U.S. District Judge Gerald Bruce Lee dismissed the False Claims Act claim, holding that because the invoices Triple Canopy submitted for payment did not, themselves, contain false statements, they could not be considered “false claims” for purposes of FCA liability. Distinguishing the case from those involving defective products, the court explained that there could “be some inherent value retained in a service that is provided by an unqualified employee compared to a complete inability to use a product that is rendered defective.” The court held that the government had failed to sufficiently allege that the guards’ services were “entirely devoid of value or that the noncompliance with the weapons qualification requirement caused any injury to the government such that the guards effectively provided no service at all.”

The government also asserted that Triple Canopy’s submission of invoices to the government constituted a “false implicit certification” of compliance with the requirements of the contract. Judge Lee, however, recognized that the Fourth Circuit has not adopted an “implied certification theory” of liability under the False Claims Act. Even if it had, the court held that the government’s failure to plead that weapons qualification certification forms were a precondition for payment undermined their implied certification theory of liability.

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About Triple Canopy 

Triple Canopy is a leading global provider of mission support, security and training services. We offer comprehensive program management solutions to support government agencies and multinational corporations in high risk and complex environments across the globe. Our personnel bring a dynamic combination of management, expertise and execution to each challenge–delivering long-term, cost-effective programs that are specifically tailored to meet customer needs.

“There is a serious problem in Afghanistan related to disputes regarding the payment of Afghan subcontractors by prime contractors,” John F. Sopko, the inspector general, wrote in a letter accompanying the report, which was sent to numerous senior officials this week, including Secretary of State John F. Kerry and Defense Secretary Chuck Hagel. “SIGAR has received testimonial and documentary evidence from credible sources alleging death threats, work stoppages, and strikes.”

With tens of billions of U.S. tax dollars flowing into Afghanistan since the war began in 2001, government contracting has proved highly lucrative for thousands of U.S. and foreign companies. But many projects also rely heavily on subcontractors, about 90 percent of whom are based in Afghanistan.

In recent years, SIGAR and other government agencies have received a flood of complaints about prime contractors — about 40 percent of whom are U.S.-based — not living up to contractual agreements. According to the report, SIGAR’s hotline received 183 complaints about nonpayment from 2009 through October. Fifty-two investigations are underway into complaints involving a total $69 million.

“While a subcontractor may always face the risk of nonpayment,” the report says, “Afghan subcontractors may be particularly at risk due to a lack of adequate legal protections and limitations placed on the U.S. government’s ability to intervene on their behalf.”

Meanwhile, a growing number of Afghan subcontractors are threatening street justice.

IGAR has documented threats to “blow up a compound of U.S. contractors and government agencies,” detonate suicide bombs, pull weapons on employers or damage property to try to collect money.

“Investigators have found that the prime contractor’s failure to pay is often viewed by the Afghan subcontractor as a failure on the part of the U.S. government,” the report says.

In February, a subcontractor told SIGAR representatives he planned to ignite himself in front of the U.S. Embassy, saying he had not been paid for work on an Army Corps of Engineers project in Helmand province. There is no evidence he followed through on his threat.

The report notes that failure to pay subcontractors also can lead to serious hardship for Afghan workers, many of whom earn only a few hundred dollars a month.

In addition, some Afghan employees have walked off the job amid allegations of nonpayment, threatening the pace of multimillion-dollar U.S.-financed reconstruction projects.

But the inspector general also notes that prime contractors have faced “extortion” following false claims of nonpayment made to Afghan police and courts.

In some cases, the prime contractors or their employees have had their passports seized by Afghan authorities or have been put on the no-fly list at Kabul’s airport so they cannot leave the country until a payment dispute is resolved. Afghan police have also issued arrest warrants for prime contractors accused by Afghan employees of nonpayment.

U.S. authorities are often powerless to intervene, even when it appears the allegation of nonpayment is unfounded.

“We have identified a range of potential risks associated with subcontractor nonpayment,” the report states.

David Snepp, a spokesman for the U.S. Embassy, said State Department officials would review the report.

Sopko recommends that U.S. agencies, including the Defense Department, more aggressively monitor payments to contractors and step in to suspend or revoke contractors’ licenses when payments are not made.

He also recommends more aggressive enforcement through the False Claims Act when it is proved that prime contractors have not made justifiable payments to subcontractors. www.washington post

While the Army has pushed to change the LOGCAP III pricing structure to a firm, fixed-price basis, KBR has sued to keep the closeout work under the existing cost-reimbursable arrangement.

The company says the cost-reimbursable model is better because neither the company nor the Army can estimate the scope or duration of closeout work.

