Kellogg Brown & Root Services, Inc.
Docket: ASBCA 56358, ASBCA 57151
Decision date: 2017-06-08

ARMED SERVICES BOARD OF CONTRACT APPEALS 
Appeals of -- ) 
) 
Kellogg Brown & Root Services, Inc. ) 
) 
) 
Under Contract No. DAAA09-02-D-0007 ) 
APPEARANCES FOR THE APPELLANT: 
APPEARANCES FOR THE GOVERNMENT: 
ASBCA Nos. 56358, 57151 
57327,58583 
Jason N. Workmaster, Esq. 
Raymond B. Biagini, Esq. 
Alejandro L. Sarria, Esq. 
Herbert L. Fenster, Esq. 
John E. Hall, Esq. 
Covington & Burling LLP 
Washington, DC 
Raymond M. Saunders, Esq. 
Army Chief Trial Attorney 
ChristinaLynn E. McCoy, Esq. 
MAJ Lawrence Gilbert, JA 
Trial Attorneys 
OPINION BY ADMINISTRATIVE JUDGE O'SULLIVAN ON THE 
GOVERNMENT'S MOTION TO DISMISS AND APPELLANT'S MOTION FOR 
SUMMARY JUDGMENT 
These appeals involve costs incurred by Kellogg Brown & Root Services, Inc. 
(KBRS) and its subcontractors for private security to accompany company officials 
and convoys used to deliver food and other 
supplies to U.S. and coalition troops in 
Iraq during military operations in the 2003-2006 timeframe. Starting in 2007, the 
Army withheld a total of $44,059,024.49 from KBRS billings under the contract to 
recoup previously paid costs of private security that the government had determined 
were unallowable. Three of the appeals, ASBCA Nos. 56358, 57151 and 57327, are 
before us on remand from the United States Court of Appeals for the Federal Circuit, 
which held that the contract prohibited the use of private security companies (PS Cs) 
but, in order to fully resolve the dispute, remanded the appeals to the Board to decide 
whether KBRS "properly raised its breach and remedy allegations, and if so, to rule 
on those contentions." McHugh v. Kellogg Brown & Root Services, Inc., 626 F. App 'x 
974, 978 (Fed. Cir. 2015). 
The fourth appeal, ASBCA No. 58583, is before the Board following KBRS's 
appeal from a deemed denial of its 29 September 2011 certified claim for breach of 

contract. This appeal was not decided by the Board and was consolidated with the 
other three appeals only after the appellate remand. On 19 January 2016 the Board 
denied the government's pending motion to dismiss this appeal for lack of jurisdiction. 
Kellogg Brown & Root Services, Inc., ASBCA No. 58583, 16-1 BCA ~ 36,233. 
Following the Board's denial of the government's motion to dismiss in ASBCA 
No. 58583, KBRS filed a first amended and consolidated complaint (FACC) in all four 
appeals. 1 Thereafter the government filed a motion to dismiss as to all counts and 
appellant filed a motion for summary judgment. Oral argument was held on the 
motions on 23 August 2016. 
DISCUSSION 
KBRS in its F ACC asserts the following: 
Count I-the government's recovery on its claim is 
time-barred because the contracting officer's 30 January 
2013 final decision was issued more than six years after 
the government's claim accrued, which was no later than 
10 June 2005. 
Count II-KBRS is entitled to judgment because the Army 
breached its contractual obligation to provide adequate 
force protection and the use of PSCs was a permissible 
remedy. 
Count III-the Army breached the contract by requiring 
KBRS to perform beyond the original scope and the use of 
PSCs was a permissible remedy. 
Count IV-the Army breached the contract by failing to 
comply with the FAR 16.301-3 requirement to have available 
adequate resources to manage a cost reimbursement contract 
and use of PSCs was a permissible remedy. 
Count V-KBRS is entitled to judgment because the 
contract prohibition relied on by the Army applies only in 
peacetime, not during war. 
1 Prior to the filing of the FACC, KBRS's amended complaints in ASBCA Nos. 56358, 
5 7151, and 5 73 2 7, filed 16 January 2013, contained three counts: Count I 
(Breach of Contract), Count II (Waiver/Ratification), and Count III (Bad Faith). 
2 

Count VI-KBRS is entitled to judgment because the 
government waived the contract prohibition on the use of PSCs. 
Count VII-KBRS is entitled to judgment because the Army 
cannot reopen the firm-fixed-price subcontracts at issue. 
Count VIII-under a cost-reimbursement contract, KBRS 
is entitled to recover all of its incurred costs so long as they 
were not incurred due to fraud, lack of good faith, or 
willful misconduct. 
Count IX-KBRS is entitled to judgment because the 
Army released KBRS from all claims 
related to the pricing 
and award of the ESS subcontracts. 
Count X-KBRS is entitled to judgment because the Army 
contracting officer's 30 January 2013 final decision was invalid. 
Count XI-the Army's damages calculation is inaccurate 
and unsupported. 
Count XII-the Army acted in bad faith in its decision to 
recapture funds from KBRS. 
KBRS has moved for summary judgment only on Counts II (breach of contract) and 
VI (waiver). 
The affirmative defenses asserted by KBRS on 25 March 2013 in its complaint 
in ASBCA No. 58583 largely foreshadow the affirmative defenses articulated in 
KBRS's FACC. The only new counts in the FACC are Counts IV, V, and VII. 
Before considering the parties' arguments, we address the parameters governing 
what is, and what is not, properly before us in these consolidated appeals. On appeal 
from our 2014 decision, the United States Court of Appeals for the Federal Circuit 
(hereinafter "court" or "Federal Circuit") was asked to decide two issues: ( 1) whether 
the Board erred in deciding that the contract did not prohibit the use of PSCs, and 
therefore that KBRS was entitled to payment for the use of PSCs; and (2) whether the 
Board erred in deciding that the Army's affirmative claim against KBRS contained in 
the contracting officer's final decision (COFD) issued 30 January 2013 was barred by 
the CDA's six-year statute of limitations. McHugh, 626 F. App'x at 976. The court 
affirmed the Board on the second issue, finding that the Army's 30 January 2013 
affirmative claim was time-barred, but reversed the Board's holding that the contract 
did not prohibit the use of PSCs. Id. at 977, 979. The court recognized that "[t]his 
3 

narrow contract interpretation based on the weapons prohibition ... may not fully 
resolve the dispute," and remanded to the Board to determine whether "KBR properly 
raised its breach and remedy allegations, and if so, to rule on those contentions." 
Id. at 978. In ascertaining the proper scope of the appeals now before us, we are 
mindful that our appellate mandate constitutes the law of the case on all issues that 
were explicitly or implicitly decided by the court. Exxon Corp. v. United States, 
931 F.2d 874, 877 n.7 (Fed. Cir. 1991) (citing lB J. MOORE, J. LUCAS & T. CURRIER, 
MOORE'S FEDERAL PRACTICE ii 0.404[10] at 172-74 (2d ed. 1988)). However, we do 
not read the court's opinion to foreclose the Board from considering and deciding 
other issues presented in these appeals that 
were not previously decided by the Board 
and were therefore never appealed. 
I. The Government's Motion to Dismiss 
The government has moved to dismiss all counts ofKBRS's FACC and KBRS 
has responded in opposition. A short discussion of the approach taken by the 
government and how we intend to decide the motion to dismiss is in order. The 
government's motion, with respect to some counts of the F ACC, asserts that they fail 
to state a claim upon which relief can be granted. With respect to other counts, the 
government asserts that the Board lacks jurisdiction to entertain them; and with respect 
to the remainder, the government argues that they are foreclosed either by law of the 
case or by the Federal Circuit's mandate. Because a government claim is at the heart 
of the matter and KBRS' s complaint primarily consists of affirmative defenses to that 
claim, it is appropriate with respect to certain counts to treat the government's motion 
to dismiss as a motion to strike affirmative defenses under Federal Rule of Civil 
Procedure (FRCP) 12(f) rather 
than as a Rule 12(b)(6) motion to dismiss. 2 Further, in 
those instances in which the motion to dismiss relies on matters outside the pleadings, 
we may treat it as a motion for summary judgment. Dongbuk R&U Engineering Co., 
ASBCA No. 58300, 13 BCA ii 35,389 at 173,637. And, unlike the usual circumstance 
in which a motion to dismiss for failure to state a claim is filed before the evidentiary 
record has been fully developed, a full record exists in these appeals. Thus, in 
considering the government's motion, we will look both to KBRS's FACC and the 
record in these appeals. 
The parties' contentions on the government's motion to dismiss and the Board's 
related dispositions are as follows: 
2 In appropriate circumstances, where our rules do not address a matter, we commonly 
look to the Federal Rules of Civil Procedure for guidance. TTF, L.L.C., 
ASBCA No. 58494, 13 BCA ii 35,343. 
4 

Count I (Government Claim Time-Barred) and Count X (COFD Invalid) 
The government asserts that Count I fails to state a claim on which relief can be 
granted because all but nearly $12 million 3 of the total amount claimed in the final 
decision was the subject of both government withholding in 2007-2009 and 
subsequent KBRS claims, of which the Board has jurisdiction. Therefore, the three 
remanded appeals involve KBRS claims for withheld monies that are properly before 
the Board after remand. As to Count X, the Army states that the "invalidity" of the 
COFD, like its untimeliness, has no logical connection to whether KBRS i's entitled to 
recover on its claims for the withheld sums. 
KBRS responds that what is at issue here is a government claim and that claim 
is untimely as to the $44 million that was withheld as well as the $12 million that was 
not. At oral argument, KBRS summed up its position as being that the government 
needed to issue timely COFDs on the withheld amounts in order to "perfect" its claim 
(tr. 38). KBRS further states that in the absence of a COFD on the government's claim 
for the $44 million, KBRS's 2007, 2009, 2010 and 2011 claims (which KBRS calls 
·'submissions") did not '"magically convert" a government claim into contractor 
claims. Rather, the principal effect of KBRS's claim submissions was to start the 
running of CDA interest and ensure that the Board had jurisdiction over any 
subsequent appeals by KBRS. (App. opp'n at 5-6) 
The government replies that the Army's notices of withholding were 
administrative claims which KBRS could have appealed, but it chose to submit its own 
claims for the monies withheld and then appeal from the deemed denials of those 
claims (gov't reply at 3-5). 
We conclude that Counts I and X of the F ACC are within the proper scope of 
our consideration. Both of these counts were asserted by KBRS in its complaint in 
ASBCA No. 58583 in March of 2013. They were not decided by the Board and thus 
were not appealed. 
As previously found by the Board, the Army procuring contracting officer 
(PCO) and the Defense Contract Audit Agency (DCAA) first notified KBRS by letter 
dated 6 February 2007 and DCAA Form 1 (No. 127) of the same date that they were 
respectively ·'adjusting payments" (PCO) and "suspending" costs (DCAA) in the 
amount of $19,652,815 representing PSC costs incurred by KBRS's subcontractor, 
3 As to the nearly $12 million affirmative claim, the Board's holding that this claim 
was untimely was affirmed on appeal; therefore, this part of the claim is no 
longer before the Board. The exact amount was $11,561,567.55. Kellogg 
Brown & Root Services, Inc., ASBCA No. 56358 et al., 14-1 BCA ii 35,639 at 
174,520. 
5 

