A federal judge last week tossed out a complaint from wartime contractor KBR, in a case the Justice Department said could have ended up leaving taxpayers on the hook for ever-increasing costs from the war in Iraq.
The more than yearlong dispute centered around how KBR should be paid as the contractor winds down the nearly $38 billion logistics contract used to support troops in Iraq.
KBR wanted to continue billing the government on a cost-reimbursable basis, meaning the company gets paid costs plus a fee as the expenses are incurred. But Army officials want KBR to provide a fixed fee, meaning the company would have to cover costs that exceed that amount.
But Justice Department attorneys noted last year the that case held far broader implications.
“KBR does not deign to address the implication of its position: if the Court accepts KBR’s novel theory, literally tens of thousands of government contracts will be affected, creating enormous uncertainty for the government and contractors alike,” Justice Department attorneys wrote.
In dismissing the case last week, U.S. Federal Claims Court Judge Victor Wolski ruled that the court didn’t have jurisdiction over matters involving contract administration. John Elof, a KBR spokesman, said the company was disappointed in the ruling but would be studying its options. He declined further comment.
The case provided a significant window into the tenuous relationship between the Army and KBR.
In one email made public in the lawsuit, an Army contracting officer told a KBR official he was through talking unless the company was ready to discuss providing a “FFP deliverable,” referring to a firm fixed price of the contract closeout.
But among its own court filings, KBR pointed out unprecedented level of Pentagon scrutiny, saying the Defense Contract Audit Agency is also still auditing KBR invoices and may still need another five years to complete the job.
Even then, audit disputes can extend for years. Officials estimate the closeout of the contract could last nearly a decade, as lawsuits against KBR continue wend their way through the courts.
Under a provision that some lawmakers have railed against, KBR is able to pass on many of its legal defense bills stemming from its work on the contract onto the U.S. government.
While comprising a small slice of multibillion-dollar contact known as LOGCAP III, the legal costs associated with KBR’s lawsuits have become an increasing sore point on Capitol Hill.
In June, two U.S. senators pressed the Pentagon for details on how much the company billed the U.S. government for defending a lawsuit by soldiers who accused the company of exposing them to carcinogens.
The letter by Sens. Ron Wyden and Jeff Merkley, both Oregon Democrats, said the company attorneys had flown first class and billed up to $700 per hour.