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KBR loses $84.7M in Award Fees for LOGCAP III in Iraq

Is this "no award fee" the equivalent of a good old fashioned DoD spanking?

Below is a recent article from Bloomberg Business Week. It’s obvious KBR is trying to spin this pathetic award fee into something positive for their shareholders. The fact of the matter is, of the $123.8M available for award fee for the 7 quarters listed below, including the first quarter of 2008 when SSG Ryan Maseth was killed, KBR actually lost $84.7M in available awards. Of the $123.8M available for those quarters, KBR was awarded $39.1M a mere 32% of what was available. KBR has enjoyed unchallenged award fees in the 90% of total fee available for years. That doesn’t really sound like a job well done to me!

KBR profits are based on award fees. Although the Army just awarded them a $568M contract for LOGCAP IV (for whatever reason), no award fee means NO PROFIT for KBR! ~ Ms Sparky

KBR Loses $24.1 Million Bonus Over Green Beret’s Death in Iraq
June 09, 2010, 10:22 AM EDT

By Tony Capaccio

June 9 (Bloomberg) — KBR Inc., the largest contractor in Iraq, lost all of its potential bonus — $24.1 million — for the first four months of 2008 because it was found partly to blame for the accidental electrocution of a Green Beret.

This is the first time KBR lost its entire performance fee since the company won the contract in 2001 to support U.S. troops, Army Contracting Command spokesman Daniel Carlson said.

Houston-based KBR has received orders from this contract totaling $35.7 billion to date. Its profit comes from a base fee of 1 percent and periodic bonuses based on criteria such as quality of work and its control over cost and schedule.

Staff Sergeant Ryan Maseth of the 5th Special Forces Group was electrocuted while showering on Jan. 2, 2008, in part because the shower’s electrical pump wasn’t properly grounded when installed less than two years before, the Pentagon inspector general reported on July 27, 2009.

The report criticized the Army’s oversight of Maseth’s compound, saying his death “was the catastrophic result of the failure of multiple systems exposing U.S. personnel to unnecessary risk.”

Army commanders, the Army contracting command and KBR were all “responsible for the use and physical condition” of the compound, the report said.

“KBR did not ground equipment during installation or report improperly grounded equipment identified during routine maintenance” at the facility starting in February 2006, thereby “perpetuating electrical hazards,” the report found.

Accidental Death

The death was ruled accidental and KBR wasn’t found criminally negligent. Maseth’s mother, Cheryl A. Harris, in March 2008 filed a wrongful death suit against KBR. A federal judge last year denied a KBR dismissal motion. The case is pending in the 3rd U.S. Circuit Court of Appeals in Philadelphia.

The Army’s decision to deny KBR’s bonus followed a Jan. 7 report from its audit agency, which conducted its own investigation as well as reviewing the Pentagon inspector general’s report and the findings of an Army Criminal Investigation Command probe.

The $24.1 million wasn’t rolled into the subsequent award- fee period so KBR can’t earn it back, Carlson said in an e-mail.

KBR spokeswoman Gabriela Segura said the company was notified Feb. 19 that the fee wouldn’t be paid but hasn’t seen the Army audit “so it would be inappropriate to comment” at this time.

“We requested access to all information used so that we are better able to understand” the decision and “to determine whether there are additional actions that we might take,” she said.

KBR’s performance improved enough in the subsequent bonus periods from May 2008 through August 2009 for the Army to pay it $39.1 million of the $99.7 million available, or about 40 percent, according to the contracting command.

The Army announced May 6 that KBR received a new order worth as much as $568 million to continue to provide services in Iraq such as housing, meals, laundry, showers, water purification and bathroom cleaning. (Click HERE for  original article)

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