* Covers 2003-06 time period, KBR and 33 subcontractors
* KBR has been criticized for Iraq cost overruns
(Updates with KBR comment, paragraphs 4, 9-13)
By James Vicini
WASHINGTON, April 1 The U.S. Justice Department
said on Thursday it sued the Houston-based military contractor
KBR Inc (KBR.N) for alleged false claims act violations over
improper costs for private security in Iraq.
The lawsuit, filed in federal court in Washington, D.C.,
alleged that KBR knowingly included impermissible costs for
private armed security in billings to the U.S. Army covering
the 2003-2006 time period, the department said.
KBR has been the U.S. military's largest private contractor
in Iraq and Afghanistan. It has been criticized for cost
overruns in Iraq, and lawmakers in Congress last month
questioned the Army's continued use of KBR for logistics work.
The company said it had to hire private security because
the government failed to protect its employees, and added that
it believed the government filed the lawsuit to avoid
reimbursing it for security costs.
The Justice Department said the case, which seeks
unspecified damages, was brought as part of an initiative to
crack down on procurement fraud.
The contract at issue in the lawsuit provided for
logistical support, such as food services, transportation,
laundry and mail, for military operations in Iraq. The lawsuit
involved the company and 33 KBR subcontractors.
The lawsuit said KBR violated the contract by failing to
obtain Army authorization for arming subcontractors and by
allowing the use of private security contractors who were not
registered with the Iraqi Ministry of the Interior.
The subcontractors also are alleged to have violated the
terms that required travel only in military convoys, the
The lawsuit alleged that KBR managers considered the use of
private security unacceptable and were concerned the Army would
disallow costs for such services. But KBR still charged for the
costs of the unauthorized services, the suit said.
KBR said in a statement late on Thursday that it had to
hire private security to protect its workers in Iraq because
the U.S. Army failed to do so.
"The government fails to acknowledge that the Army breached
the contract by repeatedly failing to provide the necessary
force protection and, in fact, frequently left KBR, its
employees and its subcontractors unprotected," KBR said.
The company said it considers the Justice Department
lawsuit an attempt to avoid paying the company's security
costs. KBR has been attempting to recover the funds through the
Armed Services Board of Contract Appeals.
"The government's recent filing of a new complaint in
another forum appears to be an attempt to avoid a decision in
that proceeding," KBR said.
(additional reporting by Erwin Seba in Houston; Editing by
Robert MacMillan, Leslie Gevirtz and David Gregorio)