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SPECIAL INSPECTOR GENERAL FOR IRAQ RECONSTRUCTION 

October 30, 2007 

MEMORANDUM FOR COMMANDING GENERAL, U.S. ARMY SUSTAINMENT 

COMMAND 

COMMANDER, DEFENSE CONTRACT MANAGEMENT 

AGENCY 

MANAGEMENT COUNSELOR, U.S. EMBASSY-IRAQ 

COMMANDER, JOINT AREA SUPPORT GROUP – CENTRAL 

SUBJECT: Logistics Civil Augmentation Program Task Orders 130 and 151: Program 

Management, Reimbursement, and Transition (SIGIR-08-002) 

We are providing this audit report for your information and use. This review of Logistics Civil 

Augmentation Program (LOGCAP) Task Orders 130 and 151 issued to Kellogg Brown & Root 

Services Inc. is another in a series of audits SIGIR has completed on this contract. It follows up 

a previous review to determine whether the support provided under LOGCAP Task Order 130 

was reasonable, efficient, and cost effective. This review focuses on steps taken to address 

management issues identified in our previous report, reimbursements for services provided under 

the contract, and transitioning the contract from a contingency contract to a more competitive 

contract in future embassy operations. Our work was completed at the request of the Office of 

the Chief of Mission, U.S. Embassy-Iraq. 

In preparing the final report we considered written and verbal comments from the U.S. EmbassyIraq, the Joint Area Support Group-Central, and the Defense Contract Management Agency. 

Written responses received are included in the Management Comments and Audit Response 

section of this report. 

We appreciate the courtesies extended to the staff. For additional information on this report, 

please contact Mr. Walt Keays (walt.keays@iraq.centcom.mil / 703-343-7921) or Mr. Glenn D. 

Furbish (glenn.furbish@sigir.mil / 703-428-1058). For the report distribution, see Appendix C. 

Stuart W. Bowen, Jr. 

Inspector General 

cc: See Distribution
Table of Contents 

Executive Summary i

Introduction 1

Government and Contractor Actions to Address Previously 

Identified Management Issues 4

Improvements Needed in the Management of Reimbursements 12

Planning for Transition from Contingency Contracting 18

Conclusion and Recommendations 19

Appendices 

A. Scope and Methodology 22 

B. Acronyms 27 

C. Report Distribution 28 

D. Audit Team Members 30 

Management Comments 

U. S. Embassy – Iraq 31 

Joint Area Support Group-C 32 

Defense Contract Management Agency 33 
Logistics Civil Augmentation Program 

Task Orders 130 and 151: Program Management, 

Reimbursement, and Transition 

SIGIR-08-002 October 30, 2007

Executive Summary 

Introduction 

Established in 1985, the Logistics Civil Augmentation Program (LOGCAP) is a U.S. Department 

of the Army (Army) program that preplans for the use of global corporate resources in support of 

worldwide contingency operations. In the event that U.S. forces deploy, contractor support is 

available to commanders as an option. The LOGCAP objectives are twofold: 

• Provide combat support and combat service support augmentation to both combatant and 

component commanders, primarily during contingency and other operations (including 

reconstitution and replenishment) within reasonable cost. 

• Facilitate the management and physical responsibility to support deployment, site 

preparation, set preparation, module operations and maintenance, redeployment, and 

transportation requirements for the force provider. 

Examples of the types of support available include supply operations, laundry and bath, food 

service, sanitation, billeting, maintenance, fuel services, transportation, and power generation 

and distribution. LOGCAP has been used to support U.S. forces in operations in Somalia, Haiti, 

and Bosnia, and is currently being used in Afghanistan, Kuwait, and Iraq. LOGCAP support is 

also sometimes authorized for other U.S. military services, coalition forces, other government 

agencies, and nongovernmental organizations. 

Awarded on December 14, 2001, the LOGCAP contract (DAAA09-02-D-0007) comprises a 

series of task orders that commit both the contractor to provide support services and the 

government to pay for those services. Task orders under this contract can be either fixed price or 

cost–reimbursable. In Iraq, the total cost of all 149 task orders issued under the LOGCAP 

contract as of March 4, 2007, is approximately $22.5 billion. 

The focus of this review is LOGCAP Task Order 130 and Task Order 151, which were awarded 

on April 27, 2006 and June 6, 2007 respectively, to Kellogg, Brown and Root Services Inc. 

(KBR) to provide services necessary to support, operate, and maintain the Chief of Mission 

(COM) and Multi-National Force-Iraq staffs located at the U.S. Embassy-Iraq, and at other Chief 

of Mission sites within Iraq located in Baghdad, Basra, Al Hillah and Kirkuk. Task Order 130 

has an estimated value of about $283 million and expired on June 6, 2007. Task Order 151, the 

successor to Task Order 130, was awarded for a one year period with an estimated cost of $200 

million. These task orders are a continuation of services previously awarded under Task Orders 

i
100 and 44, which were awarded on November 5, 2004, and March 6, 2003, respectively. 

Because these task orders provided support to both the Department of Defense (DoD) and 

Department of State (DoS) missions in Iraq, DoD and DoS agreed that the reimbursement of 

costs associated with these task orders would be shared 60% by DoS and 40% by DoD. The total 

cost of these four task orders is approximately $1.5 billion dollars. 

The primary government offices involved with the operation of Task Orders 130 and 151 in Iraq 

are: 

• The DoS Embassy Management Office headed by the Counselor for Management 

Affairs, U.S. Embassy-Iraq, which is responsible for the day-to-day support of Chief of 

Mission operations in Iraq. 

• The DoD Joint Area Support Group–Central (JASG-C), located in the International Zone, 

which is the military component of the Multi-National Force–Iraq that provides 

administrative and logistical services and coordinates military support to the U.S. 

Mission–Iraq. 

• The Baghdad office of the Defense Contract Management Agency (DCMA) which 

provides on-site monitoring of the contractor. 

• The U.S. Army Sustainment Command, which is responsible for administration of the 

LOGCAP program. The Procuring Contracting Officer, the LOGCAP Program Manager, 

and the Logistical Support Element Office (established in Iraq to help customers with 

LOGCAP requirements) are assigned to this command. 

• The Defense Contract Audit Agency, which provides its expertise in reviewing the 

contractor’s financial management system and ensuring that costs claimed by the 

contractor are reasonable, allowable, and allocable. 

The Army’s LOGCAP contract is a contingency umbrella contract that is considered “a contract 

of last resort” for customers because of the potential additional costs associated with this type of 

contract. Contingency contracts are primary designed for areas where emerging requirements 

are the norm, rapid response is required, and/or conditions are such that normal sustainment type 

contracts are not competitively available. Under contingency contracts the government typically 

assumes the financial risk with the use of cost-plus award fee contracts. Once a condition 

stabilizes and a reasonable determination can be made as to the quantity and type of contract 

work that will be required to support a mission, customers should transition out of contingency 

contracts into a more normal cost-effective contract. 

