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United Staes ex rel. Howard v. KBR, Inc.

United States District Court, C.D. Illinois, Rock Island Division

October 15, 2015


          For 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.

         For 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.

         For Kbr Inc, Kellogg Brown & Root Services Inc, Defendants: Craig D Margolis, Tirzah S Lollar, LEAD ATTORNEYS, VINSON & ELKINS LLP, Washington, DC USA.


         Michael M. Mihm, United States District Judge.

         Now before the Court is KBR, Inc. and Kellogg Brown & Root Services, Inc.'s (collectively referred to as " KBR" or " Defendants" )[1] 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.


         This 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 of Illinois.


         On 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. 49).


          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).


         A. Parties

         The 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.

         Relator 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.

         Relator 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. Id.

         Defendant 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.

         B. Background

         In 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. at 8.

         The 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.

         On 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.

         LOGCAP 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.

         C. Regulatory Oversight of LOGCAP III

         The 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.

         Among 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[2] 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.

         D. KBR's Control Procedure for Government Property

         In 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.

         The 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.

         KBR 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.

         The 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 DMC. Id.

         In 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 property. Id.

         The PCP 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.

         Whenever 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 14.

         The 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.

         KBR's 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.

         NS 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.

         KBR 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.

         Stock 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. Id.

         KBR 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[3] 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[4] (" 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.

         The 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.

         PCARSS 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.

         Prior 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.


         The 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. Id.

         KBR 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.

         For 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.

         In 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 inventory ...

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