KBR Chastised in Iraq Contract Review

The military contractor Kellogg Brown and Root (KBR) was chastised as "extraordinarily arrogant" today by the head of the Commission on Wartime Contracting, former Connecticut Congressman Christopher Shays.

As part of the company's ongoing accounting skirmishes with the Army, company executives sent a January 15, 2010 letter asking the military to "stand down" and refrain from using KBR's performance on containing costs as part of their calculations for their award fees.

Shays called it "stunning" that a company would ask the government to "stand down". Addressing the military accountants before him Shays said, "Basically a company is telling you to back off."

In an example of waste, the Department of Defense's Inspector General calculated that of $5 million charged for tactical maintenance work at a base in Balad, Iraq $4.6 million or 92% was wasted. While KBR says it reported this to the government, the Army did not ask the company to correct it. Commissioners criticized the Army for failing to act despite clear evidence that millions in taxpayer dollars were being wasted.

"We're paying for services that aren't needed," conceded Lieutenant General James Pillsbury, Deputy Commanding General of the Army Materiel Command.

Commissioner Clark Kent Ervin said the case in Balad was not an isolated incident. He pointed to a November 14, 2009 audit from the Defense Contract Audit Agency that found "on average across all sites in Iraq the average contract labor utilization rate was less than 11%," meaning 89% of KBR's labor was sitting idle between January and July 2009.

KBR executives testified before the committee that all of their bases have closed on time and complained they often receive "duplicative and competing direction" from multiple branches of the military at once.

KBR's Principal Program Manager Guy Laboa was asked if KBR executives ever asked him about profit. He responded, "In almost 30 months no one in any leadership position has ever mentioned the bottom line to me," he said.

KBR, which holds one of the largest military contracts in American history has been under fire from critics for slow-walking the company's exit from Iraq in order to maximize profits.

In 2009, the company took in $4.8 billion in revenue from the Army's giant logistics and support contract for Iraq known as LOGCAP. Recently, the company won an additional $2 billion military support contract in Iraq. In total the company has been awarded over $32 billion in military contracts since 2001.

By August 2010, the number of contractors on the ground in Iraq will outnumber US troops by 20,000 with 70,000 contractors working alongside 50,000 soldiers. About 30,000 of the 70,000 contractors will be KBR employees.

While the Afghan version of the Army's giant logistics contract has now been competitively bid to three companies, commission members criticized the Army for taking so long to transition LOGCAP from a no bid KBR contract to a competitive and cheaper version. Commissioner Ervin told military officials the "the public would have a right to be appalled."