United States District Court, C.D. Illinois, Rock Island Division
UNITED STATES OF AMERICA, ex rel. GEOFFREY HOWARD AND ZELLA HEMPHILL, Plaintiffs,
KBR, INC. AND KELLOGG BROWN & ROOT SERVICES, INC., Defendants
United States of America, ex rel., Plaintiff: David J
Chizewer, LEAD ATTORNEY, GOLDBERG KOHN LTD, Chicago, IL USA;
Eric I Long, LEAD ATTORNEY, U.S. ATTY, Springfield, IL USA;
Gordon A Jones, LEAD ATTORNEY, U.S. DEPARTMENT OF JUSTICE,
Civil Rights Division Employment Litigation Section,
Washington, DC USA; Judith Rabinowitz, LEAD ATTORNEY, U S
DEPARTMENT OF JUSTICE, Civil Division, Washington, DC USA;
Michael D McCoy, LEAD ATTORNEY, U.S. ATTY, Rock Island, IL
USA; John E Childress, U.S. ATTY, Springfield, IL USA; Joyce
R Branda, U.S. DEPT OF JUSTICE, Washington, DC USA.
Geoffrey Howard, Zella Hemphill, Plaintiffs: David J
Chizewer, Frederic R Klein, Matthew K Organ, LEAD ATTORNEYS,
Amanda G Penabad, William Kyle Walther, GOLDBERG KOHN LTD,
Chicago, IL USA; Edward H Arens, LEAD ATTORNEY, PHILLIPS &
COHEN LLP, San Francisco, CA USA; Eric R Havian, LEAD
ATTORNEY, CONSTANTINE CANNON, San Francisco, CA USA.
Inc, Kellogg Brown & Root Services Inc, Defendants: Craig D
Margolis, Tirzah S Lollar, LEAD ATTORNEYS, VINSON & ELKINS
LLP, Washington, DC USA.
M. Mihm, United States District Judge.
before the Court is KBR, Inc. and Kellogg Brown & Root
Services, Inc.'s (collectively referred to as "
KBR" or " Defendants" ) Motion to Dismiss
(ECF No. 38) filed pursuant to Federal Rule of Civil
Procedure 12(b)(6). For the reasons set forth below,
KBR's Motion to Dismiss (ECF No. 38) is DENIED.
Court has jurisdiction over this matter pursuant to 28 U.S.C.
§ 1331 as the claims asserted in the Complaint present
federal questions under the False Claims Act ("
FCA" ) as amended 31 U.S.C. § 3729, et seq. This
court has jurisdiction over KBR pursuant to 31 U.S.C. 3732(a)
because KBR can be found in and transacts the business that
is the subject matter of this lawsuit in the Central District
March 22, 2011, the Relators filed a one-count sealed
Complaint alleging violations of the FCA, 31 U.S.C. §
§ 3729-33, as amended. (ECF No. 1). The Complaint was
filed under seal to allow the Government time to conduct its
own investigation to determine whether to join the action.
Id. at 3. After filing several Motions for Extension
of Time to Consider Election to Intervene, on October 7,
2014, the Government filed its Notice of Election to Decline
to Intervene. (ECF No. 25). On October 9, 2014, the
Complaint, the Government's Notice of Election to Decline
to Intervene, and ECF No. 26 were unsealed. (ECF No. 26). On
March 30, 2015, KBR filed its Motion to Dismiss for Failure
to State a Claim. (ECF No. 38). On May 14, 2015, the Relators
filed their Memorandum in Opposition to the Motion to
Dismiss. (ECF No. 42). On May 29, 2015, KBR filed its Reply
to the Relators' Opposition to the Motion to Dismiss.
(ECF No. 44). On June 15, 2015, the Relators filed their
Sur-Reply in Opposition to KBR's Motion to Dismiss. (ECF
No. 46). On September 15, 2015, oral argument on the Motion
to Dismiss was held. (Minute Entry Dated 9/15/15; ECF No.
Dismissal under Federal Rule of Civil Procedure 12(b)(6) is
proper if a complaint fails to state a claim upon which
relief can be granted. Fed.R.Civ.P. 12(b)(6). To survive a
motion to dismiss, a complaint must contain sufficient
factual matter which, when accepted as true, states a claim
for relief that is plausible on its face. Ashcroft v.
Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d
868 (2009). A claim has facial plausibility when the
plaintiff pleads factual content that allows the court to
draw the reasonable inference that the defendant is liable
for the misconduct alleged. Id. (Citing Bell
Atlantic Corp. v. Twombly, 550 U.S. 544, 570, 127 S.Ct.
1955, 167 L.Ed.2d 929 (2007)). A plaintiff's claim must
" give enough details about the subject matter of the
case to present a story that holds together," to be
plausible. Swanson v. Citibank, N.A., 614 F.3d 400,
404 (7th Cir. 2010). A court must draw all inferences in
favor of the non-moving party, and must accept as true all
factual allegations in the complaint. Bontkowski v. First
Nat'l Bank of Cicero, 998 F.2d 459, 461 (7th Cir.
1993); Ashcroft, 556 U.S. at 678. However, the Court
need not accept as true the complaint's legal
conclusions; " [t]hreadbare recitals of the elements of
a cause of action, supported by mere conclusory statements,
do not suffice." Id. (Citing Bell Atlantic
Corp., 550 U.S. at 555). The Court may consider "
documents that are central to the complaint and are referred
to in it, and information that is properly subject to
judicial notice," in addition to documents that are
cited to and attached by plaintiffs. Williamson v.
Curran, 714 F.3d 432, 436 (7th Cir. 2013).
Statements in the complaint must be sufficient to provide the
defendant with " fair notice" of the claim and its
basis. Appert v. Morgan Stanley Dean Witter, Inc.,
673 F.3d 609, 622 (7th Cir. 2012). This means that (1) "
the complaint must describe the claim in sufficient detail to
give the defendant 'fair notice of what the . . . claim
is and the grounds upon which it rests'" and (2) its
allegations must plausibly suggest that the plaintiff has a
right to relief, raising that possibility above a "
speculative level." EEOC v. Concentra Health
Services, Inc., 496 F.3d 773, 776 (7th Cir. 2007).
Because the " FCA is an anti-fraud statute," FCA
claims " are subject to the heightened pleading
requirements" of Federal Rule of Civil Procedure 9(b).
United States ex rel. Gross v. AIDS Research
Alliance-Chi., 415 F.3d 601, 604 (7th Cir. 2005). This
rule requires the plaintiff to " state with
particularity the circumstances constituting fraud or
mistake." Fed.R.Civ.P. 9(b). However, the "
conditions of a person's mind may be alleged
generally." Id. Therefore, " [t]he
complaint must state the identity of the person making the
misrepresentation, the time, place, and content of the
misrepresentation, and the method by which the
misrepresentation was communicated to the [Government]."
United States ex rel. Grenadyor v. Ukrainian Vill.
Pharmacy, Inc., 772 F.3d 1102, 1106 (7th Cir. 2014).
United States of America, the real party in interest in this
case, entered into the Logistics Civil Augmentation Program
(" LOGCAP" ) III contract and various task orders
thereunder with KBR. (ECF No. 1 at 4). The United States Army
Field Support Command, located in Rock Island, Illinois,
awarded and issued the LOGCAP III prime contract.
Id. The United States Army Field Support Command and
its successor, the United States Army Sustainment Command,
also located in Rock Island, bear or bore responsibility for
administering LOGCAP III, defined the United States'
needs under LOGCAP III, and issued task orders pursuant to
LOGCAP III. Id.
Geoffrey Howard (" Relator Howard" ) is a former
employee of Service Employees International, Inc. ("
SEII" ), which is entirely owned by KBR through two
subsidiaries. Id. at 4. Relator Howard joined the
LOGCAP project on July 19, 2007, as a data and system
analyst. Id. Relator Howard's first assignment
was to work as a Desktop Analyst for KBR's IT Department
at the Al-Asad Airbase in Iraq, known as B-1 within KBR.
Id. Relator Howard then relocated to KBR site B-9,
at Habbaniyah Airbase, where he remained until March 2008.