“Legal, administrative, compliance, audit response, vendor issues, subcontract close-out and dispute resolution, to name a few, are all unknowns,” the company told the Army in a letter last summer.

In a statement to Federal Times, KBR spokesman John Elolf added, “We have explained the issue in detail to the Army and have asked that we continue with the cost reimbursement style contract that has been historically used by the Army for this type of work.”

Fixed-price contracts and task orders are seen as less risky and less expensive than cost-reimbursable contracts. The Obama administration made it a reform priority to use more firm, fixed-price contracts and fewer cost-reimbursable contracts.

Awarded to KBR in 2001, LOGCAP III — the Logistics Civil Augmentation Program III — has resulted in 160 task orders for everything from dining services for U.S. troops to in-theater delivery of housing.

In a redacted pleading made public last week, the Justice Department, which represents the Army in the contract dispute, said contracting officials hadn’t decided whether to change to a fixed-fee arrangement but rather were only exploring the possibility.

Government lawyers also argued the closeout itself was part of the contract, not a new solicitation, as KBR argues.

They said closeout isn’t a new service the government must procure, nor does the work need to take place during the performance of the contract.

If KBR gets its way in court, the impact would be felt in contracting offices across government, the Justice Department said.

“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 lawyers wrote.

In explaining the potential impact, lawyers speculated that if closeout activities had to be performed during the performance period of a contract, then the government could be forced to end deliveries to accommodate the closeout.

“For example, if an existing contract was about five years of performance, and closeout is estimated at one year, the government would need to direct the contractor to cease deliveries by year four to ensure that sufficient time exists to perform closeout,” the Justice Department filing stated.

Government lawyers also said KBR already invoiced the Army for LOGCAP III closeout work totaling nearly $25 million from 2012 through April 4, 2013, which was the same day the company filed its complaint.

The company’s invoicing raised separate concerns for government lawyers.

“If KBR truly believes that it lacked a contract, then its submission of tens of millions of dollars in invoices may require consideration of the False Claims Act because KBR may have submitted claims for reimbursement … for which it knew it was not entitled,” Justice Department lawyers wrote.

But KBR lawyers argue that LOGCAP III ended in December 2011 without any provisions to close out the contract.

When the Army requested a proposal in 2013 for closeout activities under a firm fixed-price basis, the request was “unquestionably a solicitation for a new contract,” KBR argued.

The pleadings from both sides come as government lawyers ask Judge Victor Wolski to toss the case. He was expected to issue a ruling after hearing from KBR and Army attorneys in arguments scheduled by telephone for May 30.

, an official in the Defense Department inspector general’s office said. "This has to be one of the prime poster childs for a government contract spun out of control," Rep. John Mica, R-Fla., said last week.

Mica and other members of the House Oversight and Governmental Reform Subcommittee on National Security expressed outrage at a hearing last week about the Pentagon’s handling of the deal, especially two contract extensions awarded amid a dispute between the government and the company over as much as $1 billion.

The criticism was bipartisan, and it also targeted the Swiss-based private contractor, Supreme Food service GmbH, which had previously supplied British troops in Afghanistan, Iraq and other hot spots.
The panel’s hearing, the first focused solely on the food contract, was convened to hear from agency and company officials about how a straightforward deal in 2005 to supply food and water to troops ballooned into a still-unresolved dispute with so much money at stake.

The company has denied wrongdoing. But several lawmakers at the hearing also accused it of trying to bill taxpayers improperly for a $58 million warehouse and charging $12 million to deliver food from that warehouse across the street to Camp Leatherneck in Helmand province.

“Despite all these concerns [over overbilling and undocumented costs], the government continued to contract with Supreme, and it even exercised options to extend the contract,” said Subcommittee Chairman Jason Chaffetz, R-Utah. “We have well-established contracting procedures. If we're not going to use them, why have them?”

“It took DLA six years to demand that Supreme reimburse the government for more than $750 million in what it believed were overpayments — that's an astounding amount of money,” said Rep. John Tierney of Massachusetts, the subcommittee’s ranking Democrat.

According to Tierney, DLA realized nearly a year after it expanded the scope of the contract to include many more delivery points — through verbal arrangements with Supreme — that its rates for transportation and storage costs were unreasonable. But the agency spent the next five and a half years trying unsuccessfully to negotiate fair and reasonable rates.The House subcommittee, which launched a probe of the contract last spring, found that the defense agency already had paid Supreme $1.38 billion for distributing food to additional locations when it determined it had overpaid the firm by $756.9 million.

“Despite all of these problems, the agency failed to rebid the contract after the contract expired [in 2010] and decided to grant Supreme a no-bid extension of the contract that ended up lasting two more years,” Tierney said.