Our prior work identified the need for improvements in clarifying contractor standards and 

government oversight responsibilities for the LOGCAP task orders in Iraq to ensure that services 

were accomplished in an efficient and effective manner and that appropriate internal controls 

existed for protection of government resources. Our prior work also noted concerns over 

reimbursement issues related to the contract. 

ii
Objectives 

This review follows one we previously performed to determine whether the support provided 

under LOGCAP Task Order 130 was reasonable, efficient, and cost effective. This review 

includes Task Order 130 and its successor, Task Order 151. Our reporting objectives specifically 

address whether: (1) progress has been made in addressing contract management issues that we 

previously identified, and actions still needed; (2) reimbursement issues involving costs related 

to, but not part of, Task Orders 130 and 151 are properly addressed; and (3) plans are being 

considered to transition from a contingency contract to a more competitive contract mechanism 

in the future. 

Results 

The U.S. government agencies involved in the management of Task Orders 130 and 151 have 

made major improvements in oversight since our prior report on the LOGCAP contract. In 

particular: (i) the Army Sustainment Command has clarified contractor standards and 

government oversight responsibilities, (ii) DCMA has implemented an independent Quality 

Assurance program, (iii) both JASG-C and DoS support DCMA by providing Contracting 

Officers Technical Representatives (COTRs) to assist DCMA in its contractor oversight mission, 

(iv) DoS has clarified dining facility food service cost standards that KBR is expected to adhere 

to, (v) aggressive action has been taken by both JASG-C and DoS to ensure that billeting 

operations are properly administered and billeting records reflect accurate data and (v) DoS now 

recognizes that KBR’s billeting operations its employees are subject to government oversight. 

The contractor, KBR, has also made significant improvements in its operations compared to 

conditions noted in our prior report. KBR has improved (i) the accuracy of fuel information as 

well as controls over its International Zone fuel operations, (ii) its efforts to control food costs, 

and (iii) its administration of billeting and the accuracy of billeting information. Problems, 

however, still remain in ensuring that dining facility food costs are within established standards 

and that fuel reports properly reflect the amounts issued to KBR by the Army. 

While progress has been made in ensuring appropriate reimbursement between DoD and DoS, 

problems were still noted in ensuring accurate billing for and reimbursements of both fuel and 

subsistence (food) utilized for Task Orders 130 and 151. In addition, as of September 30, 2007, 

the U.S. Embassy-Iraq had not sought reimbursement from non-U.S. organizations who receive 

life support services under Task Order 151, which became effective June 6, 2007. 

DoS has transitioned to its own contract for maintenance services at the new Embassy 

Compound, but will continue to rely upon the Army’s LOGCAP contingency contract for most 

services until the current situation in Iraq becomes more favorable for “peacetime” contractor 

operations. 

iii
Recommendations 

We recommend that the Commander, Defense Contract Management Agency: 

1. Work with KBR to implement appropriate procedures to ensure that fuel received from 

the Camp Victory fuel depot is properly recorded based upon official government 

issue/receipt documents, and that procedures for resolving discrepancies regarding fuel 

deliveries are implemented. 

2. Continue to require KBR to report the amount of commercial fuel received in the remarks 

section of the Monthly Bulk Petroleum Accounting Summary form so that MNF-I can 

differentiate between the amounts of military and commercial fuel received when 

preparing fuel reimbursement billings. (Initial action was taken during the audit on this 

recommendation.) 

3. Continue to work with the Army and U.S. Embassy-Iraq to develop and implement an 

appropriate billing procedure for Army reimbursement billings to DoS for subsistence 

costs. (Initial action was taken during the audit on this recommendation.) 

We recommend that the Counselor for Management Affairs, U.S. Embassy-Iraq: 

4. After appropriate notification to the non-U.S. organizations involved, initiate billings to 

the organizations to recover cost of life support provided under Task Order 151 for their 

personnel billeted within the Embassy housing compound. 

5. Work with DCMA and the Army to develop and implement an appropriate billing 

procedure so that DoS can reimburse the Army for dining facility subsistence costs. 

6. When security conditions within Iraq allow, consider transitioning the U.S. EmbassyIraq’s life support contract from LOGCAP to a DoS contract. 

Management Comments and Audit Response 

We received written comments on a draft of this report from the DoS Management Counselor’s 

Office, and DCMA, which are included in the Management Comments section of this report. The 

DoS Management Counselor concurred with our recommendations and stated that the Embassy 

was taking action to address each recommendation. DCMA concurred with our first two 

recommendations, but did not concur with the third recommendation. According to DCMA it 

has neither the authority nor administrative control to develop and implement reimbursement 

procedures between DoS and DoD. We recognize that DCMA does not have the authority to 

develop the reimbursement billing procedures. In recognition of that fact, our recommendation 

calls for DCMA to work with both the Army and DoS (which DCMA has done during this 

audit). Therefore, we made no change to our draft recommendation. JASG-C provided technical 

comments that we included in the report as appropriate. 

iv
Introduction 

Background 

The Logistics Civil Augmentation Program (LOGCAP) is a Department of the Army program 

that preplans for the use of global corporate resources in support of worldwide contingency 

operations. In the event that U.S. forces deploy, contractor support is then available to 

commanders as an option. The LOGCAP objectives are twofold: 

• Provide combat support and combat service support augmentation to both combatant and 

component commanders, primarily during contingency and other operations (including 

reconstitution and replenishment) within reasonable cost. 

• Facilitate the management and physical responsibility to support deployment, site 

preparation, set preparation, module operations and maintenance, redeployment, and 

transportation requirements for the force provider. 

Examples of the type of support available include supply operations, laundry and bath, food 

service, sanitation, billeting, maintenance, fuel services, transportation, and power generation 

and distribution. LOGCAP has been used to support U.S. forces in operations in Somalia, Haiti, 

and Bosnia, and is currently being used in Afghanistan, Kuwait, and Iraq. The use of LOGCAP 

to support U.S. troops in Iraq is the largest effort in the history of LOGCAP. 

In addition, LOGCAP support is authorized for other U.S. military services, coalition forces, 

other government agencies, and nongovernmental organizations. The basic contract requires the 

contractor, unless indicated otherwise, to adhere to functional Army regulations and to gather 

operational performance data required by regulations or the contract’s required list of 

deliverables. 

On December 14, 2001, the Army awarded LOGCAP contract DAAA09-02-D-0007 to Brown & 

Root Services, a division of Kellogg Brown & Root Inc. The contract was issued for a base year 

(December 14, 2001 to December 13, 2002) with nine option years. The official name of the 

contractor was changed on December 14, 2003, by modification P00007, to Kellogg Brown & 

Root Services Inc. (KBR). The overall contract was awarded as a cost-plus, award-fee contract 

under which KBR earns a 1% base fee and up to a 2% award fee. Specific services under the 

LOGCAP contract are awarded through the issuance of task orders. Task orders under this 

contract can be either fixed price or cost-reimbursable. 

The focus of this review is LOGCAP Task Orders 130 and 151, which were awarded on April 

27, 2006 and June 6, 2007 respectively, to provide services necessary to support, operate, and 

maintain the Chief of Mission (COM) and Multi-National Force-Iraq staffs located at the U.S. 

Embassy-Iraq, and at other COM sites located in Baghdad, Basra, Al Hilla, and Kirkuk. Task 

Order 130 has an estimated value of about $283 million and expired on June 6, 2007. Task Order 

151, the successor to Task Order 130, was awarded for a one year period with an estimated cost 

of $200 million. Task orders 130 and 151 continue services previously awarded under Task 

Orders 100 and 44, which were awarded on November 5, 2004, and March 6, 2003, respectively. 