ESS, in performing the contract (finding 70)4. On 22 October 2007, KBRS submitted 
a certified claim to the PCO for the withheld amount. Following a deemed denial, 
KBRS appealed to the Board and the appeal was docketed as ASBCA No. 56358. 
(Finding 72; see also KBRS's FACC iiii 7, 70, 73-74) 
On 24 August 2009, KBRS submitted an invoice under the contract for 
payment of $22,279,678.49. On or about 1 September 2009, the government 
withheld the entire amount of the invoice on the recommendation of DCAA to "take 
immediate action to recoup the disapproved costs" in a revised DCAA Form I 
(No. 127 Revision- I, 3 August 2009). KBRS submitted a certified claim to the PCO 
on 20 October 2009 for $21, 131, 7 43 of the withheld amount. When no decision 
issued on its claim, KBRS appealed the deemed denial of its claim and the appeal was 
docketed as ASBCA No. 57151. (Finding 75) 
In March 2010, the government withheld an additional $2, 126,531 from 
payments otherwise due under the contract to recoup additional PSC costs. Thereafter, 
on 16 June 2010, KBRS submitted a certified claim for that amount plus the remainder 
of the 1 September 2009 withholding for a total claim amount of $3,274,466.49. 
Following the PCO's failure to issue a final decision on the claim, KBRS appealed the 
deemed denial and it was docketed as ASBCA No. 57327. (Finding 76; see also 
KBRS's FACC iiii 9, 83-84) 
The applicable legal standard in considering a motion to strike pursuant to 
FED. R. CIV. P. l 2(F) is whether the pleading asserts an "insufficient defense" or 
contains any "redundant, immaterial, impertinent, or scandalous matter." Only if a 
defense is insufficient as a matter of law will it be stricken. Danae, Inc., ASBCA 
Nos. 30227, 33394, 88-3 BCA ii 20,993 at 106,071; Space Age Engineering, Inc., 
ASBCA No. 25761 et al., 83-2 BCA ii 16,789 at 83,439 (citing Anchor Hocking Corp. 
v. The Jacksonville Electric Authority, 419 F. Supp. 992 (D.C. M.D. Fla. 1976)). 
We conclude, based on the facts alleged in the FACC (as well as the facts 
previously found by the Board), that the PCO issued timely final decisions on the 
government's claim. As set forth above, the government's claim was asserted by the 
PCO, in writing, by set-off and withholding, in February 2007, September 2009, and 
March 2010. In Placeway Construction Corp. v. United States, 920 F .2d 903, 906-07 
(Fed. Cir. 1990), the court reversed the lower court's dismissal for lack of jurisdiction 
where the contractor had appealed from the government's assertion of a right of set off. 
Though there was no "final decision" labeled as such and no notice of appeal rights, the 
court held that the CO had effectively issued a final decision and granted a government 
claim in the amount of the set off. See also KAL ME.I. Manufacturing & Trade, Ltd., 
4 References to "findings" refer to findings of fact in our previous decision, Kellogg 
Brown & Root Services, 14-1 BCA ii 35,639. 
6 

ASBCA No. 44367 et al., 94-1BCA,-i26,582 at 132,257 (citing Placeway, 920 F.2d at 
902) (government's withholding constituted "a final decision on a government claim"). 
Likewise, here 
the PCO's decisions may not have conformed to the 
usual COFD format, including the language required by the CDA to inform a 
contractor of its appeal rights, but they were nevertheless a "formal and final action 
equivalent to a decision from which the contractor could appeal." P.X Engineering 
Co., ASBCA No. 38215, 89-2 BCA ,-i 21,859 at 109,952 (contractor could appeal 
from unilateral contract modification); see also Systron Donner, Inertial Division, 
ASBCA No. 31148, 87-3 BCA ,-i 20,066 (CO's determination ofCAS noncompliance 
was appeal able final decision). The decisions were issued within six years of the date 
we previously found that the government knew or should have known of the use of 
PSCs to perform the contract-IO June 2005. KBRS, 14-1 BCA ,-i 35,639 at 174,520. 
KBRS could have directly appealed the PCO's withholdings but chose to file claims 
contesting the withholdings in order to start the running of CDA interest. Moreover, 
KBRS 
has not been prejudiced by the omission of final decision language and an 
explanation of appeal rights, as is evidenced by its prompt filing of certified claims 
and appeals from deemed denials. Thus, we agree with the government that the 
affirmative def ens es contained in Counts I and X should be stricken because they fail 
as a matter of law, and grant the government's motion to strike as to Counts I and X of 
the FACC. 
Counts II (Prior Material Breach-Force Protection), III (Prior Material Breach-Cardinal 
Change), and IV (Prior Material Breach-Noncompliance with FAR 16.301-3) 
The government contends that Counts II, III and IV should be dismissed for 
lack of jurisdiction because KBRS did not submit a claim to the CO alleging these 
grounds for relief (gov't mot. at 4-6). In the alternative, for any of the three counts for 
which the Board finds it has jurisdiction, the government moves to dismiss for failure 
to state a claim for relief, on the grounds that KBRS is not entitled in law to breach the 
contract 
as a remedy for the government's breach (id. at 6-7), and also that KBRS has 
no valid claim for breach for the government's alleged failure to provide required 
force protection because it had adequate remedies under the contract (id. at 8-9). 
Finally, with respect to the same three counts, the government argues in the alternative 
that they are time-barred because KBRS's September 2011 claim for breach was filed 
more than six years after accrual of the claim (id. at 9). 
For its part, KBRS argues that the Board has jurisdiction over Counts II through 
IV because these counts, which allege different prior material breaches by the 
government, are common law defenses to the government's claim which are not 
required to be submitted to a contracting officer (CO) for a decision; and in any event, 
the allegations made in the counts fall ·'within the scope" of four previous claims · 
submitted to the PCO ( app. opp' n at 7-13 ). Because common law defenses are not 
7 

required to be the subject of claims, the government's argument that Counts II through 
IV are time-barred also fails (id. at 22). Addressing the government's alternative 
ground for dismissal, KBRS contends that the counts state a claim upon which relief 
can be granted, because a party's prior material breach excuses the other party's later 
breach (id. at 14-18). KBRS adds that the government is foreclosed from claiming that 
KBRS had an adequate contract remedy and could have delayed its performance 
without penalty under the contract's "excusable delay" clause, because this issue was 
decided against the government in the Board's 2014 decision and was not appealed 
(id. at 18-19). 
In reply, the government argues that KBRS is only entitled to assert that a 
"mere defense" need not be submitted 
to a contracting officer for decision if it has 
timely appealed from a government claim (gov't reply at 6). The government argues 
with respect to Counts II-IV that KBRS's submission of certified claims for the 
amounts withheld by the government means that the appeals do not involve a 
government claim, 5 thus restricting the Board's jurisdiction to the contents of KBRS's 
certified claims (id.). Further, the government posits that KBRS was required under 
M Maropakis Carpentry, Inc. v. United States, 609 F.3d 1323 (Fed. Cir. 2010), to 
have submitted a timely certified claim of breach because it alleges that the 
government's prior material breach excused KBRS from complying with any contract 
prohibition on the use of PSCs and thus "seeks an adjustment of contract terms." (Id.) 
Counts II-IV are within the proper scope of our consideration on remand. 
Counts II and III were asserted as affirmative defenses in ASBCA No. 58583 in 
KBRS's complaint 
filed 25 March 2013, and have not yet been decided by the Board. 
Additionally, our appellate mandate specifically instructs us to consider whether 
KBRS 's breach and remedy allegations are properly before us and, if so, to rule on 
them. Count IV was not separately asserted until KBRS filed its F ACC, but 
it, along 
with Counts II and III, asserts prior material breach as an affirmative defense. 
We also conclude that we have jurisdiction over Counts II-IV. The government 
argues that the Board lacks jurisdiction because the "claims" asserted by these three 
counts were not clearly presented to the contracting officer for a decision (gov'tmot. 
at 4-6). We have already found that KBRS's 29 September 2011 breach claim 
underlying Count II adequately apprised the PCO that the basis for the claim was the 
Army's failure to meet its contractual obligation 
to provide force protection, 6 and the 
government withdrew its request for reconsideration of that finding at oral argument 
5 We note this assertion is inconsistent with the government's argument with respect to 
Counts I and X that KBRS could have appealed directly from the government 
claims effected by the Army's notices of withholding (gov't reply at 4-5). 
6 Kellogg Brown & Root Services, Inc., ASBCA No. 58583, 16-1BCAii36,233 at 
176,771. 
8 

(tr. 45). As to Counts III and IV, they were not presented to the Army CO for 
decision. We hold as to all three counts that they are affirmative defenses that do 
not seek adjustment of the terms of the contract, and therefore did not need to 
be presented to the CO for decision for the Board to have jurisdiction under 
M Maropakis. Laguna Construction Company v. Carter, 828 F .3d 1364, 1369-73 
(Fed. Cir. 2016); see also ASFA International Construction Industry and Trade, Inc., 
ASBCA No. 57880, 14-1BCA~35,736 at 174,911. 
The government also argues that KBRS is entitled to assert a "mere defense" to 
a government claim only if it has timely appealed from a government claim and that 
the appeals before us do not involve a government claim because KBRS filed its own 
claims for the withheld costs. Both parties have shifted position on whether it is a 
contractor claim or a government claim that is before us, depending on the results 
produced. We have already held with respect to Counts I and X, to the government's 
benefit, that these appeals involve timely asserted government claims to recover 
allegedly unallowable costs previously paid. With respect to Counts II through IV, we 
hold the same, this time to the detriment of the government's argument. Additionally, 
because these counts each invoke prior material breach and thus are affirmative 
defenses that need not have been presented to the CO for a decision, we reject the 
government's further argument that they are time-barred by the CDA's six-year statute 
of limitations (gov't mot. at 9). In doing so, we deem it unnecessary to determine 
whether KBRS' s 29 September 2011 claim would have been timely if in fact it 
constituted a contractor claim rather than a defense to a government claim. 
Alternatively, the government asserts that Counts II through IV fail to state a 
claim for relief. The government argues that hiring and billing the government for the 
costs of PSCs does not qualify as "mitigation of damages" and that a prior material 
breach by the government does not entitle KBRS to also breach the contract while 
continuing to perform it. In other words, KBRS had to choose between 
ending the 
contract and electing to continue performance, and if it chose the latter, its contract 
obligations continued in full force and effect. (Gov't mot. at 6-7) The government 
also contends that KBRS had no valid claim of breach because it had contractual 
remedies for government failures to provide force protection (gov't mot. at 8).7 
7 In a footnote, the government reiterates its argument that Count II independently fails 
to state a claim for relief because adjudication of whether the Army provided 
force protection "commensurate with the threat" is a non-justiciable political 
question. The Board previously rejected this argument on the ground that we 
have jurisdiction to determine whether the government met its contractual 
obligations. KBRS, 14-1 BCA ~ 35,639 at 174,522. This issue was not 
appealed, and we consider it foreclosed under the doctrine of law of the case. 
See Exxon Corp., 931 F.2d at 877 n.7. 
9 