Matthew Beebe, DLA’s deputy director for acquisition, told the panel that his agency has recouped $283 million — over a third of the $757 million in overpayments — by withholding nearly $22 million a month from Supreme, which is still supplying food and water to U.S. troops and NATO forces. The withholding, which began on March 2012, followed unsuccessful negotiations and audits in 2008 and 2011 to determine “whether Supreme’s rates were fair and reasonable,” Beebe said.

The company claims it is owed $1 billion more than the $5.5 billion it already has been paid over the life of the contract. It claims the initial contract allowed prices to be adjusted as the work expanded, and has appealed the refund demands to special government board.

Michael Schuster, Supreme Foodservice’s managing director for logistics, told the panel the audits were flawed. As its work progressed, Supreme had “to change fundamentally the way it executes its responsibilities and to develop and operate a network of airplanes, helicopters, and trucks able to reach isolated regions of Afghanistan,” Schuster said.

He added that DLA’s original solicitation said that only “remnants” of the Taliban were still active in areas of Afghanistan where his company would be operating. But as its mission expanded from four locations to 120 in remote areas, “312 of our subcontractors” lost their lives while delivering food to troops, he said. “Supreme had to build this network in an active war zone,” Schuster said.
At the hearing, Daniel R. Blair, the Pentagon’s deputy inspector general for auditing, told lawmakers however that the contract was expanded improperly through orders that were not written down promptly. The DLA contracting officer “did not provide sufficient oversight,” by failing to set appropriate rates and promptly modify the written contract.

Beebe confirmed that DLA extended the contract for two more years in 2010, even though a 2008 review of the contract by the Defense Contract Audit Agency found possible double-billing by the company for the cost of delivering food to the forward operating bases. DLA officials did not seek competition because Supreme “was the only source able to provide the required support within the required timeframe,” he said.

Last summer, Beebe added, the agency issued a follow-on interim contract to Supreme that expires Dec. 12, 2013. That, too, was not competed, he said.

When questioned by Rep. Jackie Speier, D-Calif., about the warehouse the company built in southern Afghanistan, Schuster said it was necessary because of the surge in U.S. troop strength there in 2010 and 2011. Speier then raised the $12 million delivery cost for transporting food from the warehouse across the street. “So whether it costs you $12 million or not, it was a great way to soak the federal government, it sounds like?” she asked.

“No, it wasn't,” Schuster said.

Mica said he concluded that “we need to get out of Afghanistan sooner rather than later and put this whole wasteful episode behind us and, again, in a time of national deficits and the United States economic and national security being threatened by our fiscal situation.”

The conspiracy claims were critical to the lawsuit because the four prisoners make no allegation that they suffered harm directly at the hands of CACI employees, who worked as contract interrogators at Abu Ghraib. The conspiracy claim rested on the theory that CACI as a corporation actively engaged in a plot to torture prisoners, a theory Lee said was unsupported by the facts.

“I need to have facts about what happened to these plaintiffs” that directly relate to CACI, Lee said during Friday’s hearing.

Baher Azmy, a lawyer for the New York-based Center for Constitutional Rights, which represents the plaintiffs, was disappointed by the ruling, but said Lee’s decision still allows the plaintiffs to refile their claims to include facts that would support a conspiracy claim. Azmy said fact-finding is ongoing — one of the plaintiffs gave a deposition Wednesday, as has former Staff Sgt. Ivan “Chip” Frederick, the highest-ranking soldier to be convicted after horrific photos depicting abuse suffered by Abu Ghraib prisoners were released in 2004.

Lee also dismissed parent company CACI International Inc. from the suit, leaving only a subsidiary — CACI Premier Technology, which employed the contract interrogators — as a defendant. The dismissal of the parent company could limit the plaintiffs’ ability to collect damages if they eventually prevail.

In the lawsuit, the former prisoners claimed CACI conspired in a pattern of abuse, including mock executions, beatings, electric shocks and other humiliating treatment. One of the men said he was kept at the prison for more than four years without ever being charged before his 2008 release.

Arlington-based CACI says its employees never even came in contact with the plaintiffs. In court papers, they say it defies common sense for the company to have actively engaged in a torture conspiracy, saying the company had nothing to gain by doing so.

The lawsuit was first filed in 2008. At a preliminary stage, Lee had issued rulings favorable to the plaintiffs. At Friday’s hearing, though, he said that a 2009 U.S. Supreme Court case, Ashcroft v. Iqbal, changed the legal landscape and tightened the requirements for demonstrating that higher-ups can be implicated in a conspiracy claim.