Because these task orders provide support to both the Department of Defense (DoD) and 

1
Department of State (DoS) missions in Iraq, the departments agreed that the reimbursement of 

costs associated with these task orders would be shared 60% by DoS and 40% by DoD. The total 

cost associated with these four task orders is approximately $1.5 billion dollars, as shown in 

Table 1. 

Table 1—LOGCAP Estimated Task Order Support Costs as of 

September 10, 2007 

Task Order Performance Dates Total (millions)* 

44 03/06/2003-10/07/2004 $ 579.0 

100 10/08/2004-04/07/2006 $ 440.2 

130 04/08/2006-06/06/2007 $ 282.9 

151 06/07/2007-06/05/2008 $ 200.1 

TOTAL $1, 502.2 

Source: Costs identified within the contract task orders and associated modifications. These costs 

do not necessarily reflect actual costs incurred or paid. 

The government offices involved with the LOGCAP contract and Task Orders 130 and 151 in 

Iraq are: 

• The Army’s Office of the Deputy Chief of Staff, G-4 (Logistics), is both the Army and 

Joint Staff proponent for LOGCAP. 

• Army service component commands1 and other LOGCAP-supported customers and their 

respective commanders are responsible for determining requirements and providing 

detailed statements of work for services performed under LOGCAP. 

• The U.S. Army Materiel Command, as the executive agent for the program, implements 

overall policy, guidance, and direction. 

• The U.S. Army Sustainment Command at Rock Island, Illinois, a subordinate command 

of the U.S. Army Materiel Command, is the contracting agent for the program and 

awards, manages, and executes the LOGCAP contract through a duly appointed 

Procuring Contracting Officer. The Procuring Contracting Officer (PCO) delegated 

Administrative Contracting Officer (ACO) duties to the Defense Contract Management 

Agency (DCMA), a DoD proponent for contract administrative services. The U.S. Army 

Sustainment Command also established a logistics support element at each approved 

LOGCAP site to coordinate and monitor LOGCAP requirements during a contingency 

mission. 

 

1 There are nine Army Service Component Commands, comprised primarily of operational organizations, serving as the Army component for a 

combatant commander. Specifically: U.S. Army Europe, U.S. Army Central, U.S. Army North, U.S. Army South, U.S. Army Pacific, U.S. Army 

Special Operations Command, Military Surface Deployment and Distribution Command, U.S. Army Space and Missile Defense Command/Army 

Strategic Command, and Eighth U.S. Army.

2
• DCMA Central Iraq, under DCMA Iraq/Afghanistan, provides contingency contract 

administration services in direct support of LOGCAP. DCMA-I/A is delegated 

responsibility for contract administration, property administration, quality assurance, and 

surveillance oversight over the LOGCAP contractor, KBR, 

• The DoS Embassy Management Office, headed by the Counselor for Management 

Affairs, U.S. Embassy–Iraq, is responsible for the day-to-day support of COM operations 

in Iraq. The DoS has assigned a contracting officer’s representative (COR) to Task 

Orders 130 and 151. 

• The DoD Joint Area Support Group–Central (JASG-C), located in the International Zone, 

is the military component of the Multi-National Force–Iraq that provides administrative 

and logistical services and coordinates military support to the U.S. Mission–Iraq. 

• The Defense Contract Audit Agency provides its expertise in reviewing the contractor’s 

financial management system and ensuring that costs claimed by the contractor are 

reasonable, allowable, and allocable. 

This report is part of a series of reports SIGIR has published on the use of the LOGCAP contract 

in Iraq. On October 26, 2006, we issued an interim report, Inappropriate Use of Proprietary 

Data Markings by the Logistics Augmentation Program (LOGCAP) Contractor, (SIGIR-06-

035), which discussed KBR’s practice of routinely marking information provided to the 

government as “KBR Proprietary Data” and KBR’s initial refusal to provide data we requested in 

its native electronic format. On June 26, 2007, we issued a report, Logistics Civil Augmentation 

Program Task Order 130: Requirements Validation, Government Oversight, and Contractor 

Performance (SIGIR-07-001), which discussed the contractor’s performance and government 

oversight of contractor’s performance in the areas of (i) fuel operations, (ii) food service 

operations, (iii) billeting, and (iv) morale, welfare, and recreation support. The report identified a 

need for improvements in clarifying contractor standards and government oversight 

responsibilities for the LOGCAP task orders in Iraq to ensure that services were accomplished in 

an efficient and effective manner and that appropriate internal controls existed for protection of 

government resources. SIGIR also noted concerns the with lack of reimbursement procedures for 

costs related to, but not part of, the LOGCAP contract, and stated that these concerns would be 

addressed in a future SIGIR audit. 

Objectives 

This review follows one we previously performed to determine whether the support provided 

under LOGCAP Task Order 130 was reasonable, efficient, and cost effective, and looks at the 

successor to Task Order 130, Task Order 151. Our reporting objectives specifically address 

whether: (1) progress has been made in addressing contract management issues we previously 

identified, and actions still needed; (2) reimbursement issues involving costs related to, but not 

part of, Task Orders 130 and 151 are properly addressed; and (3) plans are being considered to 

transition from a contingency contract to a more competitive contract mechanism in the future. 

For a discussion of the review’s scope and methodology, and summary of prior coverage, see 

Appendix A. For the acronyms, see Appendix B. For the report distribution, see Appendix C. For 

a list of the review team members, see Appendix D. 

3
Government and Contractor Actions to Address 

Previously Identified Management Issues 

The U.S. government agencies involved in the management of Task Orders 130 and 151 have 

made major improvements in their oversight since our prior review of the LOGCAP contract. In 

particular: (i) the Army Sustainment Command has clarified contractor standards and 

government oversight responsibilities, (ii) DCMA has implemented an independent Quality 

Assurance program, (iii) both JASG-C and DoS support DCMA by providing Contracting 

Officers Technical Representatives (COTRs) to assist DCMA in its contractor oversight mission, 

(iv) DoS has clarified dining facility food service cost standards that KBR is expected to adhere 

to, (v) aggressive action has been taken by both JASG-C and DoS to ensure that billeting 

operations are properly administered and billeting records reflect accurate data, and (v) DoS now 

recognizes that KBR’s own billeting operations are subject to government oversight. 

The contractor, KBR, has also made significant improvements in its operations when compared 

to conditions noted in our prior report. KBR has (i) improved the accuracy of fuel information as 

well as controls over its International Zone fuel operations, (ii) increased its efforts to control 

food costs, and (iii) improved its administration of billeting and the accuracy of billeting 

information. However, there are still areas that need management attention, such as KBR fuel 

reports that do not always reflect the amounts reported as issued to KBR by the Army, and 

dining facility food costs that are not always maintained within established standards. 

Government Actions Taken To Improve Management Oversight 

Army Sustainment Command 

Our prior review noted that confusion existed regarding the role and responsibility of the U.S. 

government in the oversight of KBR’s own billeting operations because contractual language in 

this area was vague. The Procuring Contracting Officer at the U.S. Army Sustainment 

Command, at SIGIR’s recommendation added language to the Scope of Work for Task Order 

151 that clarified this issue. Our prior review also noted that, as reported in SIGIR’s interim 

report, KBR inappropriately marked reports and data provided to the government as contractor 

protected proprietary data when such data was clearly not proprietary and that KBR refused to 

provide SIGIR requested data in its native electronic format. The Procuring Contracting Officer 

added specific language to the LOGCAP contract that addressed these issues. 