Id. at 4-5. Relator Howard's job was to work as
an IT technician and to help implement KBR's new property
management system. Id. at 5. Relator Howard was
later transferred to a position with KBR's Support Office
in Kuwait (" KSO" ) on March 16, 2008, where he
prepared reports on KBR's materials usage. Id.
During this assignment, the Relators allege Relator Howard
discovered hundreds of millions of dollars in idle Government
property. Id. Due to pressure from KBR, resulting
from his complaints about excessive ordering and
underutilization of Government property under the LOGCAP III
contract, the Relators allege Relator Howard resigned on
August 2, 2009. Id. Relator Howard currently resides
in Langenberg, Germany. Id.
Zella Hemphill (" Relator Hemphill" ) is an
employee of SEII. Id. Relator Hemphill joined KBR as
a LOGCAP III recruiter in its Human Resources Department in
2004. Id. On July 27, 2005, Relator Hemphill was
deployed to the LOGCAP III project to work as an
Administrative Specialist in Baghdad, Iraq. Id.
Relator Hemphill was subsequently transferred to Tikrit,
Iraq, and Kirkuk, Iraq, to manage KBR's Government
property. Id. During this assignment, the Relators
allege Relator Hemphill discovered large problems in how KBR
was ordering, using, and accounting for Government property.
Id. In May 2008, Relator Hemphill was transferred to
KBR's newly-created Distribution Management Center
(" DMC" ) in KBR's KSO and promoted there to
Senior Materials Control Specialist one month later.
Id. Relator Hemphill's job at the DMC was to
facilitate usage of KBR's excess Government property by
matching internal demand for materials with available
supplies in KBR storerooms, a process known as
cross-leveling. Id. Relator Hemphill worked closely
with Relator Howard to increase KBR's cross-leveling and
correspondingly decrease duplicative purchasing. Id.
Relator Hemphill is a resident of Houston, Texas.
KBR, Inc. is a global engineering and construction company
incorporated in Delaware with its corporate headquarters in
Houston, Texas. Id. at 6. Defendant Kellogg Brown &
Root Services, Inc. is a Delaware corporation with its
principal place of business located in Houston, Texas.
Id. Defendant Kellogg Brown & Root Services, Inc. is
a wholly owned subsidiary of KBR, Inc. and assumed
responsibilities for the LOGAP III contract. Id.
Prior to 2005, KBR, Inc. was known as Kellogg Brown & Root,
Inc., a wholly owned subsidiary of Halliburton Company.
Id. In April 2007, KBR became an independent
company. Id. at 7.
1985, the Government initiated LOGCAP, a United States Army
initiative for the use of civilian contractors to provide
combat support and combat service support to armed forces in
wartime and other contingencies. Id. at 7. Since its
initiation, LOGCAP has grown exponentially as the Government
has relied increasingly on private contractors to support the
military missions in Iraq and elsewhere. Id. From
1992 to 2007 the LOGCAP prime contract increased from $2
billion to $23 billion. Id. The first LOGCAP prime
contract, LOGCAP I, was awarded to KBR in 1992; LOGCAP II, to
DynCorp in 1997; and LOGCAP III, to KBR in 2001. Id.
contracting agency for LOGCAP is the United States Army
Sustainment Command located in Rock Island, Illinois.
Id. Once the prime LOGCAP contract has been awarded,
all work to be performed under the contract is awarded by
individual task orders that specify a particular Statement of
Work and period of performance. Id. The services
provided under the LOGCAP program include supply operations
such as the delivery of food, water, fuel, spare parts, and
other operations; field operations, such as dining and
laundry facilities, housing, sanitation, waste management,
postal services, and morale, welfare, and recreation
activities. Id. Other operations under the LOGCAP
program include engineering and construction, support to
communication networks, transportation and cargo services,
and facilities maintenance and repair. Id.
December 14, 2001, LOGCAP III was awarded to Brown & Root
Services, Inc., a subsidiary of Kellogg Brown & Root.
Id. at 6, 8. Brown & Root Services later transferred
its responsibilities under the LOGCAP III contract to
Defendant Kellogg Brown & Root Services, Inc. Id. at
6. LOGCAP III was a performance based cost plus award fee
contract that provided for KBR to be paid as profit 1% of its
costs plus up to an additional 2% for good performance based
on a detailed set of performance criteria. Id. at 8.