While some CACI interrogators were implicated in improper conduct in military investigations of the Abu Ghraib scandal, none have ever faced criminal charges. And CACI has never been found liable for Abu Ghraib abuses in a civil case.

Last year, a different contractor at Abu Ghraib settled a similar lawsuit and has since paid more than $5 million to former prisoners held at Abu Ghraib and other U.S.-run detention sites in Iraq during the war.

In August, the company admitted to lawbreaking that ranged from possessing illegal machine guns at its Camden County training grounds to attempting to land $15 billion in oil and defense contracts in southern Sudan while U.S. companies were barred from doing business there.

The company agreed to pay a fine of up to $7.5 million and entered a deferred prosecution agreement that will essentially expire after three years of good corporate behavior. Only the corporation admitted wrongdoing in that deal.

Thursday’s guilty pleas relate to one of the admissions from the agreement struck in August.

Blackwater used illegal methods of circumventing federal firearm laws when it acquired two Steyr machine guns in 2003 and never registered them as required by federal law. The company acquired 17 AK-47s and 17 M-4s, which it did not properly register with the Bureau of Alcohol, Tobacco, Firearms and Explosives. Instead, the company claimed that it was simply storing the guns for the Camden County Sheriff’s Office.

Blackwater was technically a private firearms dealer, and as such could not possess more than two fully automatic weapons, but law enforcement agencies can.

Tiny Camden County had just 12 full-time deputies at the time, and major violent crimes are a rarity. Blackwater also employed a high-ranking officer at the sheriff’s office as a trainer. After several name changes, the firm is now called Academi.

In recent years, Blackwater has been embroiled in numerous civil and criminal cases. The company agreed in 2010 to pay the State Department $42 million for matters related to the agreement struck in August. The company settled with the families of army officers killed when a Blackwater airplane flying without a flight plan crashed into an Afghan mountain.

Four former employees face weapons and manslaughter charges for a 2007 shooting in a Baghdad square that killed 17 Iraqis. Another guard pleaded guilty to voluntary manslaughter in that case. Two former Blackwater guards were convicted of manslaughter last year for the murder of two Afghans in 2009.

Blackwater was founded by Erik Prince, a former Navy SEAL whose father made his fortune manufacturing auto parts. Prince is a staunch conservative with extensive political connections in Republican and evangelical Christian circles. He built Blackwater into the nation’s biggest private trainer of the military and police at its sprawling compound in Camden and Currituck counties. The company provided security to diplomats in Iraq and Afghanistan, and held a number of classified contracts with intelligence agencies.

Prince’s primary customer was the U.S. government. According to USAspending.gov, Blackwater was paid at least $2.4 billion in federal contracts.

Prince, who has not been charged, has started a private equity investment fund, Frontier Research Group, which aims to provide security, logistical and management services to projects in Africa.

But the little-known agency that uncovered the scam is about to close its doors, even though Lee remains a fugitive and 91 additional criminal investigations into the disappearance of Iraq reconstruction funds remain unsolved.

The mandate and funding of the Special Inspector General for Iraq Reconstruction, which was established in October 2004 and is known as SIGIR, expires in March. It will mark the end of an effort to document and fix the myriad failings of the most ambitious U.S. rebuilding effort since the Marshall Plan. The extent to which U.S. military personnel abused their positions during the war is a part of the legacy of the deeply unpopular conflict that has gone largely unnoticed.

“This is a tiny if disgraceful minority,” Stuart W. Bowen, the head of the agency said. “A lot of these cases came to light deep into the reconstruction experience, which by then had been recognized to have fallen short of its goals.”

The Kuwait scheme became the agency’s landmark case. But SIGIR investigators uncovered scores of other plots that could be turned into thrillers. There were corrupt officers ratted out by spurned wives. Military officials accepted first-class tickets from contractors so they could hide their exploits in bank accounts in the Cayman Islands and Thailand. One soldier mailed stolen cash wrapped in American flags. Another particularly clever attempt to haul stacks of stolen cash to the United States involved stitching them into a Santa Claus costume.

SIGIR’s criminal investigations, conducted with help from the FBI, the IRS and other federal agencies, have resulted in 81 convictions, including 47 military personnel. A few defendants are awaiting trial. Authorities have recovered more than $189 million.

Anyone who worked in Iraq during the heyday of reconstruction spending is unlikely to be surprised that many people were tempted to steal. U.S. officials came to see cash as a“weapon system” that could buy goodwill, forge alliances and alienate insurgents. There was loads of it, in bags, boxes and chests. With a widespread perception that oversight was lax, many saw the chance of a lifetime.

“There was so much money to be made at the time,” said Daniel F. Willkens, the agency’s head of investigations.