The doctrine of prior material breach holds that when a party to a contract 
is sued for breach, it may defend on the ground that a legal excuse for its 
nonperformance existed at the time of the alleged breach. Faced with two parties to a 
contract, each of whom claims breach by the other, courts will often impose liability 
on the party that committed the first material breach. Long Island Savings Bank, 
FSB v. United States, 503 F.3d 1234, 1251 (Fed. Cir. 2007) (false certification 
constituted material failure of performance precluding plaintiffs' claim for breach 
damages) (citing Barron Bancshares, Inc. v. United States, 366 F.3d 1360, 1380 
(Fed. Cir. 2004); and Christopher Village, L.P. v. United States, 360 F.3d 1319, 1334 
(Fed. Cir. 2004)). 
In Laguna Construction, 828 F.3d 1364, the Federal Circuit affirmed the 
ASBCA' s grant of summary judgment to the government on its affirmative defense of 
prior material breach. The contractor had filed a claim for the unpaid costs of 
performing an environmental remediation and construction contract in Iraq. It then 
appealed to the Board from the contracting officer's deemed denial of its claim. 
Meanwhile, the government had been investigating allegations that Laguna's employees 
were receiving kickbacks from subcontractors. Several employees and officers of 
Laguna pied guilty to criminal indictments from 2010 to 2013. After the last of these 
pleas, the government moved to amend its answer in the appeal to include the 
affirmative defense that it was not liable for Laguna's claim since Laguna had 
committed a prior material breach of the contract by soliciting and accepting kickbacks, 
which constituted fraud against the United States. In granting summary judgment for 
the government, the Board observed that Laguna had breached the duty of good faith 
and fair dealing by its acts of fraud, and had also breached the Allowable Cost and 
Payment clause, FAR 52.216-7, by submission of vouchers that were improperly inflated 
to include the kickbacks. 
The Federal Circuit affirmed the Board on the grounds that Laguna committed 
the first material breach by violating the Allowable Cost and Payment clause, which 
states that a cost is allowable only if it is reasonable and complies with the terms of the 
contract. Laguna, 828 F .3d at 13 72-73. The court found "unpersuasive" Laguna's 
argument 
that the remedies available to the government under the contract's 
termination and Anti-Kickback clauses foreclosed application of the common law 
defense of prior material breach. The court stated that the government could have 
availed itself of those clauses, but was not required to do so, and "may use the prior 
material breach doctrine to defeat a contractor's breach claim." Id. at 1371. The court 
also rejected the argument that the government waived the defense by continuing to 
perform the contract until 2015 when it knew of the kickbacks as early as 2008, 
finding it was reasonable of the government to wait to invoke the defense un.til after 
the last of the guilty pleas was entered. Id. at 1372. 
10 

With that background, we address the arguments that the government makes 
in pressing its case that Counts II-IV fail to state a claim. First, the government 
advances the proposition that a party who chooses to continue to perform waives any 
prior material breach as a matter of law (gov't mot. at 6-7). We do not agree. In 
Northern Helex Co. v. United States, 197 Ct. Cl. 118, 129 (1972), the government's 
primary defense to the contractor's claim for breach damages for nonpayment on a 
contract to deliver helium was that the contractor waived its right to claim total breach 
by continuing performance and treating the lack of payment as immaterial. The court 
acknowledged that "there is venerable authority" that when performance is continued 
in spite of a known breach, the wronged party can no longer avail itself of that excuse. 
However, the court observed that "it is very doubtful that, even when first formulated, 
that rule disregarded particular circumstances justifying further performance in the 
specific case." Id. at 125. 
While acknowledging "the general proposition" that a party cannot continue 
performing after a material breach (although stopping performance would be fair and 
convenient), run up damages, and then go to court, the court found for two reasons that 
Northern Helex had not waived its right to damages for the government's 
material 
breach. First, the contractor's continued performance was commercially reasonable, 
because its helium extraction facilities were so interrelated with the rest of its 
operations that its helium facilities must continue in operation whether the helium was 
sold or wasted, and since it had no storage facilities, and there was no other market for 
the gas, it had no realistic alternative but to continue to tender helium to the 
government. Northern Helex, 197 Ct. Cl. at 126. As Judge Davis concluded: 
Id. at 129. 
[T]o determine whether waiver has occurred, a more 
complex inquiry must be made than merely, "did 
performance continue?" The guiding principle is whether, 
in the individual circumstances, the seller exercised 
"reasonable 
commercial judgment" in continuing to 
manufacture and deliver, in the effort to mitigate damages, 
although his obligation to perform has been discharged by 
the buyer's total breach. 
Second, there was 
a "special aspect" to the case, which was that "the action 
taken by Northern Helex was consistent with the purpose of the program, the 
conservation of a valuable national resource.'' The court went on to elaborate: 
In considering the Government's failure to observe the 
procedural requirements of the National Environmental 
Policy Act of 1969 when it terminated the contracts of the 
11 

three other suppliers, the Tenth Circuit characterized the 
termination as "an action which has environmental 
consequences, namely rapid depletion of the helium 
resources of the country." National Helium Corp. v. 
Morton, 455 F.2d 650 (10th Cir. 1971). The decision, 
requiring that the Secretary at least consider the 
environmental impact of his action, is predicated on the 
view expressed by Congress "that it is in the national 
interest to foster ... [the development and] distribution of 
supplies of helium ... sufficient to provide for essential 
government activities." 
Northern He/ex, 197 Ct. Cl. at 126 (footnote and citation omitted). This "special 
aspect" was also held by the court to be good reason for the company's continued 
performance. 
The record in these appeals similarly supports the conclusion that continuing to 
perform the contract with PSC protection was not only a commercially reasonable 
decision on the part of KBRS and its subcontractors, 8 but also that it was consistent 
with the purpose of the contract and in the national interest. In our previous decision 
we cited testimony that, for example, without a convoy every three days the military 
dining facilities would run out of food to feed the soldiers (finding 52), underscoring 
the important national interest in continuing to run the supply convoys. We also noted 
that the contract was a "rated'" order potentially subjecting KBRS to criminal penalties 
for failure to deliver within the required time. KBRS, 14-1 BCA ~ 35,639 at 174,521. 
Thus, KBRS's affirmative defenses of prior material breach (Counts II-IV) are not 
insufficient as a matter of law simply because KBRS continued to perform the 
contract. 
The government also argues that the defense of prior material breach is 
inapplicable here because it is a defense to a claim of breach and the government has 
not asserted a claim of breach against KBRS (gov't reply at 10). We disagree. The 
government's claim against KBRS, that KBRS and its subcontractors violated the 
contract prohibition against employing PSCs and that KBRS billed the government for 
8 We also note that while KBRS was continuing to perform, Army COs with 
knowledge of KB RS/ subcontractor use of PSCs continued paying KBRS' s 
invoices and took no other action to stop the use of PSCs. The Army did not 
seek to disallow PSC costs until February 2007. Under the circumstances, it 
would have been reasonable for KBRS to think, at least until February of 2007, 
that the parties had achieved a mutually acceptable solution that allowed KBRS 
to continue to accomplish its warfighter support mission despite the 
acknowledged force protection issues. 
12 

unallowable PSC costs in violation of the Allowable Cost & Payment clause, is plainly 
a claim of breach regardless of the fact that the government may not have used the 
word 
"breach'' to describe its claim. See also Laguna, 828 F.3d at 1371 (contractor, 
by billing the government for unallowable costs, violated the Allowable Cost & 
Payment clause and committed material breach of contract). 
The government's next argument is that KBRS cannot claim that its PSC costs 
were incurred to mitigate the damages caused by the Army's prior material breach 
because, under Count II, the PSC costs are the damages caused by the alleged breach 
(gov't reply at 10). In its FACC, KBRS alleges both that it incurred the PSC costs to 
mitigate damages caused by the Army's prior material breach, and that the Army's 
prior material breach excused it from any subsequent failure to comply with the 
contract's prohibition on the use of PSCs (FACC ,-i,-i 123-25). Although we are not 
convinced that these types of damages are mutually exclusive, 9 we do not think that 
the government's proffered distinction between PSC costs as damages caused by a 
breach and PSC costs as costs incurred 
in mitigation of damages that otherwise would 
result from a breach makes a difference in the context of deciding the government's 
motion to dismiss, because in these appeals KBRS is first and foremost asserting prior 
material breach as a defense to the government's claim of breach. 
The government's last argument for the proposition that Counts II-IV "fail to 
state a claim for relief' is that the contract afforded KBRS adequate remedies for any 
government-caused delays pursuant to the Changes and Excusable Delay clauses and 
therefore the dispute arises "under the contract," rendering KBRS' s breach claim 
invalid (gov't mot. at 8). The government recognizes that the Board previously 
rejected its argument that KBRS's sole remedy for government failure to provide the 
level of force protection promised in the contract was delay, but argues that our prior 
ruling rested principally on the premise that the contract allowed the use of PSCs (id.). 
This notion is not supported by the government's citation to our 2014 decision. In our 
prior decision we rejected the identical argument, stating that it was fortunate for the 
troops who depended on KBRS for life support that KBRS and its subcontractors did 
not adopt the attitude now suggested by the government. We also noted that the 
contract was a "rated order" under which a failure to deliver within the required time 
could be subject to criminal penalties. Only then did we observe that "[m]oreover, the 
9 For example, if the alleged breach had not occurred (i.e., the contractually promised 
level of force protection had been provided by the Army to KBR and its 
subcontractors), KBRS and its subcontractors would not have incurred PSC 
costs (damages). But also, ifKBRS and its subcontractors had not hired and 
paid PSCs to perform their missions when force protection was not available, it 
is entirely conceivable that the resulting damages could have been vastly in 
excess of the cost of the PSCs. (See app. reply at 9-11) 
13 

government's argument presupposes that PSCs were prohibited under the terms of the 
contract." KBRS, 14-1BCA~35,639 at 174,521. Clearly, this additional observation 
was not the driver of our rejection of the government's "delay" argument. And since 
our 2014 decision, the Federal Circuit issued its decision in Laguna in which it 
explicitly held that the availability of a contract remedy does not mean the wronged 
party must avail themselves of that remedy in lieu of the affirmative defense of prior 
material breach. 828 F.3d at 1371. The government is bound by our prior holding 
which is the law of the case. Exxon Corp., 931 F.2d at 877 n.7. 
The government also attempts in its motion to distinguish between "mere 
delay,'' which it states is permissible under a rated order, and "willful failure to 
perform," which is not permissible (gov't mot. at 8). We decline the invitation to 
reconsider our prior holding on the basis of a hypothetical dividing line between "mere 
delay'' in deliveries and willful failure to perform. The record in these appeals 
indicates that any such line was extremely thin, if not non-existent. The military 
dining facilities needed to be resupplied no less often than every three days to keep the 
soldiers fed. (Finding 52) Moreover, we have found as fact that during the years 
2003-2006 the government was unable to provide force protection at the levels 
specified in the contract and that the use of PSCs by KBRS and its subcontractors to 
supplement government force protection was reasonably necessary to accomplish the 
logistical support mission of the contract and task orders thereunder. KBRS, 14-1 
BCA ~ 35,639 at 174,521, and findings 13-60. 
Therefore, we conclude that the affirmative defenses of prior material breach 
contained in Counts II-IV are not insufficient as a matter of law simply because the 
Excusable Delay clause was incorporated into the contract. 10 The government's 
motion to strike is denied as to Counts II, III, and IV. 
Counts V ((LOGCAP III Special H Clauses Applied Only in Peacetime), VI (Army 
Waived Contract's 
Prohibition on Use of PSCs), VII (The Army is Prohibited from 
Re-opening Firm-Fixed-Price Subcontracts), and VIII (KBRS is Entitled to 
Reimbursement of Its Incurred Costs Absent Evidence of Willful Misconduct) 
The government moves to dismiss these four counts as foreclosed by either law 
of the case or by our appellate mandate (or both). As to Counts V and VIII, the 
government contends that "[t]hese counts must be dismissed because they conflict 
with the Federal Circuit's express holdings that the H Clauses were applicable and 
barred the use of armed PSCs in contract performance" (gov't mot. at 10). As to 
Count VII, the government points out that in Kellogg, Brown & Root Services, Inc., 
10 While the government's motion also mentions that the contract contained the 
Changes clause, it makes no argument regarding remedies available under that 
clause (gov't mot. at 8). 
14 