Defense Contract Management Agency 

Our prior review noted DCMA oversight of KBR operations in the areas of fuel, food service, 

and billeting operations, while adequate to ensure that delivery of services was accomplished, 

was not adequate to ensure (i) that services were accomplished in an efficient and effective 

manner and (ii) that appropriate internal controls existed for protection of government resources. 

Our review specifically noted that DCMA 

• Did not perform independent, in-depth, quality assurance oversight of contractor 

operations 

4
• Quality assurance results were reported on KBR signed forms, which were annotated as 

KBR proprietary data 

• Had not requested functional representatives, in the form of COTRs, from either JASG-C 

or U.S. Embassy-Iraq to help assist with its oversight responsibilities 

• Did not monitor dining facilities subsistence costs and as such took no actions when the 

Dining Facilities Financial Summary Reports showed that contractor operated dining 

facilities consistently exceeded established subsistence cost tolerance levels 

• Was not aware of significant control problems that existed within the contractor’s fuel 

operations and errors that existed within the contractor’s fuel database 

• Was not aware of inaccurate information within the contractor’s billeting database 

DCMA has taken appropriate corrective actions on the issues noted in our prior review. 

Specifically, DCMA 

• Has initiated a comprehensive schedule of aggressive, in-depth, independent, quality 

assurance reviews of contractor operations 

• Now reports the results of its quality assurance reviews on its own government reports 

• Has appointed and effectively utilizes functional representatives from both the JASG-C 

and the U.S. Embassy-Iraq as COTRs to assist in the oversight of KBR’s operations 

• Now monitors the status of dining facilities subsistence (food) costs, and includes the 

status of KBR efforts to control those costs so as to stay within cost tolerance levels as a 

briefing element to the monthly KBR Program Evaluation Board. 

• Has worked with the contractor to ensure that appropriate controls are in place and 

implemented over fuel operations and that information within the contractor’s fuel 

database is accurate 

• Has worked with the contractor in coordination with JASG-C and U.S. Embassy-Iraq to 

ensure that that billeting data is verified and accurate 

Joint Area Support Group – Central (JASG-C) 

Our prior review indicated the need for improved contract oversight by the Joint Area Support 

Group-Central. It found that: 

• Initially, JASG-C’s role in oversight was limited and no JASG-C personnel were 

appointed as COTRs to assist DCMA in monitoring the contractor’s performance. 

However, JASG-C appointed COTRs during the review 

• JASG-C was not involved in contract oversight functions required by regulation, such as 

the requirement for military personnel to conduct a headcount in the dining facilities 

• Initially, JASG-C had little involvement with ensuring that billeting standards were 

adhered to and that MNF-I personnel housed within the Embassy compound were 

identified on the KBR billeting database. However, during the review JASG-C, in 

5
coordination with U.S. Embassy-Iraq, initiated a validation process to ensure that the 

billeting database was accurate. 

Our current review shows significant improvement in JASG-C oversight role, in that: 

• As of September 15, 2007, 15 personnel from JASG-C were appointed as COTRs to 

assist DCMA with contractor oversight responsibilities 

• Starting in September 2007, JASG-C assigned military personnel to conduct headcounts 

in the Palace Dining Facility 

• JASG-C, in coordination with the U.S. Embassy-Iraq, now requires all MNF-I personnel 

housed within the Embassy compound to verify their status each quarter with the KBR 

billeting office to ensure that the accuracy of billeting data 

U.S. Embassy-Iraq 

Our prior review noted that improvements were needed in the U.S. Embassy’s oversight of 

contractor operations. It found that: 

• While the U.S. Embassy-Iraq appointed a COTR to serve as an interface between DoS 

and the contractor, no other U.S. Embassy-Iraq COTRs were appointed to assist in the 

oversight of the contractor. However, during our prior review DCMA appointed a COTR 

to assist the Embassy. 

• The U.S. Embassy-Iraq housing officer had no oversight of KBR’s own billeting 

operations 

• The U.S. Embassy-Iraq did not actively enforce billeting standards and ensure that Chief 

of Mission personnel housed in the Embassy compound were properly identified on the 

KBR billeting database. However, during our review U.S. Embassy-Iraq, in coordination 

with JASG-C, initiated a validation process to ensure that the billeting database was 

accurate.) 

• The U.S. Embassy-Iraq was not aware of, and had no oversight over, the cost of 

subsistence in the dining facilities. In addition, the U.S. Embassy-Iraq had not 

established subsistence cost standards for KBR to adhere to, even though management 

personnel within DCMA and KBR told us that the U.S. Embassy-Iraq expected KBR to 

provide a higher standard of meals than that established within the Army’s Basic Daily 

Food Allowance (BDFA) 

Our current review shows significant improvement in the U.S. Embassy-Iraq oversight in that: 

• As of September 15, 2007, five personnel from U.S. Embassy-Iraq have been appointed 

as COTRs to assist DCMA with oversight of contractor operations 

• The U.S. Embassy-Iraq housing office is now aware that the U.S. Embassy has the option 

of overseeing, monitoring, and utilizing for government needs, if required, billets 

operated by KBR for their own employees 

6
• The U.S. Embassy-Iraq, in coordination with JASG-C, now requires all personnel housed 

in the Embassy compound to verify their billeting status with the KBR billeting office 

each quarter 

• The U.S. Embassy-Iraq is now aware of the need to control subsistence costs within the 

dining facilities. On May 28, 2007, it issued a memorandum establishing a “plate cost” 

of $20 per person per day as the standard KBR is expected to meet for meals served 

within the Place Dining Facility. This standard became effective June 1, 2007. 

Contractor Actions Taken and Opportunities for Further 

Improvement 

Our prior review noted problems in KBR’s operations including inaccurate data in its reports and 

databases, inefficient operations, and lack of basic internal controls in its fuel, food service, and 

billeting operations. While our current review notes significant improvements in KBR 

operations, we identified areas in both fuel and food service operations in which additional 

improvements are needed. 

Fuel Operations 

Our prior review noted that many basic internal controls routine to the operation of retail fuel 

operations in KBR’s International Zone fuel operations were not being used. This includes the 

use of totalizers, calibrated meters, anti-pilferage seals, strapping charts and gauge sticks, and 

receipt documents. In addition, the prior review noted numerous errors and a lack of data 

integrity controls in KBR’s fuel management database. 

