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Army-KBR Contract Dispute Article from Fed Times

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The issue:seems to be that KBR is arguing that closeout activities, because they occur beyond the performance period, aren't part of the contract.

"...In explaining the potential impact,[Government] lawyers speculated that if closeout activities had to be performed during the performance period of a contract, then the government could be forced to end deliveries to accommodate the closeout.

“For example, if an existing contract was for five years of performance, and closeout is estimated at one year, the government would need to direct the contractor to cease deliveries by year four to ensure that sufficient time exists to perform closeout,” the Justice Department filing stated.

"Government lawyers also said KBR already invoiced the Army for LOGCAP III closeout work totaling nearly $25 million from 2012 through April 4, 2013, which was the same day the company filed its complaint.

"The company’s invoicing raised separate concerns for government lawyers.

"“If KBR truly believes that it lacked a contract, then its submission of tens of millions of dollars in invoices may require consideration of the False Claims Act because KBR may have submitted claims for reimbursement ... for which it knew it was not entitled,” Justice Department lawyers wrote.

"But KBR lawyers argue that LOGCAP III ended in December 2011 without any provisions to close out the contract.

"When the Army requested a proposal in 2013 for closeout activities under a firm fixed-price basis, the request was “unquestionably a solicitation for a new contract,” KBR argued."

I don't know enough from this high level, summary type article to understand the nuances of the issues. The Government apparently feels that if the judge rules that closeout activities are part of the services that must be performed during the defined performance period, then the actual performance of services would have to be much shorter in order to allow for time to closeout the contract within the specified performance period. Plus, if the billing information wasn't finalized during that specified performance period, then the Contractor can risk being in violation of the False Claims Act.

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DCAA has tried for years to disallow contractor close-out costs that are direct charged and which are recorded after the contract's PoP.

But in this case I think the issue is that the customer wanted KBR to submit an estimate for close-out activities that would have resulted in a FFP Task Order or CLIN. KBR asserted that it could not do so, unless somebody could tell them how much support they would have to provide DCAA for close-out audits (among other things). I'm naturally sympathetic to KBR's position, though I think they could have submitted a FFP bid and documented their assumptions regarding audit support, such that they could ask for a REA if DCAA audit support took significantly more hours than bid.


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