The Relators allege KBR's profit under LOGCAP III
increased the more its cost increased with no specified cap.
Id. at 9.
III initially was designed to last up to 10 years; however
KBR's performance under the contract was subject to
intense criticism on multiple fronts. Id. Beginning
in 2004, the Special Inspector for Iraq Reconstruction and
other audit agencies found multiple deficiencies by KBR
across a wide spectrum of responsibilities under LOGCAP III.
Id. Various governmental audits, including a United
States Government Accountability Office report issued in
April 2005, turned up more than $1 billion in questionable
costs. Id. The Army eventually terminated LOGCAP III
early and awarded LOGCAP IV in 2007 to three prime
contractors, Fluor, DynCorp, and KBR, who compete for task
orders under the contract. Id. KBR did not earn a
LOGCAP IV task order until February 27, 2010, and it remains
the only LOGCAP prime contractor for Iraq. Id.
Regulatory Oversight of LOGCAP III
Relators allege that as a United States Army contract, LOGCAP
is subject to the Federal Acquisition Regulations ("
FAR" ) and the Defense supplement to the FAR ("
DFAR" ). Id. The Relators allege that by its
express terms, KBR's performance under LOGCAP was
required to comply with a wide range of terms, provisions,
and representations set out in the industry standards, Army
regulations and programs, and KBR documents among other
sources. Id. at 10. The Relators allege that by the
terms of the contract these various " clauses and
provisions have the same force and effect as if the entire
full text was included in the solicitation/contract."
Id. LOGCAP III was awarded on the basis of an offer
made by KBR 15 days after the attacks of September 11, 2001,
and the Relators allege the award expressly stated it was
" based upon the representations, resources and quality
of performance proposed." Id.
other regulatory provisions, the Relators allege LOGCAP III
incorporated FAR § 45.5, which at the time specified KBR
was responsible and accountable for the Government
property in its possession, and required it to
establish and maintain a system to " control, protect,
and maintain" all such property. Id. The
Relators allege FAR § 45.5 also made KBR "
responsible for the proper care, maintenance, and use of
Government property in its possession or control from the
time of receipt until properly relieved of responsibility, in
accordance with sound industrial practice and the terms of
the contract." Id. at 10-11. (citing 48 C.F.R.
§ 45.509). In accordance with this responsibility, the
Relators allege KBR was required to promulgate and follow
written procedures adequate for assuring that Government
property would " be used only for those purposes
authorized in the contract." Id. at 11.
KBR's Control Procedure for Government Property
accordance with LOGCAP III KBR developed LOGCAP Government
Property Control Procedures (" PCP" ). Id.
at 11. Each revision of the PCP was submitted to the Defense
Contract Management Agency (" DCMA" ) by KBR for
approval. Id. DCMA approved a KBR PCP on July 15,
2008, under 48 C.F.R. § 45.104(b), which allows the
Government to revoke its assumption of risk for " loss,
theft, damage or destruction" of Government property if
the contractor's property management procedures are
inadequate. Id. The PCP covers " all facets of
property control, from requisition through disposition of all
[G]overnment property in the possession of KBR."
Id. The Relators allege that according to KBR, the
PCP " ensure[s] [G]overnment property is protected,
controlled, reserved, and maintained in accordance with the
FAR and the terms of the contract." Id.
Relators allege PCP, Tab A, P5.1.1 provides KBR must order
Government property-- whether furnished by the Government or
acquired by KBR ? in " [r]easonable quantities,
commensurate with the work to be accomplished."
Id. The Relators allege the quantities of material
that KBR uses or otherwise consumes must likewise be "
reasonable when compared to the work/job at hand and Material
Requisitions." Id. The Relators allege KBR must
use Government property only for performing the LOGCAP III
contract and may dispose of Government property only by
screening the items against current and anticipated needs.