Our current review shows that KBR has significantly improved the fuel controls by: 

• Installing and using new calibrated meters to measure fuel receipts and issues 

• Recording and using totalizer amounts from fuel meters 

• Utilizing anti-pilferage seals on all tanker trucks when fuel is transported 

• Obtaining signed receipt documents upon issue of fuel by the military 

• Redesigning the fuel database to add data integrity controls with automatic error 

reporting messages 

• Working with DCMA to provide scientifically engineered and updated strapping charts 

for fuel tanks. (A problem identified by KBR apparently still exists with the accuracy of 

strapping charts for four KBR tankers, which KBR is working to correct) 

• Performing both gauge and meter measurement of fuel upon receipt at the International 

Zone fuel point 

• Adding an accountant position at the International Zone fuel point to maintain and ensure 

the accuracy of fuel data reports 

In spite of these improvements, one area of concern remains. KBR tanker trucks travel from the 

International Zone to the fuel depot at Camp Victory to obtain fuel from the military. At Camp 

7
Victory, the fuel issued to the trucks is measured and a camp representative signs a DA Form 

2765-1, Request for Issue or Turn In showing the amount issued. The KBR driver also signs the 

form acknowledging receipt. However, while KBR now receives and maintains fuel receipt 

paperwork from the military at Camp Victory, it does not always record in its records the amount 

of fuel shown as issued by the military in its official fuel daily receipt document, DA Form 3643, 

Daily Issues of Petroleum Products and in its official monthly fuel inventory report, DA Form 

4702-R (Monthly Bulk Petroleum Accounting Summary), which is provided to the U.S. 

government. Instead, KBR usually records the amount of fuel received based upon its own meter 

recorded amounts upon transfer of the fuel from the pick-up tankers to the fuel storage tanks 

within the International Zone fuel site. 

KBR explained that it records the meter fuel amounts received, rather than the amounts shown 

on the Camp Victory DA Form 2765-1 receipt documents because it believes that the meter 

amounts are a more reliable and accurate measurement of the fuel that it received and must 

account for. KBR also explained that it only meters diesel (DF2 type) fuel and not MoGas type 

fuel upon receipt. In addition, if a fuel tanker carrying DF2 type fuel returns from Camp Victory 

too late in the day, KBR does not always meter the fuel amount received, but instead accepts and 

records the military fuel issue amount shown on the DA Form 2765-1 in its fuel receipt records. 

To determine if there is a disparity between the military receipts and KBR’s records, we 

conducted an examination of all fuel receipts maintained by KBR for July 2007. In July KBR’s 

fuel records (based on the metered amounts) show that 1,259,285 gallons of DF2 fuel was 

received from the military at Camp Victory. Military records (DA Form 2765-1) in KBR’s 

backup files show that 1,271,216 gallons of DF2 type fuel was received – a difference of 11,931 

gallons. 

SIGIR believes that the amounts recorded on the DA Form 2765-1 should be the official record 

of fuel issued to KBR. This amount should be recorded on the official government daily and 

monthly fuel receipt reports. Recording some amounts based on meter measurements, and other 

amounts based upon the DA Form 2765-1, creates an inconsistent accounting practice. KBR 

should record the amount shown as issued per the DA Fm 2765-1 in the official fuel receipt 

records, DA Form 3643 (Daily Issues of Petroleum Products) and DA Form 4702-R (Monthly 

Bulk Petroleum Accounting Summary). 

KBR could maintain an electronic record of the officially recorded amounts and the metered 

amounts it recorded upon delivery at the IZ fuel site to capture the total monthly difference 

between its meter results and Army issue amounts. This amount could then be used by KBR in 

conducting research if monthly inventories exceed tolerance (maximum allowable gain or loss) 

levels. In addition, KBR should consider reporting differences greater than one-half of one 

percent (00.5%) as shipping discrepancies under the provisions of AR 710-2. 

In an attempt to obtain an independent record of the amount of fuel the military issued to KBR 

during fiscal year 2007, we requested–from military officials responsible for the Camp Victory 

fuel operation–a record of the summary of amounts of fuel issued each month from October 

2006 to July 2007. As of October 3, 2007, we had not received the requested information. The 

fuel information presented in this report is therefore based solely upon the information obtained 

8
from KBR fuel records retained within the International Zone, and has not been verified with the 

fuel issue records at Camp Victory. 

In written comments on a draft of this report, JASG-C suggested that SIGIR recommend 

appointment of a contractor appointed Terminal Manager and a government Property 

Administrator for fuel. However, the requirement to appoint a Terminal Manager for fuel applies 

only when the fuel is capitalized under the Defense Energy Support Center (DESC)—the fuel 

discussed in this report is not capitalized. The issue of whether or not the fuel should be 

capitalized under DESC and the appointment of a Property Administrator for fuel are systemic 

issues that need to be addressed throughout the Iraq theater of operations and are beyond the 

scope of this audit. These issues should be addressed as part of a comprehensive audit of fuel 

operations in Iraq—such an audit is outside the scope of SIGIR’s audit authority. (SIGIR did, as 

a result of problems noted in our prior review, recommend to the Iraq Inspector General Council 

in February 2007 that a separate review be considered of fuel operations at Camp Victory. We 

continue to believe that such a review is needed.) 

Food Service Operations 

KBR has taken actions to reduce the costs of meals served in the dining facilities, but needs to 

continue to apply cost saving measures to meet subsistence cost standards authorized by the 

Army’s Basic Daily Food Allowance (BDFA) or DoS’ meal allowance for the Palace Dining 

Facility. 

Our prior review disclosed that neither the government nor KBR was overseeing/ managing 

dining facility subsistence costs to remain within the subsistence cost standards required by AR 

30-22, the Food Service Program, dated May 10, 2005. AR 30-22 is the regulation KBR is 

required to follow. Based upon this standard, our prior review noted that KBR exceed 

subsistence costs standards by approximately $4.5 million for fiscal year 2006. 

Our current review shows that the government now monitors the subsistence costs in the dining 

facilities and includes subsistence cost status as a briefing item during Program Evaluation Board 

meetings. In addition, the U.S. Embassy-Iraq requested, and DCMA issued, a memorandum 

establishing a “plate cost” of $20 per person per day as the standard to which KBR is expected to 

adhere to in planning and serving meals within the Palace Dining Facility effective as of June 1, 

2007. 

Among the actions KBR told us they had taken to reduce meal costs and remain with subsistence 

cost standards were the following: 

• More reliance on the Army’s 21-day menu plus 

• Lobster will be served once every 21 days instead of every Sunday 

• Pasta served on the short order line to reduce costs 

• Use of more leftovers during the midnight meal to reduce costs 

• Better portion control through training servers to serve recommended portion and 

requiring customers to specifically request larger portions rather than automatically 

serving larger portions 

9
• Increased control over customers removing subsistence from dining facility by 

• Headcounter maintaining control over to-go boxes and requiring customers to sign for 

more than two boxes 

• Prohibiting customers from carrying backpacks or large bags into the dining facility that 

could be used to carry out food items 

• Using military headcount checkers who have more authority to enforce take-out rules in 

the Palace dining facility starting September 1, 2007 

These actions have reduced the costs of meals and brought KBR subsistence costs for the Palace 

dining facility below the State Department’s meal allowance for the months of June and July 

2007. As reflected in chart 1, however, KBR needs to take additional cost control measures to 

ensure that subsistence costs for the other dining facilities in the International Zone are within 

the Army’s Basic Daily Food Allowance (BDFA). 

The chart below shows the KBR meal cost (based on a nominal meal computation2) for fiscal 

year 2007 through July 2007. 

 

2

 The number of “nominal meals” is determined by taking the dining facility headcounts for each type of meal 

served (breakfast, lunch, dinner, and midnight meal) and applying the appropriate monetary allowance percentage 

(20% for breakfast and 40% each for lunch, dinner, and midnight meal) to determine the equivalent number of full 

single daily meals served. The nominal meal cost is determined by dividing the actual monthly subsistence costs by 

the number “nominal meals” served during the month. 

