Covington Secures Key Victory for KBR in Iraq War Contract Dispute

WASHINGTON—Covington recently secured a significant victory on behalf of Kellogg Brown & Root Services Inc. (KBR) in a long-running contract dispute with the U.S. Army arising from the Iraq War. The U.S. Court of Appeals for the Federal Circuit unanimously affirmed a 2017 ruling by the Armed Services Board of Contract Appeals (ASBCA) that held the United States government breached its contractual obligation to provide physical security to KBR and its subcontractors, awarding the company $44 million plus interest.

In December 2001, the Army awarded KBR the LOGCAP III contract to provide logistics services in support of overseas contingency operations. The contract required the government to provide “force protection” for KBR and its subcontractors so that they could safely and timely perform their operations. Insufficient protection resulted in the deaths of several employees and caused substantial delays in the delivery of food and supplies. As a result, KBR and some of its subcontractors hired private security contractors to protect their employees and obtained reimbursement for those services from the government.  The government later deemed those costs to be unallowable and, between 2007 and 2010, the government recouped approximately $44 million from a series of KBR invoices.

The Federal Circuit’s ruling confirmed that the ASBCA had jurisdiction over KBR’s affirmative defense of prior material breach, which asserted that the government breached its force protection obligation under the contract.  It also endorsed long-standing ASBCA precedent that states a contractor may file a claim to start the running of Contracts Dispute Act interest on amounts taken or held by the Government to enforce a government claim.

The Covington team was led by partner Ray Biagini, special counsel Alex Sarria, and senior of counsel Herb Fenster.