*Will pay up to $568 million for food, other support
*KBR to remain sole-souce supplier pending US withdrawal
*Army says acted on commanders' advice
By Jim Wolf
WASHINGTON, May 6 The U.S. Army, in a reversal,
said it will stick with KBR Inc (KBR.N) to supply up to
another $568 million of food, laundry and other essential
support to U.S. troops in Iraq until their scheduled withdrawal
at the end of next year.
The move denied DynCorp International Inc (DCP.N) and Fluor
Corp (FLR.N) a shot at what was to have been a competitive
stage of a previously sole-source contract.
"This decision is based primarily on the assessment of
commanders that such a transition during the drawdown could
have significant adverse operational impacts," the Army
Sustainment Command said in a statement dated Wednesday.
The Army, prodded by Congress, requested competitive
proposals in January for a planned fourth phase in Iraq of its
Logistics Civil Augmentation Program, or LOGCAP.
The solicitation was canceled on Wednesday.
"We concluded that continuing LOGCAP III support provided
the best solution for our men and women in uniform as well as
the U.S. taxpayers," said Linda Theis, a sustainment command
spokeswoman. "Operational requirements, cost, and contractor
performance were key to our decision."
The contract's current task order expires Aug. 31. The Army
said it would exercise an option for KBR to continue its "base
life support" deal from Sept. 1 through Dec. 31, 2011, the
projected completion of U.S. troop withdrawal from Iraq.
The contracted services include engineering and
sustainment, equipment maintenance, facility operations,
dining, cleaning, laundry, water production, sewage and trash
Fluor had submitted a competitive bid for the Iraq work
"with an achievable transition schedule" designed to produce
significant savings for taxpayers, said Keith Stephens, a
DynCorp had no comment on the Army's decision, said Jason
Rossbach, a company spokesman.
KBR remains "proud of our work and we are humbled to
support our troops," said Mark Williams, President, KBR
Infrastructure, Government and Power.
The U.S. Justice Department said on April 10 it had brought
a civil fraud suit against KBR, alleging KBR charged the
government for unauthorized security services in Iraq. In 2007
and 2008, the Defense Department disapproved $103.4 million
paid to KBR under LOGCAP III for unauthorized security
Separately, the Justice Department said on Wednesday it had
joined a lawsuit against KBR that alleges employees of two
freight forwarders provided unlawful kickbacks to KBR
transportation department employees.
The Democratic and Republican heads of a U.S. Senate
Homeland Security and Governmental Affairs subcommittee wrote
to Defense Secretary Robert Gates last week in an attempt to
head off the decision to stick with a sole-source deal.
"Given the significant progress made in the last year
toward increased competition, oversight and accountability
through the successful transition of both Kuwait and
Afghanistan to LOGCAP IV, we are dismayed by the prospect of
the (Defense) Department foregoing these potential gains,"
Senator Claire McCaskill, head of the subcommittee on
contracting oversight, and Sen. Scott Brown, the panel's top
Republican, wrote in an April 30 letter.
The Army, in its statement, said any transition to a new
contractor in Iraq would have taken until February 2011 even
assuming a prompt contract award that went unchallenged by the
loser or losers.
The handover would have cost taxpayers $77 million that
would not have been recouped, Theis said in an emailed reply to
She said KBR stands to gain up to $568 million in extra
work under LOGCAP III -- work that might have gone to DynCorp
The U.S. exit from Iraq involves closing or transferring
139 active bases or facilities; management of 95,400
contractors currently in the country, including 49,400 involved
in the LOGCAP program, and an inventory of 2.9 million separate
items, the sustainment command said.
DynCorp and Fluor were picked over KBR last July for
five-year contracts worth up to $7.5 billion each to support
U.S. troops in Afghanistan under a separate LOGCAP IV deal.
The decision to stick with KBR in Iraq does not change the
Army's determination to solicit competition under LOGCAP IV and
other contracts elsewhere in the U.S. Central Command's area of
operations, the sustainment command said.