ASBCA No. 56358, 12-1BCAii35,001at172,015, we held that "[i]n the context 
of determining the reasonableness of a subcontract fixed price under a cost 
reimbursement prime contract, the government may properly consider the components 
of that subcontract fixed price." And as to Count VI, the government states that 
KBRS's waiver argument is foreclosed by the Federal Circuit's declination ofKBRS's 
invitation to affirm the Board's 2014 decision on the alternative ground that the 
government gave permission to KBRS and its subcontractors to use PSCs, stating that 
'·we do not find any of those purported alternative grounds persuasive." 11 As to these 
four counts, we treat the government motion as one to strike affirmative defenses. 
KBRS in response states that the issue of whether the contract's H clauses 
only applied in peacetime (Count V) was never squarely before the Federal Circuit 
because the Board never decided it. It was presented on appeal only as an alternative 
ground on which the appellate court could affirm the Board's decision, and was 
opposed by the government not on the merits, but because the Board had not made 
findings on the issue and a remand would be necessary before it could be considered 
(app. opp'n at 24-25). As to Count VI (waiver), KBRS opposes the government 
motion on the ground that the "permission" argument that it advanced on appeal as an 
alternative ground for affirmance is distinct from the "waiv~r" defense asserted in 
Count VI-while the former advances the proposition that use of PSCs was allowed, 
the premise of the latter is that the use of PSCs was not allowed but this restriction was 
waived by the government. Thus, the appellate decision should have no effect on 
KBRS's ability to pursue its waiver defense. (Id. at 26-27) 
On Count VII, KBRS points out that the Board expressly advised the parties 
that its 2012 decision denying cross-motions for summary judgment was interlocutory 
and 
any error therein was subject to correction in the Board's final decision on the 
merits following the hearing. KBRS adds that during the hearing on the merits, the 
presiding judge invited it to raise the argument again in its post-hearing briefing, and it 
did so. Therefore, it concludes, the issue is not foreclosed. (App. opp'n at 27-28) 
With respect to Count VIII, KBRS responds that the Federal Circuit's opinion was 
limited to the contract 
interpretation issue and neither explicitly nor implicitly reached 
KBRS' s argument that under a cost reimbursement contract a contractor is entitled to 
recover all its incurred costs unless they stem from fraud, lack of good faith, or willful 
misconduct (id. at 28-29). 
In reply, the government cites to the transcript of the hearing on the merits to 
argue that the presiding Board judge had no interest in revisiting the issue presented 
by Count VII and in fact did not revisit it in the Board's decision on the merits, 
confirming that the issue was settled (gov't reply at 19). The government also points 
11 Count VI was not part of the government's original motion to dismiss, but was 
added to it by letter supplement dated 9 February 2016. 
15 

out that KBRS has not distinguished Grumman Aerospace Corp. v. United States, 
549 F.2d 767 (Ct. Cl. 1977), the precedent on which the Board relied in its 2012 
decision, and that the Federal Circuit did not find this ground persuasive when it was 
raised on appeal as an alternative ground for affirmance (gov't reply at 19). 
Which of these counts pose issues that are properly before us at this stage of the 
proceedings? Count V asserts as a defense that the H clauses which the Federal 
Circuit interpreted in deciding the contract interpretation issue raised in the 
government's appeal only applied in peacetime and thus were inapplicable to 
performance in the war conditions under which the PSC costs were incurred. While 
we acknowledge KBRS' s argument that this issue was not before the Federal Circuit 
on appeal because it was never decided by the Board, we conclude that this issue is 
foreclosed on remand. The court's holding on appeal that the H clauses prohibited 
KBRS and its subcontractors from hir~ng PSCs by necessary implication decides the 
issue of whether the H clauses were applicable. SUFI Network Services, Inc. v. 
United States, 817 F .3d 773, 779 (Fed. Cir. 2016), and cases cited therein. Therefore, 
we grant the government's motion and strike the affirmative defense presented in 
Count V. 
Count VI asserts the affirmative defense that the Army waived any right to 
refuse to reimburse the PSC costs incurred 
by KBRS or its subcontractors on the basis 
that use of PSCs was prohibited by the contract. We agree with KBRS that the 
defense of waiver is distinct from the argument advanced by KBRS on appeal that it 
received "permission" to use PSCs as an alternative ground for affirming our 2014 
decision. Moreover, the waiver defense was asserted by KBRS in the remanded 
appeals (ASBCA Nos. 56358, 57151, and 57327) well prior to the hearing on the 
merits, but was not decided by the Board and not appealed by the government, and 
was not, therefore, before the Federal Circuit on appeal. 12 And, since the issue was not 
decided by us on the merits, and was not necessary to the Federal Circuit's disposition 
of the contract interpretation issue, we are not barred from considering it on remand. 
Laitram Corp. v. NEC Corp., 115 F.3d 947, 951-52 (Fed. Cir. 1997) (citing Conway v. 
Chemical Leaman Tank Lines, Inc., 644 F.2d 1059, 1062 (5th Cir. 1981)). The 
government does not raise any argument in support of its motion to strike Count VI 
other than its argument that consideration of Count VI is foreclosed by our appellate 
mandate. Therefore, we deny the government's motion as to Count VI. 
We also find that Count VII is properly before us and that we may consider 
it in these remand proceedings. The Board's 2012 decision denied the parties' 
cross-motions for summary judgment. In the course of doing so, the Board addressed 
12 KBRS also asserted the defense of waiver in Count V of its initial complaint in 
ASBCA No. 58583, which was filed on 25 March 2013. The issue has not been 
decided in that appeal either. 
16 

KBRS's contention that the government has no contractual right to disallow a particular 
component of a subcontract fixed price: 
However, none of the authorities cited for this proposition 
involved the allowability of a questioned component of a 
subcontract fixed price as a reimbursable cost under a cost 
reimbursement prime contract. In the context of determining 
the reasonableness of a subcontract fixed price under a cost 
reimbursement prime contract, the government may properly 
consider the components of that subcontract fixed price. 
[Citation omitted] 
KBRS, 12-1 BCA ~ 35,001 at 172,015 (citing Grumman Aerospace Corp., 549 F.2d at 
77 4-7 5 ). The Board noted that there remained a genuine issue of material fact as to 
whether, at the time the 11 subcontracts at issue were awarded, the component for 
PSC costs included in the subcontract fixed prices was reasonable 
as to both the need 
for, and the amount of, that component. Id. at 172,016. After a hearing on the merits, 
the Board found as a matter of fact that the PSC costs incurred by KBRS and its 
subcontractors were reasonable under FAR 31.201-3(a). KBRS, 14-1BCA~35,639 at 
174,521. The Board did not address in that decision KBRS's contention that the 
government could not disallow specific components of the price of a firm-fixed-price 
subcontract, presumably finding it unnecessary in light of its holding that the contract 
did not prohibit the use of PSCs. 
The law of the case doctrine does not apply to issues that were not decided. 
l 8B WRIGHT, MILLER & COOPER, FEDERAL PRACTICE AND PROCEDURE: LAW OF THE 
CASE 2d § 4478 at 664-67. In its 2012 interlocutory decision the Board's discussion of 
the Grumman Aerospace case may well have been dicta, since it was not necessary to 
the result-denying the cross-motions for summary judgment on the basis of unresolved 
issues of material fact. But even ifthe Board's discussion was more than dicta, it did 
not decide the issue presented to us now. The defense presented to us by KBRS in its 
F ACC Count VII is: 
Under applicable regulations, including the FAR, and the 
federal common law applicable to government contracts, 
the Army is barred from reopening firm-fixed price 
subcontracts awarded under a cost-reimbursement prime 
contract to contest the allowability of a particular 
component included in the subcontract price. 
(FACC at 29, ~ 180) KBRS alleges in Count VII that it awarded the subcontracts in 
issue between 2003 and 2006 pursuant to its approved purchasing system for the 
provision of dining and other logistical support services at total prices it determined 
17 

were fair and reasonable based on competition and/or price analysis. The 
government's position all along in this case has been that the costs in question are 
unallowable based on the contract's prohibition against using PSCs, not that the total 
subcontract 
prices were unreasonable. Presumably for that reason, the government did 
not appeal the Board's finding that the PSC costs incurred by KBRS and its 
subcontractors were reasonable. 13 
Because the issue presented by Count VII was presented to but not decided by the 
Board, and was neither before the Federal Circuit on appeal nor necessarily implicated in 
its decision, we do not view the appellate court's statement that the alternate grounds 
(one of which mirrored Count VII) presented by KBRS for affirmance were "not 
persuasive" to signify anything other than that the court declined KBRS 's invitation to 
affirm on alternate grounds not properly before it. In conclusion, Count VII is properly 
before us now. The government's motion to strike is denied as to Count VII. 
We also find that Count VIII is properly before us. This defense-that under a 
cost reimbursement contract KBRS is entitled to recover its incurred costs absent 
evidence of fraud, lack of good faith, or willful misconduct-was raised by KBRS in its 
25 March 2013 complaint in ASBCA No. 58583 and has not been decided on the 
merits. We do not agree with the government that the Federal Circuit's decision that 
the contract prohibited the use of PSCs equates to a finding that the costs of PSCs are 
unallowable under the contract (gov't reply at 20). We note the court itself 
characterized its decision as one of "narrow contract interpretation based on the 
weapons prohibition" 
and did not purport to decide the question of cost allowability. 
McHugh, 626 F. App'x at 978. 
The case law cited by the government does not persuade us to its view. Geren 
v. Tecom, Inc., 566 F.3d 1037, 1041 (Fed. Cir. 2009) merely recognizes that to be 
allowable a cost must comply with the "terms of the contract," and that "where neither 
the contract nor 
the FAR dictates the treatment of specific costs, we must determine 
how those costs are to be treated by looking to'' the principles and standards in FAR 
Subpart 31.2. In this case, there was no term of the contract or FAR cost principle 
dictating the treatment of PSC costs. 14 In Kellogg, Brown & Root Servs., Inc. v. 
13 To be sure, we recognize that the government's position may also be that the costs 
were unreasonable because they were specifically prohibited by contract. 
However, that position is still based on a term of the contract disallowing a 
specific type of cost, not any determination that the total price of the subcontracts 
was unreasonable, which was what the Grumman Aerospace case and the Board's 
2012 decision addressed. 
14 In Geren, the court noted that costs resulting from a breach of a contractual 
obligation are not allowable costs under a contract. 566 F .3d at 1043 (citing 
Dade Brothers, Inc. v. United States, 325 F.2d 239, 240 (Ct. Cl. 1963)). This 
18 

United States, 728 F.3d 1348, 1359 (Fed. Cir. 2013), the Federal Circuit rejected a 
similar argument made by KBRS in that case, holding that in determining the 
reasonableness of costs, evidence of willful misconduct, gross negligence, or arbitrary 
conduct could be relevant, but such evidence is not required to disallow costs as 
unreasonable. This is a ruling by our appellate authority in a different case. It is 
binding precedent, but it does not implicate the law of the case doctrine or otherwise 
preclude us from deciding a similar issue on the record created in these appeals. 
Therefore, the government's motion to strike is denied as to Count VIII. 
Count IX (The Army Released KBRS from All Claims Related to the Pricing and 
A ward of Eleven ESS Subcontracts and KBRS is Entitled to Recover PSC Amounts 
Associated with Those Subcontracts) 
The government moves to dismiss Count IX or in the alternative for 
summary judgment on the ground that PSC costs were expressly excluded from the 
2010 and 2011 settlement agreements relied on by KBRS, either by the underlying 
Forms 1 or by the underlying audit reports (gov't mot. at 12). KBRS maintains that 
any exclusion in the underlying Forms 1 is ineffective to counter the broad language 
of the settlement agreements (app. opp'n at 29). The government replies that the 
settlement agreements clearly state their intent to settle only claims relating to the 
specified Forms 1, which do not include the Form 1 in which DCAA questioned 
the PSC costs, No. 127 and revision 1 to same, which has not been settled (gov't reply 
at 20, ex. G-4). We treat this portion of the government's motion as one for summary 
judgment on Count IX. There are no material facts in dispute, only the parties' 
differing interpretations of the settlement agreements. 
The two settlement agreements are appended to the government's motion as 
exhibits G-5 (2010 agreement) and G-6 (2011 agreement). The 2010 settlement 
agreement recites that it is in settlement of five specified DCAA Forms 1: Nos. 143, 
145, 147, 148, and 153, for a total of $13,269,983 including $12,349,633 in direct 
subcontract cost (ex. G-5 at 2-3). The 2011 settlement agreement similarly states that it 
is in settlement of six specified Forms 1: Nos. 142, 144, 151, 152, 154, and 157, for a 
total of $34,236,526 including $33,024,789 in direct subcontract cost (ex. G-6 at 2-3). 
Both settlement agreements contain the following language (with one minor 
grammatical variation not pertinent to the meaning): 
case was remanded to us with specific instructions to determine ifKBRS's 
breach of the contractual prohibition on use of PSCs was excused by the 
government's prior material breach. With this issue open, we infer that the 
absence of any determination in the court's decision on the allowability of the 
costs was a considered choice. 
19 

