ASBCA decision denying contractor claim for costs incurred in delivering housing trailers to Iraq is affirmed. The contractor claimed it was entitled to recover delay costs in delivering trailers because the government had not provided adequate security in breach of the contract’s force protection clause. The court, however, did not even reach the breach question because it found that contractor had not established that its claimed cost were reasonable. The court identified numerous problems in the contractor’s calculations—including unwarranted assumptions and lack of substantiating evidence—that precluded any recovery of delay costs.
The Army awarded Kellogg Brown & Root Services (KBR) a task order to provide temporary housing trailers for troops in Iraq. The task order, and the underlying IDIQ contract, had a force protection clause, which obligated the government to provide security for contractor employees.
To perform the task order, KBR subcontracted with First Kuwaiti Co. of Kuwait. Under the subcontract, the trailers would be manufactured in Kuwait and then transferred to the Iraqi border in truck convoys by First Kuwaiti.
But dangerous conditions in Iraq prevented KBR and first Kuwaiti from transporting the trailers. These conditions resulted in a backup of trailers at the Iraq/Kuwait border. To deal with the backup, First Kuwaiti had to rent land on the border to store the trailers. KBR ended up paying First Kuwait over $48 million in extra costs for the idle trucks and the storage of trailers at the border.
KBR filed a request for equitable adjustment with the government seeking over $51 million, which included the $48 million paid to First Kuwaiti as well as indirect costs. The administrative contracting officer only allowed $3.7 million in costs for the land leased to store the trailers.
KBR appealed to the ASBCA, arguing that it was entitled to recover the full amount paid to First Kuwaiti because the Army breached the contract’s force protection clause, which caused the delay on the Iraq/Kuwait border. The ASBCA denied the appeal, finding that the government had not breached the force protection clause. The board further found that even if the government had breached the clause, KBR could not recover because it had not shown that the amount paid to First Kuwaiti had been reasonable. KBR appealed to the Federal Circuit.
On appeal, KBR once again argued that it was entitled to recover the funds paid to First Kuwaiti because the Army breached the contract’s force protection clause. A majority of the court, however, found that it did not need to reach this issue because KBR had not shown that its claimed costs were reasonable.
For its delay claim, KBR had assumed that if the government had provided adequate security, then First Kuwaiti would have had 193 trucks per day crossing the border. If only 100 trucks crossed the border on a given day, KBR claimed that it was owed costs for the 93 that did not cross. KBR asserted that each truck that did not cross the border costs the company about $300 per day. So, KBR multiplied the total number of trucks that didn’t cross during the time period by $300 to arrive at its claim.
The court, however, found several problems with KBR’s cost claims. As an initial matter, KBR’s model assumed perfect performance by First Kuwaiti, i.e., that First Kuwaiti had 193 trucks at the border every day. But the records showed that there was often far fewer trucks waiting at the border than KBR’s model assumed.
Additionally, the court reasoned that KBR’s model assumed that all delays at the border were the result of the government’s inadequate force protection. In fact, however, substantial evidence demonstrated that delays at the border were caused by factors outside the government’s control—e.g., road conditions, insurgency attacks. KBR had failed to disaggregate all the causes of delay.
Also, the court found that KBR failed to provide evidence of its claim. KBR submitted spreadsheets calculating delays, but these spreadsheets were not accompanied by substantiating data or records. What’s more, KBR offered no fact or expert witnesses to support the reasonableness of its idle truck estimates. It was simply not plausible that First Kuwaiti did not have information about how long trucks were detained at the border.
The court further noted that KBR had offered only conclusory testimony as to the reasonableness of the $300 rate for each idle truck. First Kuwaiti was a sophisticated company with several government contracts. The company likely recorded precise daily costs for each idle truck. The court reasoned that KBR could have provided more detailed information substantiating the claimed $300 per day rate.
Moreover, the court opined, KBR charged a $300 rate for all claimed delays, assuming that each trailer was always attached to a truck with a driver. But the company was also seeking costs for the trailers that were offloaded and stored. KBR had not explained why it was entitled to costs related to drivers and trucks for stored trailers.
Aside from the delay costs, the court also determined there were problems with KBR’s claims for costs incurred in storing and handling trailers. Once again, KBR failed to support the reasonableness of its storage costs with evidence. Additionally, the description of the work performed storing the trailers lacked the detail. For instance, KBR claimed costs related to “skilled workers” without describing what these workers did.
KBR argued that the board should apply the “jury verdict” method to calculate its costs. But the court reasoned that the jury verdict method is only appropriate when other more exact methods of calculation cannot be applied. KBR had not shown that other, more exact methods, were unavailable.
While a majority of the court’s panel found that KBR failed to prove the reasonable of its costs, one judge dissented. The dissenting judge argued that it was improper for the court to determine reasonableness of the costs at this stage. Rather, the dissent contended, the court should have remanded the case back to the ASBCA for a determination of reasonableness of costs in the circumstances that existed. The dissent objected to the majority’s attempt to extract isolated costs from unbriefed documents without oral argument on reasonableness.
KBR is represented by Edward Sanderson How, Raymond B. Biagini, and Herbert L. Fenster of Covington & Burling as well as Alejandro Luis Sarria and Jason Nicholas Workmaster of Miller Chevalier Chartered. The government is represented by David W. Tyler. Ethan P. Davis, Russell B. Kinner, William James Grimaldi, Robert Edward Kirschman, Jr., Patricia M. McCarthy, Michal L. Tingle, Andy J. Mao, and Patrick Klein, II of the Department of Justice as well as Carol Matsunaga and Kara Klaas of the Defense Contract Management Agency.
