- The Washington Times - Tuesday, November 18, 2014

Government contractor KBR continued charging taxpayers for work on a multimillion-dollar construction project in Afghanistan for nine months after the contract was terminated, according to an internal military report disclosed amid a bitter feud between the company and military auditors.

The Army Corps of Engineers released information on the continued payout requests in a highly redacted report in response to a Freedom of Information Act request by The Washington Times. The report said KBR continued charging the government on a project at Bagram Air Base well after its contract was to cease on April 10, 2012.

KBR “continued charging costs for an additional nine months to the terminated contract with inadequate explanation and inadequate evidence to justify why these charges continued after the final extension date,” the Defense Contract Audit Agency said in a report to the Army Corps.

KBR officials downplayed the findings in interviews Tuesday, saying they represent another example of problems at the Pentagon’s audit arm.

The company called the Defense Contract Audit Agency “belligerent and unprincipled” in a recent lawsuit accusing military auditors of using KBR as a scapegoat to placate members of Congress upset about the wars in Afghanistan and Iraq.

“There are a lot of hardworking people for the DCAA [who do good work], but we have had a systemic problem in getting audits done timely, correctly and with competent people applying the DCAA’s own guidelines,” said Mark Lowes, vice president of litigation for KBR.

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The Defense Contract Audit Agency report reviewed by The Times focused on a contract in 2012 worth up to $15.2 million at the Bagram Air Base to provide training for detecting improvised explosive devices.

The agency said KBR received a termination notice on the contract on Jan. 27, 2012, though officials extended the cutoff to April 10, 2012. But instead of clearing out materials and equipment from the air base job site and ceasing charges, the company continued to incur costs and submit bills for work.

Auditors said all charges after the termination date ought to be considered unallowable. The report also said the Defense Contract Audit Agency asked KBR for a “termination plan” under the contract, but the company failed to submit the report.

The Army Corps redacted the DCAA report extensively before making a copy available to The Times, including blacking out entire pages of cost information revealing how much money was charged after the termination of the contract. Officials also withheld in its entirety a four-page response by KBR explaining the continued costs after contract termination.

But KBR officials said neither the company nor its Turkish subcontractor continued work on the contact after the termination notice.

John Adzema, senior contracts manager at KBR, also said the government kept stalling the project in the summer of 2011.

“We continued to ask them to give a notice to proceed,” he said. “Days turned into weeks and weeks turned into months.”

He said work began on the project with KBR employees on site along with more than 100 subcontractor workers. But by December 2011, KBR officials had heard the Army Corps might cancel the project. He said military officials denied it but abruptly terminated the contract just a month later in January 2012.

At that point, Mr. Adzema said, the company had a year to turn over a termination proposal outing the costs of closing out the contract. He said the company sought nearly $7 million both for work performed by KBR and its subcontractor.

The dispute dragged on as the subcontractor didn’t want the Defense Contract Audit Agency to audit its books beyond the information the company provided to KBR, according to Mr. Adzema. He said KBR settled its nearly $7 claim for about $4.5 million.

“Nobody was happy in the end,” he said.

Army Corps officials declined to comment on the contract this week.

KBR has targeted the Defense Contract Audit Agency in a lawsuit filed in September in U.S. District Court in Delaware, accusing the agency of professional malpractice in questioning more than $100 million in costs under the Army’s massive Logistics Civil Augmentation Program contract known as LOGCAP III.

LOGCAP III was the largest services contract in U.S. military history, providing logistical support for the war in Iraq. KBR officials complained in court documents early last year that the Defense Contract Audit Agency was slow to audit the company’s costs while providing an unprecedented level of scrutiny on its invoices.

The Delaware lawsuit criticized the Defense Contract Audit Agency for ruling about $100 million in contract costs of private security contractors in Iraq as unallowable. KBR said it spent millions of dollars before proving the agency wrong. Ultimately, the Armed Services Board of Contract Appeals ruled on behalf of the company.

The Defense Contract Audit Agency has about 60 auditors and more than 200 employees assigned to KBR, but the agency has shown “a larger pattern of professional misconduct,” the company charged in its lawsuit.

“For nearly a decade, DCAA’s audit work has become increasingly belligerent and unprincipled, and the agency routinely has eschewed its professional obligations to satisfy members of Congress in search of a scapegoat for the wars in Iraq and Afghanistan.”

Defense Department spokesman Bill Urban defended the audit agency.

“The DCAA services that KBRSI now asserts were negligent were financial advisory services amounting to a calculation of damages based upon a contracting officer’s interpretation of the terms of the contract,” he said in a statement. “These services were not audit services and DCAA denies that they were in response to pressure from Congress or negligent.”

• Jim McElhatton can be reached at jmcelhatton@washingtontimes.com.

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