My personal thanks to the tipster who informed me this letter even existed and to POGO for their FOIA writing expertise that got it released!
March 5, 2010
Dr. Ashton B. Carter
Under Secretary of Defense
for Acquisition, Technology and Logistics
3010 Defense Pentagon
Washington, DC 20301-3010
Dear Secretary Carter:
I write to follow up on our meeting last year and to convey several concerns about the course of events since our discussion. Developments on several fronts cause me to ask for your assistance as KBR contemplates future business decisions involving our Department of Defense contracts. Since our meeting, developments have evolved on various fronts that potentially impact KBR’s ability to continue to provide expeditionary, stability and reconstruction contract support.
Please recall that when we met I questioned the extent to which the Department values KBR’s contributions to the US Military efforts in Iraq and Afghanistan. My impression, based upon your response to the issues I raised at that meeting, was that you and the Department not only value KBR’s contributions to the war effort but see the company as an essential partner going forward.
First, with respect to the LOGCAP IV contract, while KBR had unsuccessfully bid on eight prior task orders; we are pleased that our bid for the LOGCAP IV Corp Logistics Support Services, Theater Transportation, and Postal Services (CTP) Task Order in Iraq was evaluated as providing best value to the US Army. This award was significant to KBR as it confirmed to us that our lack of success in bidding previous task orders was not the result of KBR being constructively debarred for reasons of political expediency. Further, we understand the prudency and fully support the actions by the Department to have multiple options for mission support as opposed to relying on a single source supplier.
Second, as a result of the recent actions by the LOGCAP Award Fee Determining Official to deny KBR any award fees for the period of January 1, 2008 through April 30, 2008, I feel there no longer exists any transparency or predictability in the way KBR will be treated by the LOGCAP Award Fee Determining Official with respect to the payment of any prospective award fees. In the overwhelming majority of task orders on which KBR has worked, the quality of the work has been exceptional and our customers on the ground, soldiers, sailors, airmen and Marines, have been more than satisfied with the product provided or service rendered. This has been reflected in our consistent ratings of “very good” to “excellent” award fee scores. Moreover, I believe that KBR’s contributions in Iraq in providing continuing logistics support to our troops as well as “ramping up” our services to accommodate the influx of forces associated with the surge in Iraq contributed greatly to the success of that endeavor. While we disagree with the actions on the part of the LOGCAP Award Fee Determining Official to award zero award fees for the period from January 1, 2008 through April 30, 2008, we nonetheless recognize the discretion the LOGCAP Award Fee Determining Official has in determining award fees. This action by the LOGCAP Award Fee Determining Official has caused KBR to write off $133 million of accrued awards fees as of 31 December 2009. This action, without clear delineation as to 1) how future award fee boards will be managed, and 2) if our performance warrants, as in the past, the payment of award fees how payments of these award fees will be made to KBR, raises significant questions in my mind as to the predictable and objective basis to receive award fees.
To address this concern, I request your assistance in facilitating a meeting with DCMA and colleagues in the Army to openly discuss the timing and content of future evaluations for services on upcoming award fee boards.
Third, the spate of lawsuits against KBR resulting from activities the company undertook at the specific direction and control of the Army and other military officials continues to grow. Specifically, we are facing suits literally from across the country in connection with deaths and injuries associated with supply convoys, electrical safety, chemical exposures, down wind exposure to toxins from burn pits, and other issues resulting from our work on behalf of the military. The financial and administrative burden to KBR in defending these suits is enormous, and support from our customer is critical to adequately describe the Army’s position in its use and direction of its contingency contractors.