10
Chart 1: Comparison of Nominal Meal Costs in the International Zone 

Source: SIGIR, based on analysis of headcount and cost data in KBR produced Monthly DFAC Status Reports (revised) for the 

months of Oct 2006 – July 2007. 

Comparison of Nominal Meal Costs in IZ

$12.00

$13.00

$14.00

$15.00

$16.00

$17.00

$18.00

$19.00

 $20.00 

$21.00

$22.00

$23.00

$24.00

$25.00

$26.00

$27.00

$28.00

$29.00

Oct 2006 Nov 2006 Dec 2006 Jan 2007 Feb 2007 Mar 2007 Apr 2007 May 2007 Jun 2007 Jul 2007

Months

Nominal Cost per 

Person

J1-Palace J7-KBR Camp J8-Camp Jackson BDFA

DoS Standard 

As shown in chart 1, KBR’s nominal meal costs for the Palace dining facility steadily declined 

from January 2007 to June 2007 and remained at or under the DoS authorized $20 cost per 

person per day since March 2007. For most of the fiscal year, however, the meal costs for both 

the KBR Camp Hope dining facility and the Camp Jackson dining facility exceeded the 

authorized BDFA, indicating that KBR has additional work to do to meet authorized subsistence 

cost standards. The large variance in meal costs for the KBR Camp Hope dining facility between 

February 2007 and March 2007 is, in SIGIR’s opinion, most likely the result of an inventory 

error rather than an actual reflection of the cost for each of the two months. 

Billeting Operations 

KBR has taken actions to update the billeting database and ensure the accuracy of information in 

billeting reports provided to the U.S. government. 

Our prior review noted that the billeting database was inaccurate and did not properly reflect the 

current status of persons residing within the Embassy housing compound. This condition has 

now been corrected. KBR has fully supported and worked with both JASG-C and U.S. 

Embassy-Iraq in conducting quarterly verifications of personnel housed in the Embassy housing 

areas. KBR has appropriately updated its billeting database based on the verification results and 

has provided status reports of the verification results to the government. 

11
Improvements Needed in the Management of 

Reimbursements 

Our review identified several reimbursement issues related to but not part of Task Orders 130 

and 151. The issues involve three main types of reimbursements: 

• From DoS to DoD for fuel received from the military by KBR. 

• From DoS to the Army for the cost of food consumed in the dining facilities. 

• To DoS and DoD for the costs of fuel and lodging received by personnel of foreign 

embassies and the United Nations. 

Reimbursements are an issue outside the direct management of the LOGCAP contract but one, 

nevertheless, indirectly related to it. 

Actions Creating the Need for Reimbursements 

Reimbursements for Fuel KBR Received From the Military 

When the costing for Task Order 130 was initially developed, it was assumed that KBR would 

receive its fuel from commercial vendors. Under this assumption, the cost of the fuel purchased 

by KBR to support Task Order 130 (and later Task Order 151) operations would be part of the 

overall Task Order contract costs. Thus the fuel costs, in accordance with the DoS and DoD 

agreement on cost sharing, would be split between the two agencies on a 60% - 40% basis. 

KBR, however, was unable to rely upon commercial vendors to supply the fuel necessary to 

support Task Order 130 because of the security situation within Iraq. As a result, KBR was 

forced to rely upon the military to obtain its fuel requirements. 

When KBR draws fuel from the military depot at Camp Victory, however, this fuel is issued to 

KBR without cost. Since the fuel from the military was issued without cost, no costs for this fuel 

ever showed up within the KBR contract costs for Task Order 130 and Task Order 151. As a 

result, when DoS and DoD split the cost of the Task Orders based upon the 60%/40% cost 

agreement, the cost of the fuel was never included. 

Reimbursement for Food in the Dining Facilities 

Under Task Orders 130 and 151, dining facility food is obtained by KBR from the DoD Prime 

Vendor Contract in Iraq –PWC. Under normal Army dining facility operating concepts, the 

dining facilities requisition food from the prime vendor and the costs are shown as an expense in 

the appropriate dining facility account. This expense is compared with the allowance earned by 

the dining facility, based upon application of the appropriate BDFA rate to the actual headcounts, 

to determine if the facility is operating within subsistence-cost tolerance. Both the subsistence 

requisition process and the food allowance earned based upon the headcount do not normally 

result in an actual cash expenditure or collection by the dining facility. So the facility itself does 

not actually pay the prime vendor directly for the subsistence requisitioned. Instead, the Military 

Personnel Army (MPA) account initially pays the costs of Army dining facility food purchased 

12
through DoD’s Prime Vendor Contract. The Military Personnel Army (MPA) account, where 

appropriate, is normally reimbursed from the Operation and Maintenance Army (OMA) account 

for meals consumed by authorized Army civilians. 

Reimbursement for Fuel and Life Support From Other Organizations 

The U.S. Embassy-Iraq collects reimbursements from other countries’ embassies and the United 

Nations for fuel provided to them by KBR under Task Orders 130 and 151. In addition, 

reimbursement is collected for basic life support (lodging, meals, utility support, etc.) provided 

to personnel from those entitities who reside within the U.S. Embassy housing compound. Since 

the costs of the Task Orders is split between DoD and DoS in a 40% (DoD) and 60% (DoS) 

ratio, 40 percent of the reimbursements collected by the U.S. Embassy-Iraq are credited to DoD. 

Where Improvements in Reimbursement Procedures Are Needed 

SIGIR’s prior review noted that procedures had not been fully developed and implemented to 

ensure that reimbursement for fuel and subsistence was made between DoS and DoD for costs 

related to, but not part of, Task Order 130. The U.S. Embassy-Iraq, in coordination with DCMA 

and MNF-I, has taken actions to implement a reimbursement procedure for fuel obtained by 

KBR from the military, but problems in this area remain. In addition, while the U.S. EmbassyIraq and DCMA have attempted to work out a procedure with the Army to develop and 

implement reimbursement for dining facility subsistence costs, these procedures have not, as of 

September 28, 2007, been fully developed or implemented. Procedures are in place and working 

to obtain reimbursement from other organizations for fuel obtained from KBR. In addition, 

procedures were in place to obtain reimbursement from non-U.S. organizations, such as the 

United Nations and the British Embassy, for life support provided under Task Order 130 when 

those organization’s personnel reside in the Embassy compound housing area. However, as of 

September 30, 2007, the U.S. Embassy-Iraq had not issued billings to these non-U.S. 

organizations for cost of life support received under Task Order 151, which became effective 

June 6, 2007. 

Fuel Reimbursement 

Because KBR receives fuel from the U.S. military at Camp Victory, on March 25, 2007, MNF-I 

submitted an initial memorandum to the U.S. Embassy-Iraq requesting payment of $12,098,453 

as the DoS share (60%) of the $20,164,089 worth of fuel KBR received from the military for the 

10 month period from May 2006 to February 2007. Subsequent requests for fuel 

reimbursements were submitted to the U.S. Embassy-Iraq by MNF-I as shown in SIGIR Table 1: 

13
Table 1—MNF-I Requests to the Embassy for Fuel Reimbursements 

MNF-I Month 

Billed Gallons DF2 Gallons MoGas $ Value Fuel DoS Share Cost

March 2007 740,299 48,167 $1,633,393 $ 980,035

April 2007 719,745 53,846 $1,494,448 $ 896,669

May 2007 1,287,751 58.403 $2,594,544 $1,556,726

June 2007 1,363,996 66,027 $2,755,428 $1,653,257

July 2007 1,257,698 75,163 $2,606,431 $1,563,859

Source: SIGIR analysis of KBR data. 