[T]he Government, to the extent permitted by law, remises, 
releases, and discharges the Contractor, its officers, agents, 
and employees of and from all civil liabilities, obligations, 
claims, appeals, and demands which it now has or hereafter 
may have, whether known or unknown, administrative, 
judicial, legal, or equitable, arising under or in any way 
related to the Forms 1. 
(Ex. G-5 at 4, ~ 8, ex. G-6 at 4, ~ 5) 
Four of the underlying Forms I-Nos. 142, 144, 152, and 154-specifically 
excluded the PSC costs disapproved by Form I No, 127, revision I (ex. G-7 at 9, 
ex. G-9 at 10, ex. G-14 at 11, ex. G-16 at 13). A review of the remainder of the 
Forms 1, along with their underlying audit reports, makes it clear that PSC costs 
are not among the costs disapproved (exs. G-8, G-10-13, G-15, G-17-24). Therefore, 
PSC costs were not within the scope of the two settlement agreements and KBRS's 
contentions to the contrary must fail. Moreover, KBRS does not dispute that the 
Form 1 disallowing the PSC costs has not been settled. 
We note also that the settlement agreements resulted in a near-complete win 
for KBRS: of the disapproved costs that were the subject of the 2010 agreement, 
KBRS recovered $12,349,633 out of a total of $13,269,983. Of the disapproved costs 
that were the subject of the 2011 agreement, KBRS recovered $31,073,009 out of a 
total of $33,024,789 in direct subcontract costs, plus applicable overhead and base fee. 
(Ex. G-5 at 3, ex. G-6 at 3-4) These numbers render nonsensical KBRS's argument 
that the settlements encompassed subcontract PSC costs, since if one were to believe 
that to be true, it would lead to the conclusion that KBRS has already recovered the 
vast majority of those costs. 
For the reasons stated, we grant summary judgment to the government on 
Count IX of the FACC. 
Counts XI (Army's Quantum Calculation is Inaccurate and Unsupported) and XII 
{Army Acted in Bad Faith) 
KBRS asserts in Count XI of the F ACC that, for several reasons, the damages 
calculation underlying the Army's withholding is flawed. This contention is premature 
at best and, in the interests of judicial economy, we see no reason to address it 
before entitlement has been decided. Therefore, the government's motion to dismiss 
Count XI is denied without prejudice to its reinstatement in appropriate circumstances. 
In Count XII KBRS states it is entitled to findings of fact that the Army 
acted in bad faith by, it alleges, effecting the withholdings in question in response to 
20 

Congressional inquiries and without conducting any investigation into the underlying 
facts regarding the hostile conditions in Iraq from 2003-2006 and the military's 
inability to provide the promised level of force protection. The requested findings are 
not tied to any particular claim or affirmative defense advanced by KBRS in this 
litigation. Rather, KBRS asserts that the requested findings are the relief to which it is 
entitled (FACC at 34-35). Moreover, KBRS represented to the Board at oral argument 
that no new findings of fact are necessary to decide its motion for summary judgment 
(tr. 58). 
The government moves to dismiss Count XII for failure to state a claim, 
positing that "[a]ppellants cannot come before the Board for freestanding 'findings' 
unconnected to well-pleaded 
claims for contractual relief' (gov't mot. at 13). KBRS 
responds simply that the requested findings "are clearly within the scope of these 
appeals" and that the government has not cited to any legal authority prohibiting us 
from making the requested findings (app. opp'n at 30). 
· We have been presented with no reason why the Board should make new 
findings of fact unconnected to any contractual claim or defense before it. We 
therefore grant the government's motion to strike as to Count XII. 
In conclusion, the surviving counts ofKBRS's FACC are II,HI, IV, VI, 
VII, VIII, and XI. We now turn to KBRS's motion for summary judgment. 
II. KBRS's Motion for Summary Judgment 
KBRS has moved for summary judgment on the affirmative defenses presented 
by Counts II (prior material breach) and VI (waiver), and the government has opposed. 
The standards for summary judgment before the Board are well established 15 and 
need little elaboration here. Summary judgment should be granted if it has been 
shown that there are no genuine issues of material fact and the moving party is 
entitled to judgment as a matter oflaw. Celotex Corp. v. Catrett, 477 U.S. 317, 
322 (1986). A non-movant 
seeking to defeat summary judgment by suggesting 
conflicting facts "must set forth specific facts showing that there is a genuine issue 
for trial." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986) (quoting 
First 
National Bank of Arizona v. Cities Service Co., 391 U.S. 253, 288-89 (1968)). 
The posture in which we are asked to decide appellant's motion differs from 
the usual, in that there has already been a lengthy hearing on the merits in three of 
these appeals. Appellant relies on the Board's findings of fact set forth in our 
15 Board Rule 7(c)(2) provides that the Board looks to FED. R. CIV. P. 56 for guidance 
in deciding motions for summary judgment. 
21 

decision in KBRS, 14-1 BCA ~ 35,639, for its statement of undisputed material facts 
(app. mot. at 2). The government does not dispute those findings of fact and has 
proposed "additional material facts" drawn from the existing record in these appeals 
(gov't opp'n at 2-3). The parties agree that the Board need not find further facts in 
order to decide the motion (tr. 59). 
Based on the foregoing, we find the following facts to be undisputed for 
purposes of the motion. 
STATEMENT OF FACTS (SOF) FOR PURPOSES OF APPELLANT'S 
MOTION FOR SUMMARY JUDGMENT 
1. Contract No. DAAA09-02-D-0007 (contract or Contract 0007), awarded 
to KBRS on 14 December 200 I by the Army Operations Support Command, 
Rock 
Island, Illinois (hereinafter Rock Island), was a cost-plus-award-fee, 
indefinite-quantity, indefinite-delivery contract which was part of the Army's Logistics 
Civil Augmentation Program (LOGCAP) and is also referred to as the LOGCAP III 
contract (findings 2, 3). The 
contract included the FAR 52.211-15, DEFENSE PRIORITY 
AND ALLOCATION REQUIREMENTS (SEP 1990) clause, which stated: "This is a rated 
order certified for national defense use, and the Contractor shall follow all the 
requirements of the Defense Priorities and Allocation Systems regulation (15 CFR 700)." 
The cited regulation stated in pertinent part: 
§ 700.3 Priority ratings and rated orders. 
(a) Rated orders are identified by a priority rating .... Rated 
orders take preference over all unrated orders as necessary to 
meet delivery dates .... 
(b) Persons receiving rated orders must give them preferential 
treatment as required by this regulation. This means a person 
must accept and fill a rated order for items that the person 
normally supplies .... 
( c) All rated orders must be scheduled to the extent possible to 
ensure delivery by the required delivery date. 
22 

§ 700. 7 Compliance 
(a) Compliance with the provisions of this regulation .. .is required 
by the Defense Production Act.. .. Violators are subject to 
criminal penalties. 
(Findings 4, 5) 
2. The contract also contained section H, Special Contract Requirements, 
which set forth the following clause: 
(Finding 9) 
H-16 Force Protection 
• While performing duties [in accordance with] the terms 
and conditions of the contract, the Service Theater 
Commander will provide force protection to contractor 
employees commensurate with that given to 
Service/Agency (e.g., Army, Navy, Air Force, Marine, 
DLA) civilians in the operations area unless otherwise 
stated in each task order. 
3. Following the invasion and occupation of Iraq in March 2003, Rock Island 
issued task orders under the contract for logistic and life-support services, including 
food service and billeting, for the coalition combat forces. Task Order (TO) 59, with 
an initial total ceiling price of $802,065, 733, was issued effective 24 June 2003, and 
its successor, TO 89, was issued effective 1 May 2005 with an initial ceiling price of 
$4,972,882,216. Paragraph 1.10 in Change 5 to the TO 59 Statement of Work 
(SOW), effective 27 August 2003, stated: "The government will provide for the 
security of contractor personnel in convoys and on site, commensurate with the threat, 
and [in accordance with] the applicable Theater Anti-Terrorism/Force Protection 
guidelines." Paragraph 1.7 of the TO 89 SOW as issued on 1 May 2005 stated: "The 
Government will provide for the force protection and security of contractor personnel 
in convoys and on site, commensurate with the threat, and [in accordance with] the 
applicable Theater Anti-Terrorism/Force Protection guidelines." (Findings 11, 13) 
4. Attacks on KBRS and subcontractor supply convoys began in June 2003. 
KBRS warned the Rock Island PCO on 27 June 2003 that failure to provide force 
protection in accordance with the LOGCAP III contract would mean that KBRS 
and subcontractor vehicle convoys would have to be delayed, adversely affecting 
timely delivery of food service support. (Findings 14, 15) The Deputy Commander 
of the Coalition Forces Land Component Command (CFLCC) from 2003-2004, 
23 

Major General (MG) Stephen Speakes, testified that he arrived in Iraq in late June and 
that it was obvious to him that "we were taking new levels of threat to our supply and 
relief formations across Iraq." Among the options he considered for dealing with the 
increased threat 
were assigning more combat units to protect the convoys, and looking 
at the potential for hired contractual security. (Finding 16) 
5. On 9 July 2003, KBRS met with MG Speakes and reported that the personnel 
and equipment casualties from attacks on its convoys and those of its subcontractors 
from mid-May to date were 7 killed, 7 wounded, 4 missing and 10 trucks missing. 
MG Speakes noted: "Tomorrow the government will provide convoy protection for 
46% of the convoys waiting to travel north. This level of support must increase, but 
presently the government is short convoy escort vehicles and shooters (shotgun 
riders).'' The parties discussed KBRS contracting for private 
security, and agreed that 
"LOGCAP Planners will develop a revised statement of work requesting contracted 
security.'' (Finding 19) 
6. On 19 September 2003, MG Speakes sent the following message and formal 
request to the Rock Island Commander: 
Subject: CFLCC Request for Help with LOGCAP 
Contractor Convoy Security. 
[I]n message below we request your help in solving one of 
our most vexing problems, specifically convoy security for 
contracted operations in Iraq .... [W]e see no other optoin 
[sic] but to ask that the current contract provisoins [sic] be 
amended to support operations in Iraq. We appreciate your 
support and hope that this is a request that is 
supportable .... 
MEMORANDUM FOR Commander, Army Field Support 
Command. Rock Island, 1161299 
SUBJECT: Adequate Force Protection for the Logistics 
Civil Augmentation Program (LOGCAP) Convoys in 
Kuwait and Iraq 
1. Request Army Field Support Command (AFSC) review 
the basic LOGCAP contract and provide a contractual 
recommendation allowing Kellogg Brown & Root (KBR) 
the authorization to pursue a civilian transport and 
24 