Maj. Gloria Davis was among those tempted, according to investigators and court documents. The Army officer met George Lee in Kuwait in 2003, soon after she was assigned to award military contracts for Iraq and he was trying to get a foothold in the rapidly expanding war economy. They became close after she awarded his company a contract for buses in January 2004.

That summer, their relationship grew so cozy that he paid for her spa treatments in Kuwait City and offered her son a job. That fall, after Davis awarded Lee two multimillion-dollar contracts for bottled water maintenance services, he flew her to Thailand, where she opened a bank account into which he soon wired $80,000.

Days after her son started his job in Kuwait, Davis thanked Lee in an e-mail on Jan. 3, 2005, according to Lee’s indictment, writing that she appreciated “everything you have done for me and my family,” and offering to do her share to “on this end to help the business.”

Help she did, putting Lee and his son Justin, a business partner, in touch with other contracting officers amenable to kickbacks. Justin Lee heaped praise on Davis for her help, saying in another e-mail that they wanted her to be “as kept a woman as the princess herself.” Among Davis’s colleagues, the most audacious, investigators said, was Maj. John L. Cockerham. He became a ringleader among a cadre of contracting officers trained at Fort Sam Houston in Texas who gave preferential treatment to the Lees in exchange for kickbacks.

As the money rolled in, the Lees were enthralled by their booming business. After purchasing a first-class ticket for an officer involved in the scheme, Justin Lee wrote that Col. Kevin Davis “thought he had died and gone to heaven relative to his first first class travel.” Lt. Col. Levonda J. Selph, who also accepted a free trip to Thailand, wrote to George Lee that they could discuss business deals over “a glass of champagne,” and offered to do “everything I can barring going to jail” to get him more deals.

In 2006, Davis returned to Baghdad for a new deployment, not realizing that federal investigators had been tipped off by a competitor about irregularities in Lee’s business practices. After she admitted to agents in December 2006 that $225,000 in an offshore bank account came from bribes, Davis returned to her room and fatally shot herself in the head.

Cockerham was arrested the following year. The former officer pleaded guilty to bribery, money laundering and conspiracy in January 2008, admitting he took more than $9 million in bribes. Davis, the most senior officer convicted in the case, pleaded guilty in April 2010 to accepting illegal gratuities. Selph pleaded guilty to bribery in 2011 and unsuccessfully sought to get the Federal Bureau of Prisons to incarcerate her alongside the former officer’s pet chihuahua, Buffy. Justin Lee pleaded guilty to bribery in July. Investigators believe his father remains in Kuwait, along with much of the stolen cash.

Authorities also convicted civilians in notable cases. Robert N. Boorda, a former head of the Baghdad office of the U.S. Institute of Peace, which is funded by Congress, pleaded guilty to wire conspiracy last year after admitting he received a purported $20,000 monthly fee in 2009 from an inflated security contract submitted to his headquarters. Last year, Jill Ann Chapia, a U.S defense contractor, had to give up her job at a U.S. military base in Afghanistan after pleading guilty to lying to federal investigators who determined that she received more than $1.2 million after submitting phony invoices for work she was hired to do in Iraq in 2008.

Some of the open probes may lead to indictments before SIGIR shuts down, officials said. The agency said it is working with lawmakers in the House and Senate in hopes Congress will find the money to preserve its 21-person investigative team for the remainder of this year. If that effort fails, several of the open cases are likely to stall because they are unlikely to become priorities for federal law enforcement agencies. Credit: Ernesto Londoño

The lawsuit centered on actions that took place during October 2009. MAKS was working as a subcontractor for EODT, which had been hired to provide relocatable buildings for the U.S. military's use at Bagram Air Field in Afghanistan. EODT had also agreed to provide security for MAKS in Afghanistan.

In its suit, MAKS alleged that EODT employees staged a military-style raid on a MAKS compound and stole dozens of building modules from the company.

EODT filed its own countersuit and argued that MAKS had failed to meet the terms of its contract and that EODT was justified in terminating the subcontract and taking possession of the modules in question.

On  December 3, 2012, the jury awarded nearly $2 million to MAKS in connection with three breach-of-contract claims and $1 million on a conversion claim. One breach-of-contract claim referred to items that were also referenced in the conversion claim, and EODT has taken the position that MAKS must choose between that $975,000 breach-of-contract award and the $1 million conversion award. Joseph Hennessey, an attorney for MAKS, said the jury found EODT liable for both.

The jury rejected claims that EODT employees committed assault against two individuals. The jury rejected the breach-of-contract counterclaim filed by EODT against MAKS. Hennesseey said Monday that his clients were "grateful that the justice system was able to take an objective look at the facts and that the jury looked at all of the claims in detail and weighed the evidence and reached the just result based on the facts they heard."