We conducted a 100% review of KBR’s fuel receipt documents for the month of July 2007. This 

review found that, in addition to the military fuel received, KBR had received and reported as 

part of its Monthly Bulk Petroleum Accounting Summary (DA Form 4702-R) a total of 16,054 

gallons of DF2 fuel received from commercial vendors, for a total of 1,257,698 gallons of DF2 

fuel received in July 2007. We questioned the official identified in the MNF-I Memorandum to 

the U.S. Embassy-Iraq requesting reimbursement for the July 2007 receipt of fuel from the 

military, as to how he determined the amount of fuel KBR received from the military. The 

official told us that he used the fuel receipts amount reported by KBR on its Monthly Bulk 

Petroleum Accounting Summary report (DA Form 4702-R). When we asked the official about 

commercial fuel that may be included in the amount KBR reported, he advised that the KBR 

report included only military fuel received since KBR did not receive any fuel from commercial 

vendors. 

However, since May 2007, KBR has been receiving some fuel from commercial vendors, and the 

Monthly Bulk Petroleum Accounting Summary report prepared by KBR correctly included the 

vendor fuel receipts. At our request, KBR conducted a review of its records to identify the 

amounts of vendor fuel received (and included by MNF-I in DoS military fuel billings) with the 

following results: 

14
Table 2—KBR Commercial Vendor Fuel Receipts 

Month 

Gallons of 

Vendor Fuel 

Received per 

KBR 

Dollar Value of 

Vendor Fuel 

Received at Military 

Billing Rate

DoS Share (60%) of Vendor 

Fuel Improperly Billed by 

MNF-I

May 2007 31,544 $ 60,564.56 $ 36,338.74

June 2007 89,640 $172,108.48 $103,265.09

July 2007 16,054 $ 30,823.52 $ 18,494.11

Totals 137,238 $263,496.56 $158,097.94

Source: SIGIR analysis based on KBR data.

We suggested to KBR (through DCMA) that since MNF-I was relying upon the KBR Monthly 

Bulk Petroleum Accounting Summary report to determine the amount to bill DoS, that KBR 

consider including the amount of vendor fuel receipts in the future as a separate item in the 

Remarks section (paragraph h) of the Monthly Bulk Petroleum Accounting Summary. KBR 

accepted this suggestion and took immediate action to issue, for the months of May 2007 through 

July 2007, revised summaries that listed, in the remarks section, the amount of vendor fuel 

received. 

Dining Facility Subsistence Reimbursement 

Because KBR receives subsistence from the Prime Vendor Contract without cost, DCMA and 

the U.S. Army Center of Excellence, Subsistence were working to develop a system to bill DoS 

for its share of the subsistence cost used in Task Order 130 and 151 dining facilities. On 

September 19, 2006, we discussed this issue with representatives from the Army’s G-4 

(Logistics) office and the Army Budget Office. After our discussion, they sent an e-mail to the 

Army Center of Excellence, Subsistence advising that a member of the Assistant Secretary of the 

Army’s Office of Financial Management and Comptroller would work directly with DoS, to 

implement procedures for reimbursement. However, as of September 28, 2007, billing actions 

have not been implemented 

DCMA-Baghdad office and the U.S. Army Center of Excellence, Subsistence did propose an 

initial billing methodology in which DoS would reimburse the Army based upon the following 

methodology: 

1. Determine the normal monetary allowance earned under the Army’s BDFA rate (the 

headcount number for each meal multiplied by the meals respective BDFA rate) times 

60% to obtain the DoS base reimbursement. 

2. Determine the additional allowance earned by the Palace dining facility as a result of 

using a $20 DoS rate rather than the Army’s BDFA rate to compute the monetary 

allowance earned. 

15
3. Add the amount determined in step 1 above to the amount determined in step 2 to 

determine the amount of reimbursement the Army should collect from the U.S. EmbassyBaghdad. 

We reviewed this proposed billing method and advised DCMA-Baghdad and U.S. Army Center 

of Excellence, Subsistence that we did not agree because it is based on allowance earned rather 

than the actual cost of subsistence incurred by the dining facilities. We suggested that DCMA 

and U.S. Army Center of Excellence, Subsistence consider a methodology based on actual 

subsistence costs that would both capture the initial 60% DoS share of the subsistence cost under 

the BDFA rate and hold DoS responsible for any additional subsistence costs within the Palace 

dining facility due to KBR using the higher DoS $20 meal rate rather than the Army’s BDFA 

rate. The advantage of this methodology is that it holds DoS responsible only for actual 

subsistence costs. Thus, subsistence cost reductions below the $20 DoS rate and the BDFA rate 

that the contractor obtains result in lower reimbursement costs to DoS. After we advised them of 

our concerns with their cost methodology, DCMA and U.S. Army Center of Excellence, 

Subsistence both agreed that the billing methodology should be based on actual cost. Based on 

this methodology, we calculate that the fiscal year 2007 subsistence reimbursement costs due the 

Army for Task Order 130/151 dining operations3

 through June 2007 total approximately $14.5 

million. 

In written comments on a draft of this report, JASG-C disagreed with our proposed methodology 

for determining the amount of reimbursement that DoS owes the Army for subsistence. 

However, the billing methodology we proposed ensures proper costs sharing between the Army 

and DoS based on actual subsistence costs, while ensuring that DoS pays additional costs 

associated with the higher DoS meal rate. 

JASG-C also suggested that the Multinational Force Iraq C8 should develop and implement an 

appropriate procedure for Army reimbursement billings to DoS for subsistence costs. However, 

we believe that DCMA, as the duly appointed contractor administrator for the LOGCAP 

contract, is in the best position to facilitate discussion between DoS and Army for 

implementation of a billing system to ensure DoS reimburses the Army for subsistence costs 

incurred by KBR. 

Other Reimbursements 

The U.S. Embassy–Iraq properly billed non-U.S. organizations–the United Nations, British 

Embassy, Australian Embassy, et al–for fuel received from the KBR International Zone fuel site. 

Forty percent of the fuel billings were properly credited to DoD based on the 40%/60% cost split 

between DoD and DoS. 

The U.S. Embassy–Iraq billed non-U.S organization personnel housed within the U.S. Embassy 

compound for life support (housing, meals, utilities, etc.) provided under Task Order 130. Task 

Order 151, however, replaced Task Order 130 on June 6, 2007. In September 2007, the U.S. 

Embassy-Iraq completed its analysis of estimated Task Order 151 life support costs and 

developed a proposed daily per person rate to charge for life support provided under this new 

 

3

 For the purpose of this calculation we included all 6 of the dining facilities operated by KBR under Task Orders 

130/150, to include the 3 dining facilities in the International Zone (J1-Palace, J7-KBR Camp Hope, J8-Camp 

Jackson) and the 3 dining facilities outside of Baghdad (J3-Kirkuk, J9-Al-Hillah, J10-Basrah). 