Recently, KBR met with attorneys from the office of the Department of Defense General Counsel to discuss the need for more and better support to bring the perspective of the Army into the discussion in several of these law suits. The position of the Department to properly characterize the broad and far reaching role of the Army in its use and direction of its contingency contractors needs to be heard, if only to serve to protect the interests of the taxpayer from inappropriate and misinformed rulings from the Judicial Branch of the Government. Further, if the Army does not provide the necessary support to enable those companies who perform work at the government’s direction and control to respond to lawsuits resulting from that work, inappropriate outcomes on these lawsuits could give rise to long term adverse consequences to the Department’s ability to continue to attract and retain highly qualified battlefield contractors. Clearly, KBR does not feel like a true partner of the Department in supporting critical military missions if we are left alone to defend these suits without the appropriate involvement of the Department in these litigations. Moreover, the actual costs and any possible judgments against KBR may ultimately be visited on the U.S. Government.
To address this concern, I urge your support to assist KBR to cause our Army customer to provide a greater level of cooperation and better access to information and witnesses going forward as we seek to prevent inappropriate legal outcomes based, in part, on the failure of the court to appropriately understand the Army’s position in its use and direction of its contingency contractors.
Finally, I hope you appreciate that KBR has been subjected to an incredible amount of oversight and scrutiny in connection with its work on the Department’s behalf. This oversight and scrutiny is far more than anyone could possibly imagine. In recent years, in our Houston offices alone, we have had up to 30 DCAA auditors in resident, with more on the way. By mid-March, 61 DCAA auditors will occupy our Houston facilities. When one factors in the additional scrutiny, voluminous information requests, briefings, meetings, hearings and other administrative burdens the company faces from Congressional Committees, the Government Accountability Office, inspectors general, DCAA, DCMA, and the Commission on Wartime Contracting. I hope you can understand both the strain on the company as well as the extraordinary lengths to which KBR has gone in order to both be a good corporate citizen and to comply within the increasingly onerous requirements that go along with being a wartime contractor. While much of this oversight may have been the result of policies, actions or inactions on the part of our prior parent, Halliburton; I can assure you that KBR’s new management, as well as its new Board of Directors, does not tolerate, for one moment, any of the issues that may have given rise to such a high degree of oversight as KBR has received. Please understand that we are working to correct any deficiencies that come to light with due urgency and commitment; however, the degree of oversight and investigation is potentially crushing for a company even as large as KBR.
To address this concern, I request your assistance to cause DCMA to continue to take a more active role in managing the interface between DCAA and the contractor with an objective to reduce, and hopefully eliminate, any emotion on the part of DCAA in issuing a steady and seemingly endless string of Form 1 withhold requests. KBR has taken steps to change its personnel interfacing with DCMA and DCAA and we continue to examine ways to improve both our professional relationships and working dialog with the DCMA and DCAA; and as a consequence, I hope that a renewed effort on the part of DCMA can be a positive contributor towards getting this situation back on a more appropriate footing.
All of the foregoing circumstances, taken cumulatively, are making a significant impact on whether KBR can continue to support the Department’s battlefield logistics requirements now and in the future. Indeed, the aforementioned issues did cause KBR to decline to bid on the recent LOGCAP IV task order issued for the rebuilding of Haiti. It is extremely difficult, if not financially burdensome for KBR to continue in the present environment that exist today. I feel we may be rapidly approaching a tipping point at which the expense of defending lawsuits, increased administrative burdens and, in our view, potential financial penalties and continued uncertainties related to our ability to continue to receive award fees under the LOGCAP III contract will overwhelm our patriotic and business interests in serving our troops.
I would appreciate the opportunity to discuss in greater detail the present situation and the way forward at your earliest convenience and urge you to reconsider my request to meet in person. I want to continue to believe that KBR is a valued partner for the Department as it undertakes difficult operational challenges. We support your efforts and are honored to serve with on behalf of the troops of the United States Military. Candidly, I hope that you and the Department are willing to make the kind of commitment to a partnership that we believe will be required for KBR to continue to provide the valuable on-going and lasting support to military operational activities that it has to this point.
Sincerely,
William P. Utt
Chairman, President and CEO
Army Secretary says KBR contract still classified