In a prepared statement, EODT general counsel Erik Quist said the company was disappointed in the verdict because it maintains EODT did not breach its contract with MAKS. He went on to say that allegations separate from the contractual claims had been dismissed. "EODT has maintained all along that the allegations of assault and personal injury were meant only to harass and intimidate, and the jury agreed, finding no truth whatsoever in these allegations," he said.

Officials said Camp Arifjan, a leading U.S. military logistics base in the Gulf, became a hotbed for corruption during the war in Iraq. They said contractors routinely offered or were solicited for bribes by procurement officers in exchange for multi-million-dollar contracts.

Momon, a contracting officer in Camp Arifjan in 2005 and 2006, was alleged to have worked with other officers to accept cash from Defense Department contractors. The contractors, who supplied bottled water and other goods, were helped to win awards. “Momon agreed to accept approximately $5.8 million from his co-conspirators as payment for his actions, including $1.6 million in cash and luxury items,” the Justice Department said. Momon was believed to have learned the bribery system at Arifjan from his predecessor. Maj. John Cockerham was later convicted of bribery and sentenced to more than 17 years in prison and ordered to pay $9 million in restitution.

Officials said the bribery ring at Arifjan has forced the U.S. Army to make significant revisions in procurement. They said the revisions, which were not detailed, were worked out between civilian officials and military commanders. Some of the allegations were linked to Kuwaiti subcontractors. On Nov.
19, the Justice Department announced a suit against KBR on allegations of working with a Kuwaiti firm to inflate costs of the installation of trailers
for troops in Iraq. The department said First Kuwaiti Trading received nearly an additional $50 million for unsubstantiated crane, truck and driver
costs.

“The facts alleged in the complaint indicate that KBR and First Kuwaiti did not provide an honest accounting,” Jim Lewis, U.S. Attorney for the Central District of Illinois, said.

The government’s complaint arises from the Bed Down Mission, a push to replace the tents used to house soldiers during the early days of the war with trailers, also called living containers.  KBR performed many of the services required under LOGCAP III, including the Bed Down Mission, through foreign and domestic subcontractors. According to the complaint, KBR awarded a subcontract to First Kuwaiti on Oct. 16, 2003, to supply, transport and install 2,252 living containers at Camp Anaconda in Iraq for about $80 million.   The government alleges that First Kuwaiti was required to complete delivery and installation of the trailers at Camp Anaconda by Dec. 15, 2003.  The government further alleges that in July 2004, First Kuwaiti presented two claims to KBR contending that government-caused delays in providing military escorts for convoys into Iraq entitled the company to an increase in the contract price to cover its increased costs.   According to the complaint, KBR agreed to pay First Kuwaiti an additional $48.8 million and passed that cost on to the United States.

"We depend on companies like KBR to provide valuable noncombat services to our military such as housing and feeding our troops,” said Stuart F. Delery, Principal Deputy Assistant Attorney General for the Civil Division of the Department of Justice.   “We will en sure that contractors live up to their promises, and are not permitted to profit at the expense of the taxpayers at home who are supporting our men and women in uniform.”

The government’s complaint alleges that First Kuwaiti knowingly inflated its crane and truck costs, among other items, and misrepresented the cause of its delays. The complaint further alleges that KBR charged these costs to the United States knowing they were improper.

“When dealing with the government, just like dealing with anyone else, it’s important to give an honest account,” said Jim Lewis, U.S. Attorney for the Central District of Illinois. “The facts alleged in the complaint indicate that KBR and First Kuwaiti did not provide an honest accounting.”

The United States is suing KBR and First Kuwaiti under the False Claims Act.   The act holds persons responsible for presenting, or causing to be presented, claims for gov ernment money or property they know are false.   The statute entitles the government to recover three times its damages, plus a $5,500 to $11,000 civil penalty for each false claim. 

The United States is also suing KBR under the antifraud section of the Contract Disputes Act and for breach of contract.   The Contract Disputes Act establishes liability for contractors who certify that they are entitled to money under a contract, if any part of their claim is unsupported due to a misrepresentation of fact or fraud.   Under the Contract Disputes Act, the government may recover the false and unsupported part of the claim, plus its costs of review.

This matter was investigated by the  Commercial Litigation Branch of the Justice Department’s Civil Division; the U.S. Attorney’s Office for the Central District of Illinois; and the Defense Contract Audit Agency, the Defense Criminal Investigative Service, and the Defense Contract Management Agency of the Department of Defense.   The claims asserted against KBR and First Kuwaiti in the United States’ complaint are allegations only and there has been no determination of liability.

