other words, the use of government furnished weapons is strictly forbidden unless authorized by the USCENTCOM Commander. Clause H-21 also repeats the prohibition on privately owned weapons and imposes on KBR the duty to ensure that its employees and subcontractors comply with United States and Iraqi laws.
LOGCAP III, Clause H-13, also required KBR to comply with orders and directives issued by the Coalition Provisional Authority (CPA), and to ensure similar compliance by its subcontractors] CPA Order No. 3, Section 3 (Dec. 31, 2003), required private armed security companies to be licensed by the Iraqi Ministry of the Interior. CPA Memorandum No. 17, Section 6 (June 26, 2004), required private security companies to be registered with the Iraqi Ministry of the Interior. Not all of KBR’s subcontractors complied with CPA Order Nos. 3 and 17, nor did KBR meet its obligation to ensure compliance.
In the past private security contractors have acknowledged they did not comply with Ministry of Interior requirements because they believed the Ministry was infiltrated by insurgents and could use such information to help plan attacks against contractors.
Thus, the possession and use of both privately owned and government furnished firearms by KBR and its subcontractors were strictly prohibited unless authorized by the USCENTCOM Commander, or his designee, and approved by the contracting officer. But this did not leave KBR and its subcontractors without force protection. Consistent with the restrictions and prohibitions on private armed security, LOGCAP Ill, Clause H-16, assigned primary, if not sole, responsibility for force protection for KBR and its subcontractors to the military at a level “commensurate with that given to [DoD] civilians in the operations area.”
Thus, more than 30 of KBR’s other subcontractors used private armed security in Iraq without required authorization. KBR either knew that these subcontractors were using unauthorized and, therefore, prohibited private armed security, or did not ensure that their use of private armed security was authorized as it was required to do under LOGCAP III.
In particular, ESS Support Services Worldwide (ESS), a dining facilities subcontractor, routinely hired private armed security companies to shuttle managers, personnel, and payroll around Iraq, rather than arrange to travel with military convoys as required by LOGCAP III. ESS also used private armed security to provide static guards for its offices in Iraq, rather than rely on military force protection, again in violation of LOGCAP III. KBR knew that ESS hired private armed security and either knew or should have known that the cost of these services inflated the cost of ESS’ subcontracts. KBR had awarded the subcontracts without adequate price competition and with reckless disregard for the costs that it would be passing on to the Army. ESS incurred significant costs for unauthorized private armed security costs, which KBR passed on to the Army, plus associated fees, under LOGCAP III.
Those who remember the murder of the four Blackwater contractors at Fallujah, Iraq in 2004 will recall that Blackwater contracted with ESS to provide security for food shipments to U.S. bases in Iraq. The contract called for security teams to have two armored vehicles and a minimum of six personnel, as well as a heavy machine gun that could fire up to 850 rounds per minute.
I can’t help but wonder if their deaths might have been avoided if someone in government had been smart enough to disallow the invoices submitted by KBR for the private security work it was not authorized to contract out.
After all KBR knew its claims were false. As the suit points out:
28. KBR’s Senior Contracts Manager for LOGCAP III, Mary L. Wade, in an August 30, 2004 e-mail, acknowledged that “[i]f subs are using their own PSD [Personal Security Details] then the cost could be considered unallowable by both the client [the Army] and DCAA [the Defense Contract Audit Agency] as the government has the responsibility to provide force protection.”
29. Later, in an April 4, 2007 response to questions by the Army regarding the unauthorized use of private armed security, Ms. Wade admitted that KBR did not seek USCENTCOM approval for itself or its subcontractors.
30. In another internal e-mail dated June 3, 2004, KBR’s lead subcontract administrator for Iraq, James Ray, asserted that KBR should not hire subcontractors who used private security because “it will effect a material change in our contract.”
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34. In 2004, the Army and KBR discussed modifying LOGCAP III to allow the use of private armed security for convoys or the arming of KBR security personnel. The modification was never executed, in part because KBR had concerns over liability. Nevertheless, these discussions demonstrate that KBR knew and understood that a contract modification would be necessary to allow for the use of private armed security contractors or the arming of KBR personnel, and that without such a modification, KBR could not charge the Army for the costs of private armed security services.
