In 2003, Kellogg Brown and Root Services, Inc. (KBR) contracted with the U.S. government to provide trailers to house personnel at military camps in Iraq. KBR claimed the Secretary of the Army breached the contract by not providing “force protection” to trucks delivering the trailers to the military camps. KBR sought to recover payments made to its subcontractor, First Kuwaiti Co. of Kuwait, for an equitable adjustment allegedly caused by the Army’s breach of contract. The alleged breach was the Army’s failure to provide force protection to trucks delivering trailers from Kuwait that resulting in delays, idle truck costs, and double-handling costs. The U.S. Court of Appeals concluded the cost of delay at the border and costs related to double-handling claimed by the Plaintiffs were unreasonable.
In June 2003, the U.S. government executed Task Order 59, a cost-plus-fixed fee order for operations support in Iraq. The task order required KBR to “provide accommodations and life support services and coalition forces…” These services were for trailers for temporary housing of Army personnel. The trailers were to be manufactured in Kuwait and transported to Iraq by Kuwaiti in truck convoys. In October 2003, KBR and Kuwaiti entered into a firm-fixed-price subcontract for the procurement and delivery of 2,252 trailers to Camp Anaconda. The subcontract stated that if KBR ordered any changes to performance that resulted in an increased cost of performance, Kuwaiti would be entitled to request an equitable adjustment. In December 2003, KBR issued a change order for Kuwaiti to deliver and install additional trailers to a second Army camp in Camp Victory in Iraq.
The Armed Services Board of Contract Appeals found “dangerous conditions in Iraq” and “limitations upon the military’s resources to escort convoys” resulted in the failure to provide necessary force protection and convoy delays. Kuwaiti alleged it incurred additional costs for double handling, unloading, and reloading the trailers onto its trucks because of delays and backup of trailers at the Kuwait/Iraq border. Kuwaiti subsequently executed change order of more than $48 million in equitable adjustments. KBR filed requests for equitable adjustments and asserted it was entitled to recover the payment to Kuwaiti.
In July 2011, the administrative contracting officer provided $3,783,005 for costs associated with the land leased to store the trailers. KBR appealed to the Board. It argued it was entitled to recover the rejected delay and double-handling costs because the government violated the contract for failing to provide the required force protection. It argued it was entitled to $47,490,477 in disallowed costs. The Board found KBR was not entitled to reimbursement and the government did not breach the Force Protection Clause because “nothing in Change 5 required the government to place trailers into convoys without delay.” KBR appealed and its case was heard by the US. Court of Appeals.
Alleged Delays at Iraq/Kuwait Border
The U.S. Court of Appeals found KBR’s cost calculation unreasonable. It noted the Board found KBR’s model did not demonstrate the actual events that occurred. It noted Kuwaiti “did not always have the number of trucks available at the border dictated by the model or have access to the model’s required number of trucks.” The Operations Manager at Camp Anaconda stated Kuwaiti did not have the trailers ready at the border and they were not bound for Camp Anaconda. KBR’s model assumed all delays at the border were caused by inadequate government force protection. The court agreed with the Board’s findings that other factors contributed to delays. The case Sauer Inc. v. Danzig, 224 F.3d 1340, 1348 (Fed. Cir. 2000) states that “to establish a compensable delay, a contractor must separate government-caused delays from its own delays.” The court noted KBR’s calculating idle truck days data were insufficient to establish the reasonableness of its costs. KBR was required to support its estimates with representative data of the number of trucks delayed, but none was provided. KBR only offered conclusory testimony, without any supporting evidence, that the daily rate of $300 was reasonable for each truck, trailer, and driver “based on KBR’s market research and …pricing data available … at the time.”
The U.S. Court of Appeals found KBR failed to support the reasonableness of its claimed costs. KBR claim of double-handling costs only contained spreadsheets of monthly costs. It did not submit pricing data from other sources. The court also found the description of the work performed lacking in necessary detail. Kuwaiti claimed costs to “skilled-workers” without describing what they did or what their skills were. KBR also expressed concern over the reasonableness of Kuwaiti’s proposed double-handling costs. KBR described Kuwaiti’s quoted prices as “too high” and opined “there would be a very high possibility that this would be dismissed.”
In September 2020, the U.S. Court of Appeals held in favor of the Board. It agreed with the Board’s determination KBR failed to show its delay costs were reasonable by substantial evidence. The court agreed with the Board’s finding KBR failed to prove the reasonableness of its double-handling costs.
For more information on appealing decisions by the government, contact Whitcomb Selinsky PC.