transportation security company to conduct convoy escorts 
missions for the execution of convoys in Iraq during the 
movement of government materiel on theater supply 
routes. The current force protection posture, pending 
reductions in force structure, present and future demands 
for military police forces, all support the need to explore 
options other than military escorts in order to conduct 
secure and unhindered convoy operations. 
2. The LOGCAP Basic contract and Statements of Work 
(SOW) needs to be modified to allow 
for KBR to provide 
contract security for their convoys moving government 
materiel on theater supply routes in Kuwait and Iraq. This 
change to authorization and utilization of contracted 
security should be in compliance with US Federal and 
Military Regulations that established the current 
base 
contract. 
3. The contract should be administered by KBR or its 
subcontractor, with standards and operating procedures in 
accordance with the senior military police organization in 
theater. The scope of operations or task execution plan 
will be developed by KBR and accepted through the 
appropriate contracting and command channels. 
4. We understand that there will be legal and perception 
concerns in the use of contracted security, but with 
pending reductions in force structure, present and future 
demands on contractor support, we must ensure unimpeded 
flow of supplies. We believe this is a viable course of 
action. 
MG Speakes expected that Rock Island would prepare a proposal for contract 
modification that he could submit for approval by the appropriate commanders in Iraq 
and at CENTCOM. However, he testified: "'Despite my repeated efforts, to my 
knowledge I never got a formal proposal back, and I never was able to 
take anything 
and formally bring it up to a higher staff to ask for their help." (Findings 20, 21) 
7. On 24 November 2003, the commander of the Defense Contract 
Management Agency (DCMA) activity in Kuwait, CDR Kent Caldwell, USN, sent a 
message to the CFLCC 143rct Transportation Command. The message cited the 
25 

conflicting standards in operation orders (OPORDS) issued by CFLCC and CJTF-7 16 
for convoy protection, and further stated in pertinent part: 
(Finding 23) 
As convoy security is contractually required to be provided 
by the government and be consistent with the standards set 
for all DOD civilians, I believe the government is faced 
with an unexecutable task. As I understand it, they are no 
longer resourced to comply with either standard, especially 
when you consider that contractors cannot carry weapons. 
Their need for external security is greater [than] that of 
armed soldiers moving in military convoys for which the 
majority of the guidance found in both OPORD's applies. 
While I understand and appreciate the resource 
restrictions on both soldiers and government equipment to 
perform the missions assumed by KBR under the 
LOGCAP III contract, the Army has entered into a contract 
with KBR and is apparently unable to provide the requisite 
security and protection requirements established by either 
CFLCC or CJTF- 7. If uncorrected this will significantly 
impact the fuel, line haul, mail, and Class 1 transportation 
mission areas supported under this contract. 
8. On 19 December 2003, CJTF-7 Fragmentary Operations Order (FRAGO) 
1242, (KBR Convoy Security Procedures) stated in relevant part: 
ATTACKS AGAINST KELLOGG, BROWN AND ROOT 
(KBR) CONVOYS HA VE DRAMA TI CALLY 
INCREASED DURING THE MONTHS OF OCTOBER 
AND NOVEMBER. BASED UPON INTELLIGENCE 
ESTIMATES, THE THREAT OF FUTURE ATTACKS 
AGAINST KBR CONVOYS IS PROJECTED TO 
INCREASE DURING THE MONTHS OF DECEMBER 
2003 THROUGH APRIL 2004 .... SINCE THE BEGINNING 
16 Combined Joint Task Force-7 (CJTF-7) was the initial designation of the coalition 
military forces in Iraq. On 15 May 2004, the designation was changed to Multi 
National Force-Iraq (MNF-I). CJTF-7 and MNF-I reported to the Theater 
Commander, CENTCOM. KBRS, 14-1 BCA i! 35,639 at 174,522 n.3. 
26 

(Finding 24) 
OF OCTOBER, TH[E] MAJORITY OF ATTACKS 
AGAINST KBR CONVOYS HA VE BEEN THE RESULT 
OF IEDS AND SMALL ARMS FIRE. NINETY PERCENT 
OF ALL ATTACKS DIRECTED SPECIFICALLY 
AGAINST 
KBR CONVOYS HA VE OCCURRED ON MSR 
TAMPA. HOWEVER, SEGMENTS OF ASRJACKSON, 
MSR MICHIGAN, MSR MIL TON AND MSR MOBILE 
REMAIN EXTREMELY DANGEROUS TO KBR 
CONVOYS. KBR CONVOYS REMAIN EXTREMELY 
VULNERABLE TO ATTACKS AT REST STOPS, REFUEL 
POINTS, TRAFFIC CHOKE POINTS, LOCATIONS OF 
VEHICLE BREAKDOWNS, HAND-OFF POINTS FOR 
CONVOY SECURITY ESCORTS, MSC BOUNDARY 
LINES ... AND MOVEMENT UNDER OVERHEAD 
PASSES. 
9. On 22 February 2004, the KBRS Deputy Area Manager for V Corps North 
sent the following message to the troop unit 
that was responsible for force protection 
in that area: 
For your information the military has failed to comply with 
providing escort requirements. Time and time again we 
have sent emails after emails and made phone calls after 
phone calls to get this escort requirement taken care of. As 
you know last week a convoy was arranged for four ( 4) 
trucks and they were abandoned while in route because of 
the speed of travel. I would like to point out this same 
subcontractor had employees shot in a drive by shooting 
yesterday around B3, so they are a marked target. 
It was also briefed on the last [meeting with the 
government] that [the government] would prefer to have at 
least nine (9) to ten (10) trucks in a convoy. We consulted 
with our subcontractor and they hired additional trucks for 
a total often (10) trucks which are loaded and ready to go, 
when request for convoy was acquired today, KBR was 
told [the government] was not able to provide the escorts 
due to lack of assets and would not have the assets for two 
to three weeks if then. This has directly affected our 
ability to carry out our tasked assigned to KBR by CJTF7, 
27 

plus is causing the subcontractor to occur [sic] unexpected 
costs. 
The government answer to KBRS's 22 February 2004 message was that: 
(i) "these combat units were sent here to fight the war, not do escorts for KBR ONLY"; 
(ii) the tasking placed on the troop unit responsible for providing the force protection 
was 'enormous'; and (iii) when the troop unit was ready to resume escort duty, 'I will 
let you ... know."' (Findings 30, 31) 
10. On 12 April 2004, CJTF-7 FRAGO 622 described the current convoy 
security situation as follows: 
THE ENEMY IS PROSECUTING A DELIBERATE 
OPERATION TO INTERDICT OUR LINES OF 
COMMUNICATION (LOC). WITH THE 
SIMULTANEOUS ATTACKS ON SIX OVERPASSES 
ON 10-12 APRIL 04, IT IS APPARENT THE ENEMY 
HAS TAKEN HIS CAMPAIGN BEYOND 
HARASSMENT THROUGH DIRECT ACTION TO A 
DELIBERATE EFFORT FOCUSED ON THEATER LOC 
INTERDICTION. 
CURRENT SITUATION. ALONG MSRS LEADING INTO 
AND OUT OF BAGHDAD THERE HA VE 
BEEN 66 ATTACKS IN THE LAST WEEK, 49 ATTACKS 
ONE WEEK AGO, AND 50 TWO WEEKS AGO. THERE 
HA VE BEEN 3 COMPLEX ATTACKS/ AMBUSHES IN 
LAST THREE DAYS RESULTING IN THE DESTRUCTION 
OF A REFUELING CONVOY ... DESTRUCTION OF 
4 OVERP ASSES ... AND THE AMBUSH OF A 
CONVOY .... THE MSRS BETWEEN 1) BAGHDAD AND 
BALLAD, 2) BAGHDAD AND KARBALA, AND 3) 
BAGHDAD AND FALLUJAH ARE EXTREMELY 
DANGEROUS AND CONTINUE TO BE HIGHLY 
SUSCEPTIBLE TO THREAT ACTIVITY RANGING FROM 
IEDS TO SMALL ARMS AND RPG 
ATTACKS/ AMBUSHES. 
CURRENT ASSESSMENT: ATTACKS ARE MUCH 
HIGHER THIS WEEK AND UPWARD TREND IS 
LIKELY TO CONTINUE AS A RESULT OF THE 
CONTINUED SADR/MAHDI MILITIA UNREST, AND 
28 

(Finding 32) 
OPERATIONS AGAINST THREAT FORCES IN 
WESTERN IRAQ. 
11. On 14 April 2004, the DCMA administrative contracting officer (ACO) for 
TO 59 (MAJ Hills) reported to the Commander, DCMA Northern Iraq (L TC Blaine) 
the following: 
(Finding 33) 
All indications are that the government has failed to live up 
to its contractual obligation to provide Force Protection 
(FP) to the TTM convoys (T00059). Given that, KBR is 
currently not required to run most (if any) convoy routes. 
They did run three convoys to Anaconda today. Only one 
made it. The other two got lost. They are now at an FOB. 
KBR may not run any convoys tomorrow ifthe 
government does not improve its track record on FP. The 
same MP escorts that got them lost are to bring the two 
convoys in to Anaconda tomorrow. The best I can tell at 
this time is that they have never ran the route they are 
about to set out on. Based on my discussions with TTM' s 
PM .. .I went over and talked to the 13th COSCOM CC .. .I 
told him of KBR's concerns. I feel contractually the 
government is not living up to its contractual obligations. 
[The COSCOM Commander] stated that COSCOM was 
doing their part by providing a soldier for every third truck. 
He said it was the 15th MP's that were providing the escort 
not COSCOM and that the issue of getting lost was ... not a 
FP issue " ... they are all safe aren't they." I just want to go 
on record that absent any new information from the 
government, I 
concur with KBR in that the government is 
not providing FP commensurate with the threat. If they 
choose not to run tomorrow I would be hard pressed to 
disagree with them. Oh by the way, one of the trucks in 
one of the lost convoys got destroyed by an IED. 
12. Lieutenant General (L TG) Ricardo Sanchez, commander ofCJTF-7 and its 
successor unit from June 2003 to July 2004, testified that there was insufficient 
capacity to accomplish all the tasks that were assigned to the force on the ground in 
Iraq during that period and that he did not have sufficient resources to provide the 
same level of protection to KBRS that was being provided to civilians. For that 
29 

reason, he stated, in the "fall and early winter of 2003, we very clearly established 
within the command that the capacity of the force, the quantity of the force, and the 
demands of the mission ... we were not going to be able to continue supporting that 
without private security." By March 2004, he testified, there were between 10 and 
20 private security contractors operating in Iraq, and he believed their presence and 
assistance in accomplishing the mission was welcomed by commanders at the 
battalion and brigade level. (Findings 35, 
37, 38) 
13. Following termination of the Coalition Provisional Authority (CPA) and 
establishment of the Interim Iraq Government as the civil government oflraq on 
30 June 2004, CENTCOM issued a Warning Order (WARNORD) on 4 July 2004 
entitled "CONTRACTOR RISK MITIGATION" that tasked commanders to develop 
courses of action (COAs) for U.S. Government contractor risk mitigation in Iraq. The 
WARNORD stated that MNF-1 had not to date provided protection for contractors 
·'AS CONTRACTOR SECURITY IS NOT A SPECIFIED MILITARY MISSION," 
and further stated that "CONTRACTORS ARE PRIMARILY RESPONSIBLE FOR 
THEIR OWN SECURITY." The WARNORD concluded that "given the current 
security environment in Iraq, all USG agencies must coordinate protection of USG 
contractors through a combination of coalition military forces, Iraq security forces, and 
private security companies." (Finding 39) 
14. From March to September 2004, attacks on KBRS subcontractor 
employees and vehicles continued, with 5 employees killed, 1 beaten, and 25 missing 
or held captive (finding 40). On 29 August 2004 KBRS notified LTC Sean O'Day, 
Commander of DCMA Northern Iraq, that a subcontractor convoy escorted by a 
private Iraqi security company had been ambushed and three trucks were missing. 
L TC O'Day remarked that there might be questions why private security and not a 
military escort was used for protection. At the hearing, he testified that security was 
always a big issue, and that there weren't enough military forces in Iraq to do 
everything that needed to be done and provide convoy security for contractors. 
(Findings 40, 41) 
15. Craig Peterson, KBRS's Program Manager in Iraq from November 2004 to 
1 April 2005, testified that although he did not have specific knowledge, KBRS 
subcontractors in Iraq had to be using PSCs because "[i]fthey were not using PSCs, 
I have no idea how they did their job. None -yvhatsoever. Because they couldn't have 
gone anywhere." Mr. Peterson further testified as to 
the availability of military 
protection for KBRS subcontractor convoys: 
I myself, as the head [of LOGCAP] and a retired general 
officer, would be on an installation and ask the young 
lieutenant or captain who has got a convoy going to 
Arifjan or somewhere if I could pile in. They said, "I don't 
30 