Id. The Relators allege KBR is required to promptly
report excess items and to dispose of such items only after
receiving governmental approval. Id. at 11-12.
supplements the PCP with Desktop Operating Procedures ("
DOP" ) and Technical Derivatives (" TD" ) to
promulgate property management policies and procedures not
otherwise provided for in the PCP. Id. at 12. Unlike
the PCP, KBR does not submit its DOP's or TD's to the
Government. Id. The procedures provided by the PCP
state KBR requisitions of Government property must be
contractually authorized, necessary for performance of the
LOGCAP III contract, and only be in the quantities that are
needed for the specific performance. Id. The
Relators allege that when requesting property, KBR employees
are required to prepare a Material Requisition request form
(" MR" ) and forward it to KBR's Material
Control office. Id. The Material Control office is
then responsible for attempting to fill the request
internally before ordering additional property. Id.
Filling an MR with materials available in the local warehouse
is known as " transfer," and the process of
screening MR's for suitable property available elsewhere
within KBR is known as " cross-utilization" or
" cross-leveling." Id. at 13.
Relators allege cross-leveling is mandatory and necessary to
prevent KBR from buying excess amounts of property.
Id. The Relators allege KBR is required to use the
property in its possession that the Government has already
paid for, whether locally or theater-wide, before it
purchases more of the same property. Id. KBR
supplements the PCP's cross-leveling procedures with a
DOP for the Distribution of Government Property ("
DGP" ). Id. Under the DOP, the Relators allege
KBR's DMC is responsible for screening all procurement
requests for possible cross-leveling. Id. The
Relators allege KBR's policy is that cross-level requests
must be filled for all lines of inventory that are above a
safety stock level. Id. The Relators allege
inventory that does not have a safety stock level, such as
excess materials, must be " entirely available" for
cross-leveling. Id. The Relators allege sites are
required to fill all valid cross-leveling requests from the
screening procurement requests " for availability within
theater prior to purchase," the Relators allege the DMC
must cross-level materials in the following order: (1) from
redistributable storerooms, such as those holding excess
materials; (2) from underutilized stock; and (3) from stock,
provided the item is above the safety stock level.
Id. at 13-14. The DOP further states cross-leveling
" should not only be used when tasked by the DMC. If a
site foresees a need for an item(s), it is contractually
obligated to attempt to obtain the items through
crossutilization within its project (group of sites)."
Id. at 14. Thus, the Relators allege through this
provision and others, KBR concedes its contract requires
cross-leveling before buying or disposing of Government
includes procedures for ensuring " proper consumption,
maximum utilization, and required maintenance of Government
property in accordance with contractual requirements."
Id. KBR must use Government property for its
authorized purpose. Id. KBR departments designate
Property Custodians to control and protect the Government
property that is issued. Id. The Custodians'
duties include reporting losses and conducting and
reconciling physical inventories. Id.
excess property is discovered, the Relators allege KBR is
required to turn it in to Material Control, which then
reports " all idle property" to the relevant KBR
Project Administrator. Id. " Idle property no
longer required to support the contract will be declared
excess," and will be stored pending disposition
instructions from a DCMA Plant Clearance Officer or
Contracting Officer. Id. The Relators allege KBR
must maintain the Government property in its possession, in
accordance with the LOGCAP III contract, " sound
industrial practices," the equipment's technical
manuals, and local maintenance procedures. Id. at
Relators allege KBR is also required to keep reasonable stock
levels in its warehouses, and Government property must be
consumed in reasonable relation to contract requirements.
Id. at 15. KBR warehouses must maintain on-hand
stocks " in reasonable quantities to support contractual
requirements and in accordance with specific project policies
or replenishment lead time. Stock levels will be based on
equipment density, population to be supported, recurring
demands or the history of a previous project with like
property." Id. In maintaining stock levels, the
Relators allege KBR must return to its warehouses any
Government property it has taken out of inventory, but not
used, such as materials intended for specific projects or
specially reserved in Administrative Change Letters, which
are DCMA directives authorizing the contractor to perform
additional work under the contract. Id. The Relators
allege the return must occur within a reasonable time after
KBR completes the relevant work or has made no demand for the
property. Id. The purpose of the requirement is to
ensure that materials KBR reserves for a specific purpose are
made available for other projects as soon as they are no
longer needed, and to prevent KBR from ordering materials it
already has available. Id.
policies for managing inventory under the PCP are set forth
in its LOGCAP III Materials Stock Plan DOP. Id. In
accordance with industry standards, KBR classifies the
property in its possession as either stock (" STK"
), special order items (" SP" ), or non-stock
(" NS" ). Id. STK is material with
recurring demand, and is re-ordered based on the number of
those demands. Id. SP items are property with a
non-recurring demand and no expectation of future demand,
such as items ordered for a specific project. Id. SP
is also the default classification for all items added to a
storeroom. Id. at 16.
items are those without demand, and is used until depleted
and is not reordered. Id. The primary difference
between NS items and SP items is that NS items are
redistributable to other KBR sites, while SP items are
reserved for the project for which they were requisitioned.
