Ms Sparky

Indemnification clauses are nothing new in defense contracting. Many defense contractors  now have or have had in the past, contracts with the Pentagon containing indemnity provisions. These provisions potentially immunize the contractors from legal accountability for harm caused during the implementation of their contracts. Indemnification clauses are most commonly found in high risk contracts dealing with the manufacture and disposal of hazardous materials for the Pentagon. Most importantly these indemnification clauses are not necessarily “classified” by the Pentagon unlike the indemnification clause that was added to KBR’s no bid contract to Restore Iraqi Oil (RIO) at Qarmat Ali in Southern Iraq in 2003.

In a deposition filed in U.S. District Court in Portland, Oregon in the case of the deadly hexavalent chromium exposure of  Oregon National Guardsman and others,  it was revealed that on March 18, 2003, the eve of the Iraq invasion, a KBR attorney secured a secret indemnification clause ensuring U.S. taxpayers, and not KBR, would pay for damages in the event of any death or injury which occurred during KBR’s implementation of the Restore Iraqi Oil no-bid contract in Southern Iraq, a contract worth over $2.5B.

The typical defense contractor indemnification provisions (pdf) for defense contracts, entered as Plaintiff’s exhibit #34 in the Oregon National Guard case against KBR states:

Section (e) – The Contractor shall not be reimbursed for liabilities (and expenses incidental to such liabilities)–

Section (e)(3) – That result from willful misconduct or lack of good faith on the part of any of the Contractor’s directors, officers, managers, superintendents, or other representatives who have supervision or direction of–

(i) All or substantially all of the Contractor’s business;

(ii) All or substantially all of the Contractor’s operations at any one plant or separate locations in which this contract is being performed; or

(iii) a separate and complete major industrial operation in connection with the performance of this contract.

KBR’s recently declassified indemnification provisions (pdf) for the $2.5B no-bid Restore Iraqi Oil contract in Southern Iraq are a stark contrast to the typical indemnification afforded to other defense contractors and states: Read the remainder of this entry »