do contractors." I said, "I'm Craig Peterson. I'm in charge 
of LOGCAP." They said, "I don't do contractors." 
Q. They didn't say, "Who?" 
A. No .... So, I mean, it -- ifl got kicked out of 
convoys, then there is no doubt in my mind that subs did. 
(Findings 49, 50) 
16. KBRS's principal subcontractor in Iraq was Eurest Support Services 
Worldwide (ESS), who installed and operated military dining facilities (DFACs) at 
specified sites throughout Iraq and concluded its operations in Iraq on 30 June 2006. 
ESS's operation manager from June 2003 to June 2006 was Steven Murray. Mr. Murray 
testified that ESS used PSCs for the entire period of its performance in Iraq to 
supplement military force protection: 
[W]e pretty consistently used, from early '03 and all the 
way through our departure in '06, PSD [private security 
detachment] teams to move people and money and 
equipment in and out of the country, because again, even 
in '05 and '06, the [military] convoy system would not let 
our NTVs [non-tactical vehicles] in the convoy. If you 
disclosed you're carrying cash, you're not getting in the 
convoy with cash, and it was a total cash economy the 
whole time we were there . 
.. .It became extremely difficult to move things 
between sites. We'd approach - we tried to use some 
military force protection on the site, and I personally talked 
to two or three commanders about this. We were told 
pretty consistently that the military is not there to babysit 
contractors. 
I had some people ... stuck on a southern site, and I 
needed to move them to a northern site. [They were 
included in a government convoy but] halfway through 
Baghdad, they stopped our vehicle ... [S]aid they got a call 
to go on a mission and they took off in another 
31 

direction .... [W]e dispatched, enormous cost, ... a PSD team 
to go and pick them up . 
. .. Another occasion happened whereby we were 
moving equipment ... we had two or three large 500 kV 
generators ... at one site; we had to move them across 
Baghdad to another site. They [the government] agreed to 
move us . 
. . . Halfway there, they told our truck to pull over and 
wait. They had to leave, and they left. Never saw my 
truck again. It was just gone. The driver, .. .! don't know 
what happened to him. The truck was gone. 
We learned our lesson very quick. We did ask, 
from time to time, and most times it was "We're not doing 
that. We can't do that. We're warfighters. Take care of 
yourselves." It's extremely difficult to move between 
sites, and it was a pretty regular need of ours to do that. ... 
Money, people, sometimes food .... [We] only 
carried two or three days' worth of food [at each dining 
facility site]. So if you don't have a delivery coming in 
every third day, you're in trouble. You can't feed soldiers. 
That was unacceptable to us, as a caterer, and to our client, 
KBR. We could not fail. 
So we had to move food, and the military would not 
touch it from intra-theater. They had bigger things to do 
than to move contractors. 
Q: Did there ever come a time when you simply 
gave up on seeking force protection? 
A. Honestly, no. It was in our interest. I mean this 
is a business, and if I didn't have to pay a PSD team, which 
were not cheap, and I could get it in a convoy, I'd rather 
use a convoy. It didn't always fit with our business 
unfortunately. 
32 

Either you didn't have the time to do it, or they 
wouldn't do it. But always, even up until middle of June 
of 2006, when we were leaving, we tried to use convoys as 
much as we could. It's a cost saver for us. So but the 
answer ts yes. We never gave up trying to do that. 
(Findings 51, 52) 
1 7. Lack of force protection extended to static security as well as security 
for convoys. Mr. Murray testified that between January and June of 2006, as 
demobilization activities began, the military was either leaving or on their way out. 
Although it tried to secure military force protection, in several instances ESS was left 
to move people and assets out of installations that had been left completely open, and 
had to bring PSCs in to provide security for the compound while assets were taken 
down and loaded, and then used "our own guns to move those things across country." 
(Finding 53) 
18. Most if not all of the subcontracts awarded by KBRS to perform LOGCAP 
III were awarded on a negotiated firm-fixed-price basis (finding 54). Asked if ESS 
made or lost money on its use of PSCs at the hearing, Mr. Murray testified that the 
use of PSCs was unequivocally a money-losing proposition. He explained that ESS 
proposed and negotiated a price based on an estimated use of PSCs, and that as the 
scope of work expanded and the security situation worsened, both the frequency of 
use and the cost per mission of PSCs increased far beyond the estimated amount, with 
the result that "[w]e incurred more costs than we charged [KBRS]." (Finding 54) 
19. L TC Scott Sheridan succeeded L TC O'Day as commander of DCMA 
Northern Iraq in November 2004. On 22 April 2005 the award fee determination for 
KBRS's performance of TO 59 for the previous year was issued with a rating of 
'·excellent" and specific note of the challenging circumstances under which that 
rating was earned, including "attacks 
on and hijacking of your convoys" and 
"lack of force protection to escort convoys with needed materials." LTC Sheridan 
briefed the award fee determination the next day, underscoring 
the same two special 
considerations-"[o]perating in a non-permissive environment" and "[a]vailability of 
escorts." (Findings 43-45) 
20. KBRS's initial policy in Iraq was not to use private security to perform the 
contract because force protection was supposed to be provided by the 
Army (finding 46). 
However, KBRS senior managers did begin to use private security to be able to move 
around from location to location, and this was known in 2004 to both the Rock Island 
PCO (Mary Beth Watkins) and the DCMA Iraq commander, COL Ainsworth Mills, who 
expressed the opinion at the time that the PSC costs would not be allowable on the 
33 

contract (finding 4 7). The record contains no evidence that the government, including 
the PCO, did anything to stop KBRS from using PSCs (finding 48). 
21. The record also shows that the government was aware that KBRS 
subcontractors were using PSCs to move convoys and did not object. The KBRS 
coordinator for all subcontractor movements from Kuwait into Iraq from mid-July 
2003 until some point in 2005 was Ms. Leslie Smith, who testified that while the 
primary method of movement was a military escorted convoy, the Army Movement 
Control Battalion (MCB) routinely received and granted requests to move with private 
security. These requests were made expressly and in writing on the KBRS MP Escort 
Allocation Request submitted daily to the MCB. In addition, Ms. Smith on 24 March 
2004 sent a memorandum to MAJ Grady Sessoms, the designated point of contact at 
the MCB, stating in part that "Private security is allowed. Iraqi security escorts wait in 
Iraq to hook up with their convoy." On no occasion did MAJ Sessoms or anyone else 
at MCB respond that private security was not allowed. (Findings 57, 58) Moreover, 
on I 0 June 2005 a DCMA administrative contracting officer consented to the award of 
a food services subcontract with an express pricing justification in the consent 
documents referring to the expected use of PSCs to help transport maintenance 
personnel to their respective sites (finding 60). 
22. The government offered five statements of additional material facts 
(GSAMF), for the purpose of demonstrating disputes of material fact preventing the grant 
of summary judgment on either Count II or Count VI. They are as follows. 
I. In February 2006, Kristan Mendoza, the acting 
chief of the Army's LOGCAP Contracting Branch at Rock 
Island Arsenal Illinois, wrote to Mary Wade, KBR's 
LOGCAP contract manager in Houston, Texas, about a 
report that a KBR Tier I LOGCAP III subcontractor had 
accidentally discharged a handgun. Ms. Mendoza asked 
Ms. Wade, among other things, "what measures are being 
taken to ensure that contractor or subcontractor personnel 
do not possess firearms in the AO [area of operations]." 
The following day, Ms. Wade advised Ms. Mendoza, 
among other things, that "[t]he subcontractor terms and 
conditions state weapons are not allowed on the project," 
and that KBR's "policy is that no LOGCAP or 
subcontractor employees are allowed to carry weapons." 
2. In July 2006, Sylvia Youngman, the chief of the 
Army's LOGCAP Contracting Branch at Rock Island, 
emailed Philip Wagner, a KBR contract administrator, 
seeking comments on proposed responses by the Army to 
34 

questions posed by Representative Henry Waxman 
about the LOGCAP III contract. Ms. Youngman proposed 
to tell Representative Waxman that KBR "has advised the 
Army 
that it has never directly hired a private security 
contractor in support of the execution of a statement of 
work under any LOGCAP III Task Order" and that "KBR is 
presently unaware of any payments to subcontractors which 
include[ d] charges for private security costs, but [KBR] 
continues to look into this,'' When Ms. Youngman' s 
proposed responses were circulated within KBR, 
Chris Heinrich, a KBR legal official, commented internally, 
"These answers look to be appropriate." 
3. Also in July 2006, William Walter, a senior vice 
president of the appellant, who had been the appellant's 
Director of Government Compliance from 2003 to 2005, 
prepared a declaration for filing in Smith v. Halliburton 
Co., No. H-06-0462 (S.D. Tex.), a tort action against the 
appellant 
and its parent company. In a draft declaration, 
Mr. Walter stated that "under the LOGCAP Contract 
[No. DAAA09-02-D-0007] and Task Order 59, KBRSI 
had no obligation to provide, and in fact was prohibited 
from providing, force protection for its employees at 
[Forward 
Operating Base] Marez [in Iraq], including 
security of any kind to protect KB RSI personnel in the 
Dining Facility ... [from] a suicide bomber." 
4. "In response to Congressional inquiries about the 
use of PS Cs by KBRS and its subcontractors ... , 
Ms. Mendoza on 31 January 2007 obtained documentation 
from [KBR subcontractor Eurest Support Services (ESS)] 
that in March 2005, 'Security' was 12.55% of 'our labor 
pricing in our subcontracts[.]'" 
5. In February 2007, George Seagle, an executive of 
the appellant, testified before the House Government 
Reform Committee. In response to questions from 
Representative Waxman, Mr. Seagle testified that KBR had 
"never directly subcontracted for armed security under the 
LOGCAP contract" and had not "required or directed any of 
our subcontractors to subcontract for security either." 
(Gov't opp'n at 2-3) 
35 

