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Kellogg Brown & Root Servs., Inc. v. United States

United States Court of Appeals, Federal Circuit

February 3, 2014

KELLOGG BROWN & ROOT SERVICES, INC., Plaintiff-Appellant,
v.
UNITED STATES, Defendant-Appellee

Appeal from the United States Court of Federal Claims in No. 09-CV-0428, Judge Christine O.C. Miller.

HERBERT L. FENSTER, McKenna Long & Aldridge LLP, of Denver, Colorado, argued for plaintiff-appellant. With him on the brief were JAMES J. GALLAGHER and PHILLIP R. SECKMAN.

J. REID PROUTY, Senior Trial Counsel, Commercial Litigation Branch, Civil Division, United States Department of Justice, of Washington, DC, argued for defendant-appellee. With him on the brief were STUART F. DELERY, Acting Assistant Attorney General, JEANNE E. DAVIDSON, Director, and BRYANT G. SNEE, Deputy Director.

Before MOORE, CLEVENGER, and REYNA, Circuit Judges.

OPINION

Page 968

Reyna, Circuit Judge.

Kellogg Brown & Root Services, Inc. (" KBR" ) appeals a decision by the United States Court of Federal Claims awarding KBR recovery of $6,779,762 out of $12,529,504 in costs incurred while providing services to the United States Army in Iraq. Kellogg Brown & Root Servs., Inc. v. United States, 107 Fed. Cl. 16 (2012). For the reasons below, we affirm.

Background

KBR and the Army entered into Contract No. DAAA09-02-D-0007 (the " LOGCAP III contract" ) on December 14, 2001, in connection with the United States' Logistics Civil Augmentation Program. Under the LOGCAP III contract, KBR agreed to provide logistics support services during Operation Iraqi Freedom as directed by the issuance of individual task orders (" TO" ). The present dispute relates to costs incurred under two such task orders, TO 59 and TO 89, which required KBR to provide, install, operate and maintain dining facility services near Mosul, Iraq, at a site known as H4. TO 59 issued on August 12, 2003, and had a period of performance from June 13, 2003, to April 30, 2005. TO 89, which continued TO 59, commenced on April 29, 2005, with performance beginning on May 1, 2005. The LOGCAP III contract is primarily a cost-plus-award-fee[1] arrangement, and both TO 59 and TO 89 also provided that KBR would be compensated on a cost-plus-award-fee basis.

KBR selected ABC International Group (" ABC" ), a subcontractor, to provide the services required under TO 59 and TO 89. Pursuant to the subcontract KBR awarded to ABC on March 8, 2004 (the " SK 465 subcontract" ), ABC agreed to build a Kirby-style (prefabricated metal) dining facility at the H4 site and to provide dining services for a camp population of 2,573. The SK 465 subcontract had an initial period of performance of March 8, 2004, through June 12, 2004, with an optional period of performance from June 13, 2004, through June 12, 2005.

Although the cost for the initial period of performance was a fixed lump sum, ABC quoted monthly prices for the optional period according to three 1000-person numerical ranges or " headcount bands." Under each headcount band, ABC listed monthly costs for dining equipment, refrigeration units, generators, lease-to-purchase[2] of the dining facility, labor and

Page 969

consumables. The total monthly cost for the upper headcount band (3,501-4,500) was $977,935; the total monthly cost for the middle headcount band (2,501-3,500) was $869,735; and the total monthly cost for the lower headcount band (1,500-2,500) was $803,100. The middle headcount band was intended to encompass the target population (2,573), while the upper and lower bands were created as a pre-priced option that would be implemented, upon approval from the Army, to address fluctuations in the number of troops.

In June 2004, the Army ordered KBR to stop construction of the Kirby-style facility and begin construction of a dining facility made of reinforced concrete. The Army also increased the estimated headcount from 2,573 to 6,200 persons. Instead of requesting bids for the new work, KBR decided to keep ABC as the subcontractor for the H4 site due to the urgency of the Army's request and to avoid incremental costs associated with switching subcontractors. ...


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