The lawsuit was filed in the Central District of Illinois and is captioned United States v. Kellogg, Brown & Root Services, Inc., et al.

The United States has filed a civil complaint against Kellogg, Brown & Root Services Inc. (KBR) and First Kuwaiti Trading Company for submitting inflated claims for the delivery and installation of trailers to house troops in Iraq, the Justice Department announced today. KBR is headquartered in Houston.   First Kuwaiti, a KBR subcontractor, is based in Kuwait.

KBR is the Army’s primary contractor for logistical support in Iraq.   On Dec. 14, 2001, t he Army awarded KBR the LOGCAP III contract, the third generation of contracts under the Army’s Logistics Civil Augmentation Program (LOGCAP) since the program’s inception in the 1980s.   LOGCAP III required KBR to provide logistical support in the military theater whenever and wherever it was needed. Support included services such as transportation, dining services, facilities management, maintenance and living accommodations for United States and coalition forces.   LOGCAP III was originally awarded to Brown and Root Services, a division of KBR.   The United States has paid KBR tens of billions of dollars for logistical support services since awarding the contract. http://www.justice.gov

The government’s complaint alleges that Triple Canopy knowingly billed the United States for hundreds of foreign nationals it hired as security guards who could not meet firearms proficiency tests established by the Army and required under the contract. The tests ensure that security guards hired to protect U.S. and allied personnel are capable of firing their AK-47 assault rifles and other weapons safely and accurately. The government also alleges that Triple Canopy’s managers in Iraq falsified test scorecards as a cover up to induce the government to pay for the unqualified guards, and that Triple Canopy continued to bill the government even after high-level officials at the company’s headquarters had been alerted to the misconduct. The complaint further alleges that Triple Canopy used the false qualification records in an attempt to persuade the JCC-I/A to award the company a second year of security work at the Al Asad Airbase.

“For a government contractor to knowingly provide deficient security services, as is alleged in this case, is unthinkable, especially in war time,” said Stuart F. Delery, Acting Assistant Attorney General for the Civil Division of the Department of Justice. “The department will do everything it can to ensure that contractors comply with critical contract requirements and that contractors who don’t comply aren’t permitted to profit at the expense of our men and women in uniform and the taxpayers at home who support them.”

“We will not tolerate government contractors anywhere in the world who seek to defraud the United States through deliberate or reckless conduct that violates contractual requirements and risks the security of government personnel,” said Neil H. MacBride, U.S. Attorney for the Eastern District of Virginia.

The government’s claims are based on a whistleblower suit initially filed by a former employee of Triple Canopy in 2011. The suit was filed under the qui tam, or whistleblower, provision of the False Claims Act, which allows private persons to file suit on behalf of the United States. Under the act, the government has a period of time to investigate the allegations and decide whether to intervene in the action or to decline intervention and allow the whistleblower to go forward alone.

This matter was investigated by the U.S. Attorney’s Office for the Eastern District of Virginia; the Commercial Litigation Branch of the Justice Department’s Civil Division; and the Army Criminal Investigative Command (CID) and Defense Criminal Investigative Service (DCIS) of the Department of Defense.

The claims asserted against Triple Canopy are allegations only; there has been no determination of liability. The government is not aware of any injuries that occurred as a result of the alleged misconduct.

The lawsuit was filed in the U.S. District Court for the Eastern District of Virginia in Alexandria, and is captioned United States ex rel. Badr v. Triple Canopy, Inc.

When the military announced Sept. 7 that G4S was being phased out due to contractual failures, guards were initially elated, thinking they had scored a victory.

Many now fear they face another pay cut.

Union leaders say the amount of C&S three-year contract with the military may not be enough to maintain current pay levels, much less increase them.

The $57.3 million C&S contract averages out to $19.1 million per year. The $108.3 million five-year contract with G4S averaged out to $21.66 million per year.

“If C&S will give us the same payment as we’ve had under G4S, why we should work under C&S?” said Park Deok Seo, head of one of three unions representing the guards. He said guards are ready to go on strike if C&S doesn’t give them raises.

“At first, our members thought we had won against G4S,” said Kim Hyunjoong, leader of another union. “But this isn’t a complete victory because we don’t know what will happen with C&S in the future.”

None of the union leaders said they had met with C&S yet, and the company has given them no specifics about pay.

A C&S official last week said the company is still reviewing the matter but does not plan to lower wages. He said he does not know if C&S will increase their pay or alter their work hours.

U.S. Army Installation Management Command Pacific region spokesman Larry Reilly attributed the price difference between the two contracts to their different durations and the estimated number of “overall guard hours the Army anticipated ordering throughout the life of the contract.”