DECISION 
The government has made a number of different arguments with respect to 
Count II of KBRS's FACC. The vast majority of these were made in connection with 
the government's motion to dismiss and have been dealt with above. In its briefing, 
the only two arguments the government makes specifically in opposition to KBRS's 
motion for summary judgment are that ( 1) whether a breach is material is not a 
determination appropriate for summary judgment, and (2) we must deny summary 
judgment on Count II because there is a genuine dispute of material fact with respect 
to the materiality of the Army's breach (gov't opp'n at 11-12). For the latter, the 
government offers the following: ( 1) KBRS did not believe at the time it submitted its 
claims in three of these appeals that the contract obligated the Army to protect KBRS 
subcontractors, meaning that KBRS entered into the LOGCAP contract "with no 
expectation of force protection for its subcontractors;" and (2) senior management of 
KBRS in 2006-2007 told the government that KBR did not allow either KBR or 
subcontractor personnel to carry weapons, meaning that KBR senior management, at 
least, did not think that the need for security was so great that the failures in force 
protection by the Army amounted to a total or material breach. (Id. at 12) 
We address first the government's contention that whether a breach is material 
is not an issue that should be decided summarily. The government relies on two 
Federal Circuit cases to support this argument. The first is Stone Forest Industries, 
Inc. v. United States, 973 F .2d 1548 (Fed. Cir. 1992). Stone Forest is cited for the 
following proposition: 
Not every departure from the literal terms of a 
contract is sufficient to be deemed a material breach of a 
contract requirement, thereby allowing the nonbreaching 
party to cease its performance and seek appropriate 
remedy. The standard of materiality for the purposes of 
deciding whether a contract was breached "is necessarily 
imprecise and flexible." Restatement (Second) of 
Contracts § 241 cmt. a (1981 ).... The determination 
depends on the nature and effect of the violation in light of 
how the particular contract was viewed, bargained for, 
entered into, and performed by the parties. 
Id. at 1550-51. In Stone Forest, the Federal Circuit reversed the U.S. Claims Court 
and found that the government's denial of access to 15.89 percent of the timber 
originally contracted for was a material breach. Id. at 1552. 
The second case relied on by the government is Beta Systems, Inc. v. United States, 
838 F .2d 1179 (Fed. Cir. 1988), cited for the proposition that questions of contract 
36 

interpretation requiring the weighing of extrinsic evidence are not amenable to summary 
resolution. We think the government's reliance on this decision is misplaced. In Beta 
Systems, as in most cases where a court or board is called upon to decide motions for 
summary judgment, there had been no trial on the merits. In this case, there was an 
extensive hearing on the merits and testimony from numerous government and contractor 
witnesses bearing on how the LOGCAP contract and task orders were viewed, bargained 
for, entered into, and performed by the parties, as well as detailed factual findings made 
by the Board on the basis of that record. Any judgment rendered on this record is not 
truly "summary." At oral argument the government appeared to back off the position 
taken in its briefs, agreeing that the Board's original findings plus the government's 
additional material facts were a sufficient basis for the Board to rule on the motion for 
summary judgment (tr. 59). 
Next, we turn to the government's argument that KBRS's claims underlying 
ASBCA Nos. 56358, 57151, and 57327 show that KBRS had no expectation under the 
contract that the Army would provide force protection to any of its subcontractors, 
precluding summary judgment at least with respect to the subcontractor PSC costs at 
issue (gov't opp'n at 12). For this proposition, the government cites to KBRS's certified 
claims of 22 October 2007 (ex. G-1) and 16 June 2010 (ex. G-3) for sums withheld by 
the Army to recover allegedly unallowable PSC costs incurred by its subcontractors. It 
is true that in these claims, KBRS argued that the contract required the Army to provide 
force protection to KBRS employees but did not require the Army to provide force 
protection to subcontractor employees (ex. G-1at10-12, ex. G-3 at 13-15). However, 
these arguments must be viewed in context. KBRS presented this argument as one of 
many reasons why the Army's disallowance of subcontractor PSC costs under 
Clause H-16 was improper: if the contract did not obligate the Army to provide force 
protection to subcontractors, then it could not be reasonably read to prevent those same 
subcontractors from providing for their own force protection, when the Army did not 
provide it, and billing the cost of same as a reasonable cost of contract performance. 
The undisputed facts show that at the time the contract was being performed, 
both KBRS and government personnel believed the government was obligated 
under the contract to provide force protection to both KBRS and its subcontractors 
(see SOF ii 4 (KBRS warned the Rock Island PCO on 27 June 2003 that failure to 
provide force protection adequate to the threat in accordance with the LOGCAP III 
contract would mean that KBR and subcontractor vehicle 
convoys would have to 
be delayed, adversely affecting timely delivery of food service support); SOF ii 7 
(the commander of DCMA in Kuwait expressed concern in November 2003 that the 
government would be unable to meet its contractual obligation to provide security 
and protection for KBRS convoys); SOF ii 9 (KBRS manager sent a message in 
February 2004 to the troop unit responsible for force protection, saying that "the 
military has failed to comply with providing escort requirements" and citing ( 1) the 
abandonment of a subcontractor convoy while en route and (2) the assembly of a 
37 

subcontractor convoy of 10 trucks loaded and ready to go only to be told no military 
escort was available and might not be available for weeks); SOF ii 11 (the DCMA 
ACO for TO 59 stated to the commander of DCMA Northern Iraq in April 2004 that 
"[a ]ll indications are that the government has failed to live up to its contractual 
obligation to provide Force Protection ... to the [TO 59] convoys .... Given that, KBR is 
currently not required to run most (if any) convoy routes.")). The government has 
cited to no statement by either KBRS or the government contemporaneous with 
contract performance 
that would support the assertion that KBRS "viewed, bargained 
for, entered into, and performed'' the LOGCAP III contract "with no expectation of 
force protection for its subcontractors." Therefore, its argument that the Army's 
failures to provide force protection to KBRS subcontractors was not a material breach, 
because there was no expectation that force protection would be provided, i~ 
unpersuasive. 
Finally, the government asserts that there is a dispute of material fact with 
respect to how important government force protection was to KBR itself, given "[t]he 
persistence of KBR's official no-weapons policy throughout the claim period" 
(gov't opp'n at 12). For this, the government cites to GSAMF paragraphs 1, 2, and 5. 
GSAMF 1 deals only with employee possession of private weapons, which KBRS did 
prohibit, but not with PSCs, which is how KBRS provided security to its employees in 
Iraq when military force protection was not available. GSAMFs 2 and 5 both deal 
with accurate statements by KBRS officials that KBRS did not hire a PSC directly in 
support of LOGCAP III. The cost of PSCs hired to protect top KBR officials traveling 
in the Middle East was incurred by a KBRS office servicing a number of KBRS 
contracts in the Middle East, including LOGCAP III, and was allocated to those 
contracts as an indirect cost. KBRS, 14-1 BCA ii 35,639 at 174,514. The government 
has failed to raise any genuine issue of material fact regarding the importance of force 
protection to KBRS under LOGCAP III. 
The undisputed facts establish that the government committed the first material 
breach under the contract. The invasion and occupation of Iraq occurred in 
March 2003. Attacks on convoys began in June 2003, and by 27 June 2003 KBRS 
was already warning that the government was not providing force protection in 
accordance with its contractual obligation. (SOF iii! 3-4) MG Speakes, the deputy 
commander of Coalition land forces in Iraq, quickly assessed that increased force 
protection was necessary and requested that the commander at Rock Island have 
the LOGCAP III contract amended to allow for use of private security for 
convoys moving materiel in Iraq. However, that never happened. (SOF iii! 4-6) In 
November 2003, the commander ofDCMA in Kuwait warned that the government 
was "faced with an unexecutable task" to provide force protection to convoys in 
accordance with applicable standards (SOF ii 7). In response to a KBRS message in 
February 2004 that neither it nor its subcontractors were receiving the promised 
protection, the responsible military unit replied that "these combat units were sent here 
38 

to fight the war, not do escorts for KBR ONLY" (SOF ii 9). The DCMA ACO stated 
in April 2004 in no uncertain terms that the government had failed to live up to its 
contractual obligation to provide force protection to the convoys (SOF ii 11 ). Several 
witnesses testified that by spring and summer of 2004 it was evident that the force on 
the ground was insufficient to accomplish military missions and provide security for 
contractors. The need for PSCs to supplement Coalition and Iraqi forces to provide 
security to contractors was widely recognized (SOF iii! 12-14). 
The government does not seriously dispute that it was obligated under the 
LOGCAP III contract to provide force protection to KBRS and its subcontractors 
equivalent to that provided to DoD civilians, and obligated under TOs 59 and 89 to 
provide them with force protection commensurate with the threat. Indeed, it would be 
unconscionable to take the position that the contract prohibited KBRS and its 
subcontractors from providing for their own protection, while performing in a war 
zone, without otherwise providing for their security. Yet, despite the many and 
continuing failures of the government to provide the promised level of force protection 
to KBRS and its subcontractors summarized above, the government 
seeks to disallow 
the PSC costs incurred by KBRS and its subcontractors in order to accomplish their 
mission under the LOGCAP contract despite the government's breach, and argues 
that its breach was not material. It is hard to imagine a contract breach more material 
than this one, which eviscerated the promise at the heart of the justification for the 
government's claim. The government's breach was material. 
One of the grounds for the government's motion to dismiss Count II is that 
KBRS waived the material breach by continuing to perform the contract. We 
previously rejected this argument as a basis for dismissing Count II for failure to state 
a claim for relief, stating that the record in these appeals amply demonstrated that 
KBRS and its subcontractors made a commercially reasonable decision to continue to 
perform the contract with PSC protection rather than abandon performance in response 
to the government's breach, and citing the decision of the Court of Claims finding 
that continued performance did not waive the government's material breach in 
Northern He/ex, 197 Ct. Cl. 118, 129. We also found that this case presents the same 
sort of "special aspect" present in Northern He/ex, i.e., that the contractor's continued 
performance was consistent with the purpose of the contract and in the national 
interest. It is unclear to us whether the government also asserts this ground in 
opposition to summary judgment, but to the extent that it does, we hold that KBRS and 
its subcontractors did not waive the government's prior material breach by continuing 
to perform. 
What remains is the question of the appropriate remedy for the government's 
material breach. KBRS has raised prior material breach as a defense to the 
government's claim of breach embodied in its claim for unallowable costs. Our 
appellate precedent 
recognizes that a party may defend a claim of breach on the 
39 

ground that a legal excuse for its nonperformance existed at the time of the alleged 
breach. Long Island Savings Bank, 503 F.3d at 1251 (plaintiffs' claim for damages 
precluded by their prior breach-submitting a false certification). In Laguna, 828 F.3d 
at 1372-73, the Federal Circuit affirmed this Board's grant of summary judgment to 
the government, holding that a contractor's claim for unpaid costs of performing an 
environmental remediation and construction contract in Iraq was precluded by the 
contractor's prior material breach-violation of the contract's Allowable Cost & 
Payment clause. 
In these appeals, the government has claimed and withheld from payment to 
KBRS the amounts it believes it previously paid in unallowable PSC costs. The basis 
for the government's claim of unallowability is that the costs were incurred in 
violation of the contract's prohibition against the use of PSCs. Because the record in 
these appeals establishes that the claimed PSC costs were reasonable in amount and 
were incurred only when necessitated by the government's failure to provide the 
contractually promised level of force protection to KBRS and its subcontractors, the 
government's prior material breach operates to excuse any subsequent noncompliance 
with the contract's PSC prohibition. Thus, the government's claims for unallowable 
PSC costs are precluded in their entirety and we grant summary judgment for KBRS 
on Count II of its F ACC. 
CONCLUSION 
The government's motion to dismiss is granted as to Counts I, V, and X, and 
those affirmative defenses are stricken from KBRS's FACC. The motion to dismiss is 
denied as to Counts II, III, IV, VI, VII, and VIII. We grant summary judgment to the 
government on Count IX. The government's motion is denied without prejudice as to 
Count XI, and granted as to Count XII. 
We grant KBRS's motion for summary judgment on Count II of its FACC. 
Having done so, we deem it unnecessary to decide whether KBRS is also entitled to 
summary judgment on Count VI of its F ACC. The consolidated appeals are sustained 
in the amount of $44,059,024.49, with Contract Disputes Act interest as follows: on 
$19,652,815 from 22 October 2007, on $21, 131,743 from 20 October 2009, and on 
$3,274,466.49 from 16 June 2010. 
Dated: 8 June 2017 
(Signatures continued) 
40 
---

I concur 
RICHARD SHACKLEFORD 
Administrative Judge 
Acting Chairman 
Armed Services Board 
of Contract Appeals 
OWEN C. WILSON 
Administrative Judge 
Acting Vice Chairman 
Armed Services Board 
of Contract Appeals 
I certify that the foregoing is a true copy of the Opinion and Decision of the 
Armed Services Board of Contract Appeals in ASBCA Nos. 56358, 57151, 57327, 
58583, Appeals of Kellogg Brown & Root Services, Inc., rendered in conformance 
with the.Board's Charter. 
Dated: 
41 
JEFFREY D. GARDIN 
Recorder, Armed Services 
Board of Contract Appeals