Id. Because there is little difference between
unused SP items and NS items, KBR requires " strong
justification" for maintaining items as SP when they do
not meet demand criteria, even though they were classified SP
by default when they entered the warehouse. Id.
Basically, an item must have a known, upcoming need to
continue to be classified as SP. Id.
classifies materials on a site-by-site basis, and items are
classified based on the number of demands for them.
Id. An item that is requested nine times during a
360-day period may be classified as STK and added to the
Authorized Stock List (" ASL" ), which is the list
of property KBR keeps in stock. Id. Items remain on
the ASL so long as they have at least three demands in a
360-day period. Id. But, when ASL items have fewer
than three demands, but more than zero, they are reclassified
as SP and removed from the ASL. Id.
items are reordered as they are consumed, and all STK item
lines on the ASL are calculated by KBR on a reorder point and
a safety stock level based on historical usage data.
Id. at 17. The reorder point is the minimum level of
an item in inventory. Id. The safety stock level is
a safety margin calculated to allow warehouses to continue to
operate in the event of supply disruptions. Id. When
a line of STK inventory decreases to the reorder point KBR
places a requisition order for the item, and the requisition
order replenishes the STK line to the maximum allowed to be
kept in inventory. Id. SP items, KBR's default
classification for all items added to a storeroom, have no
reorder point or safety stock level, and KBR will only change
the classification of an item from SP to STK when it has been
requested nine times or more. Id. Even then,
KBR's ASL Review Board must approve the reclassification
by determining that the item has " legitimate ongoing
requirements" that justify its presence on the ASL.
must conduct physical inventories of the Government property
in its possession, and this must be done at least once a
year. Id. After each inventory, the count on the
inventory record is compared to the balance on the
corresponding property record, which is a record KBR keeps in
Maximo for all Government property in its
possession, accounting for the property from requisition to
disposition. Id. KBR must record any unresolved
discrepancies between the inventory count and its property
records in an Inventory Adjustment Report (" IAR" ).
Id. at 17-18. KBR then reports the IAR and the
overall inventory results to DCMA. Id. at 18. KBR
must identify the discrepancies it found during the inventory
and submit a complete list of Government property in its
possession. Id. The Relators allege KBR is therefore
contractually obligated to report missing Government
property, " mystery" Government property, all
unaccounted for Government property, and Government property
it counted in inventory that was " not in use nor needed
by KBR" to the DCMA annually, at minimum. Id.
The Relators allege KBR's contract also requires it to
report excess materials to the Government at the conclusion
of every physical inventory. Id.
Relators allege KBR has procedures for requesting disposition
instructions from the Government for Government property that
it identifies as " excess, obsolete, uneconomically
repairable, or otherwise unusable." Id. The
Relators allege the PCP requires KBR to report excess and
unusable materials to the Government by submitting an
inventory schedule in accordance with FAR § 45.6.
Id. Once KBR has submitted a disposition request,
the Relators allege the Government will issue instructions
for getting rid of the property. Id. The Relators
allege KBR then turns this documentation over to Material
Control who then verifies whether the property is
serviceable, and whether it can be used elsewhere on LOGCAP
III. Id. at 18-19. If Material Control concurs after
its review that the property is serviceable and excess, it
submits a disposition request to KBR's Houston Support
Office for transmittal to the Government via the
Government's automated screening system, the Plant
Clearance Automated Reutilization Screening System ("
PCARSS" ). Id. at 19.
is an online system the Government uses to screen and dispose
of its excess property. Id. Contractors submit
schedules of excess inventory through PCARSS and the
Government uses it to review the schedules and in deciding
whether to accept or reject them. Id. KBR submits
schedules to the Government through PCARSS on Standard Form
1428, which is also known as an Inventory Disposal Schedule
(" IDS" ). Id. The IDS lists the property
KBR wants to relinquish, including the property's
location(s), condition code, quantity, and total acquisition
cost. Id. KBR must also indicate whether the
property was furnished by the Government or acquired by KBR.