“The exact number of guard hours ordered throughout the life of the contract is unknown and will vary depending on mission requirements,” Reilly said in an emailed statement.

Asked if there was concern that guards might strike, Reilly said the Army reviewed the “reasonableness” of C&S’ proposal by comparing it with bids from other companies and the prices charged by previous contractors.

“Based on this comparison, the government does not consider the prices proposed by C&S to be unreasonably low,” Reilly said.

A G4S official, speaking on condition of anonymity because he was not authorized to talk to the media, questioned whether C&S would be able to hire enough guards and said more protests are possible. He said G4S submitted a proposal for the contract but was underbid by C&S.

Great Britain-based G4S was also faulted for failing to hire enough guards to fulfill its contract with the London Olympics and has promised to reimburse the British government for the cost of deploying thousands of military personnel to provide security at the Games.

G4S has paid back half of the $750,000 it owes the U.S. government for its contractual failures in South Korea and will repay the rest in January.

Kim Ji-hyoung, another union leader, said he is ready to go on strike although his union has not made a decision yet. He said guards are frustrated with USFK and with what they see as ongoing problems with its security contractors. He faulted the military for repeatedly hiring the lowest bidder, not the company that can do the best job.

“How can USFK ask us to protect the lives of U.S. soldiers and their family members when we work under the worst of conditions?” he said.

The RFP, issued on June 7, 2012, provided for award of a fixed-price contract for security services at Forward Operating Base Lindsey, Afghanistan, for a 7-month base period and two 3-month option periods. Protest at 5. Offerors were informed that award would be made to the offeror providing the lowest-priced, technically acceptable offer. Proposals were evaluated on a pass-fail basis for technical capability, pricing, eligibility requirements, and past performance. Id. at 6-7. As relevant here, under the eligibility requirements evaluation factor, offerors were required to be affirmatively determined to be responsible in accordance with the standards of Federal Acquisition Regulation (FAR) Part 9 and the solicitation.

The Army received seven proposals, and in June awarded the contract to Olive Group. EOD received a written debriefing that informed the firm that, although EOD’s proposal was otherwise technically acceptable and offered the lowest price, it was determined to be not responsible. Id. at 10.

On July 5, EOD protested to our Office challenging the award to Olive Group and requesting that the Army suspend contract performance in accordance with the Competition in Contracting Act of 1984 (CICA). On July 13, the Army advised our Office that it would reevaluate EOD’s responsibility and eligibility for award, and that, if the reevaluation results in a determination that EOD is eligible for award, the Army would “proceed accordingly.” In light of the Army’s proposed corrective action, we dismissed EOD’s protest as academic on July 16.

On July 25, EOD learned that the Army had authorized Olive Group to begin transitioning activities for contract performance, and was informed that EOD should have received official notice that it had again been found nonresponsible. Protest at 11. On July 31, EOD again protested to our Office objecting to the nonresponsibility determination, as well as the Army’s implementation of the corrective action and authorization for Olive Group to perform the contract. On August 4, the Army requested that EOD respond to specific concerns raised about EOD’s responsibility. On August 14, EOD filed a supplemental protest, arguing that the agency improperly re-awarded the contract to Olive Group and/or authorized contract performance before completing its reevaluation of OED’s responsibility.

The Army requests that we dismiss EOD’s protest as premature, stating that the agency has not yet completed its reevaluation of EOD’s responsibility. With respect to Olive Group’s performance of the contract, the Army contends that the agency was not required to continue to suspend contract performance because the CICA stay expired when GAO dismissed its protest. The Army also explains that it began to transition the contract to Olive Group in order to avoid a lapse of services.

We agree with the Army that where, as here, the agency has not yet made a new finding concerning EOD’s responsibility, EOD’s protest of the agency’s nonresponsibility determination is premature. In the event that the Army concludes that EOD is nonresponsible, the protester may re-file its protest, subject to our timeliness rules.

With respect to EOD’s argument that FAR § 9.105-2(a) requires the Army to complete its determination of EOD’s responsibility before awarding the contract to Olive Group or authorizing performance, this section indeed requires that “[w]hen an offer on which an award would otherwise be made is rejected because the prospective contractor is found to be nonresponsible, the contracting officer shall make . . . a determination of responsibility, which shall state the basis for the determination.” Here, the contracting officer in fact found EOD to be nonresponsible prior to awarding the contract to Olive Group. Although the Army’s corrective action involves a reevaluation of EOD’s responsibility, this does not implicate the agency’s compliance with FAR § 9.105-2(a) prior to awarding the contract to Olive Group.

The protest is dismissed.

Lynn H. Gibson
General Counsel

credit: http://www.gao.gov