Id. KBR must sign and date the IDS. Id.
to 2004, Form 1428 included the contractor's
certification that the schedule " does not include any
items reasonably usable, without loss to the Contractor, on
its work" and that the contractor would notify the
Government of any change in the property's status prior
to its final disposition. Id. In 2004 and
afterwards, KBR made its certifications on a form memorandum
attached to the Form 1428's. Id. The memorandum
was titled " Request for Disposition," and states:
KBR request [sic] disposition instructions for the attached
listed property. It has been determined that this equipment
is excess serviceable items to the contract and there is no
further use for the property in support of the mission
requirements. The attached lists of item(s) have been
screened for cross level requirements throughout the theater
of operation. The items have been screened and verified there
are no foreseeable requirements in support of the current
mission at this time.
Relators allege KBR is obligated to transfer or cross-level
Government property before it submits the property to the
Government for disposition. Id. at 20. Prior to
disposition, the Relators allege KBR must take four steps:
(1) screen the items against KBR's project-wide needs;
(2) report excess items to its Houston Support Office for
transmittal to the Government via PCARSS; (3) receive
Government authority for disposition; and (4) remove the
item's identification as Government property.
Id. If KBR submits Government property to the
Government for disposition and subsequently discovers the
property is " usable on other work without financial
loss," the Relators allege it must immediately notify
the Government and request continued use of the property.
implements the PCP and DOP's through an automated
property management system that is responsible for managing
KBR's Government property in all respects. Id.
The system identifies when KBR needs to procure an item, when
it needs to cross-level an item, and when it needs to dispose
of an item. Id. Since 2007, KBR has used IBM's
Maximo software to manage Government property under LOGCAP.
Id. Maximo is a universal interface for
procurements, services, and work orders, allowing KBR to
track Government property from its acquisition to its
delivery and usage. Id. When Relator Howard was
employed by SEII and joined LOGCAP his job was to help KBR
implement Maximo. Id. at 21. Before Maximo was
implemented KBR had no universal system for tracking
materials on the ground. Id. As a result, each KBR
site maintained its own property management system and each
KBR unit operated in isolation. Id. The Relators
allege KBR's fragmented property management systems
caused staggering amounts of waste. Id.
example, the Relators allege soon after the release of the
ASL Report in December 2008 Relator Howard found that 33% of
the stock in KBR's " A-site" storerooms had
never been issued, meaning KBR had bought the items and never
used them. Id. The Relators allege this idle
property was worth $20.5 million. Id. The Relators
allege this mismanagement of governmental property violated
the PCP that KBR had in effect at the time because the PCP
required KBR to screen all procurement requests for possible
cross-leveling. Id. With no common system, the
Relators allege KBR sites had no way to know if other sites
had the item they needed and, if so, whether or not the item
was available. Id. at 21-22.
2007, Maximo was implemented in response to Government
auditor's noticing KBR's inadequate property
management systems. Id. at 22. Even after Maximo was
implemented, a DCMA audit found continued use of a legacy
system instead of Maximo. Id. On March 16, 2008,
Relator Howard began a job with KBR's Support Office in
Kuwait in which he created an automated inventory reporting
system for Maximo. Id. In this position Relator
Howard programmed several reports, many of which he designed
to monitor KBR's compliance with the PCP and DOP.
Id. The Relators allege Relator Howard began writing
the most important of these reports on June 4, 2008, the ASL
Report. Id. The ASL Report used the data KBR now
stored in Maximo to report the amount of stock, special
order, and non-stock items in KBR's warehouses, and
whether KBR's utilization of those materials justified
their classifications. Id. at 22-23. In preparing
the ASL Report, Relator Howard worked with KBR's DMC in
Kuwait. Id. The DMC is responsible for
cross-leveling purchase requests against KBR's current