16
Task Order. However, as of September 30, 2007, the U.S. Embassy-Iraq had not met with the 

non-U.S. organizations affected by this new daily life support rate to advise them of and obtain 

their agreement with the new rate. Thus billings to non-U.S. organizations for life support 

provided under Task Order 151 have not been issued by U.S. Embassy-Iraq as of September 30, 

2007. 

17
Planning for Transition from Contingency 

Contracting 

The Army’s LOGCAP contract is a contingency contract that is considered “a contract of last 

resort” for customers because of the potential additional costs associated with it. Contingency 

contracts are primarily designed for areas where emerging requirements are the norm, rapid 

response is required, and/or conditions are such that normal sustainment contracts are not 

competitively available. Under contingency contracts, the government typically assumes the 

financial risk with the use of cost plus award fee contracts. Once a condition stabilizes and a 

reasonable determination can be made as to the quantity and type of contract work that will be 

required to support a mission, customers should transition from contingency contracts to a more 

normal cost-effective contract. 

In the new U.S. Embassy in Baghdad, the U.S. Embassy-Iraq will have its own contractor for inhouse maintenance operations. But because of Iraq’s on-going wartime conditions and related 

security concerns, the Embassy elected to stay with the current LOGCAP contingency contract 

for most basic life support missions. While the DoS justification for this action is reasonable in 

the short-term due to the security environment, planning to transition to more competitive 

contracting in the longer term as conditions warrant may be desirable from the standpoint of cost 

effectiveness. 

18
Conclusion and Recommendations 

Conclusion 

The U.S. government agencies involved in the management of Task Orders 130 and 151 have 

made major improvements in their oversight since our prior review of the LOGCAP contract. 

These improvements should result in more economical and efficient contractor services. In 

particular: (i) the Army Sustainment Command has clarified contractor standards and 

government oversight responsibilities, (ii) DCMA has implemented an independent Quality 

Assurance Program, (iii) both JASG-C and DoS support DCMA by providing COTRs to assist 

DCMA in its contractor oversight mission, (iv) DoS has clarified dining facility food service cost 

standards that KBR is expected to adhere to, (v) aggressive action has been taken by both JASGC and DoS to ensure that billeting operations are properly administered and billeting records 

reflect accurate data, and (v) DoS now recognizes that KBR’s own billeting operations are 

subject to government oversight. 

KBR has also made significant improvements in its operations when compared to those noted in 

our prior report. KBR has improved (i) the accuracy of fuel information as well as controls over 

its International Zone fuel operations, (ii) its efforts to control food costs, and (iii) its 

administration of billeting and the accuracy of billeting information. Problems remain in 

ensuring that dining facility food costs are within established standards and that fuel reports 

properly reflect the amounts issued to KBR by the Army. 

While some progress has been made by the U.S. government in ensuring appropriate 

reimbursement between DoD and DoS, significant problems were still noted in accurate billing 

for and reimbursements of both fuel and subsistence provided under Task Orders 130 and 151. 

DoS has transitioned to its own contract for maintenance services at the new Embassy 

compound, but will continue to rely upon the Army’s LOGCAP contingency contract for most 

services until the current situation in Iraq becomes more favorable for “peacetime” contracting 

operations. 

It should also be noted that both the government and KBR took immediate corrective actions on 

problems we noted and suggestions we made to correct the conditions identified during this 

review: 

• DCMA and KBR agreed with our suggestion to include the amount of commercial fuel 

received in the remarks section of DA Form 4702-R (Monthly Bulk Petroleum 

Accounting Summary), so that MNF-I can determine the amount of military-only fuel 

received in preparing reimbursement fuel bills. In addition, KBR conducted a search of 

its vendor purchase requests and sub-contracts to identify the amount of fuel received 

from commercial vendors and issued revised DA Form 4702-R’s reflecting the amount in 

the Remarks section of the forms. 

• The Army agreed to provide DoS credit for the amount of commercial fuel erroneously 

billed. 

19
• DCMA and Army Center of Excellence, Subsistence agreed with our suggestion that 

dining facility subsistence should be based upon actual subsistence costs; rather than just 

on headcount numbers and associated allowances. 

Recommendations 

We recommend that the Commander, Defense Contract Management Agency: 

1. Work with KBR to implement appropriate procedures to ensure that fuel received from 

the Camp Victory depot is properly recorded based upon official government 

issue/receipt documents and that procedures for resolving discrepancies regarding fuel 

deliveries are implemented. 

2. Continue to require KBR to report the amount of commercial fuel received in the 

Remarks section of the Monthly Bulk Petroleum Accounting Summary form, so that 

MNF-I can differentiate between the amounts of military and commercial fuel received 

when preparing fuel reimbursement billings. (Initial action was taken during the audit on 

this recommendation.) 

3. Continue to work with the Army and the U.S. Embassy-Iraq to develop and implement an 

appropriate procedure for Army reimbursement billings to DoS for subsistence costs. 

(Initial action was taken during the audit on this recommendation.) 

We recommend that the Counselor for Management Affairs, U.S. Embassy-Iraq: 

4. After appropriate notification to the non-U.S. organizations involved, bill the 

organizations to recover cost of life support provided under Task Order 151 for their 

personnel billeted within the Embassy housing compound. 

5. Work with DCMA and the Army to develop and implement an appropriate billing 

procedure so that DoS can reimburse the Army for dining facilities subsistence costs. 

6. When security conditions in Iraq allow, consider transitioning from the Army’s LOGCAP 

contract for life support of the U.S. Embassy-Iraq mission to a DoS-managed life support 

contract. 

Management Comments and Audit Response 

We received written comments on a draft of this report from the DoS Management Counselor’s 

Office, DCMA, and JASG-C. The DoS Management Counselor concurred with our 

recommendations and stated that the Embassy was taking action to address each 

recommendation. DCMA concurred with our first two recommendations, but did not concur 

with the third recommendation. According to DCMA it has neither the authority nor 

administrative control to develop and implement reimbursement procedures between DoS and 

DoD. We recognize that DCMA does not have the authority to develop the reimbursement 

billing procedures, however, the intent of the recommendation is for DCMA to continue working 

with both the Army and DoS (which DCMA has cone during this audit) in the development and 

implementation of the reimbursement process to ensure KBR’s subsistence cost reports reflect 

20
appropriate information needed to support the reimbursement procedures. JASG-C provided 

technical comments that we include in the report as appropriate. 

21
Appendix A—Scope and Methodology 

This review was announced on June 22, 2007 (Project No. 7014), with the overall objective of 

reviewing program management, reimbursement, and transition issues related to Task Orders 

130 and its successor, Task Order 151. 

We conducted this review at Kellogg Brown & Root Services Inc. (KBR) sites in Baghdad. As 

part of the process, we interviewed government personnel involved with the administration or 

oversight of those task orders, including: 

• The Defense Contract Management Agency (DCMA) commander, administrative 

contracting officer, and other DCMA personnel in Iraq. 

• The Defense Contract Audit Agency in Iraq. 

• Department of State personnel assigned to the U.S. Embassy-Iraq, such as the 

Management Counselor, the Task Orders 130 and 151 contracting officer’s 

representative, the senior financial management officer, the General Services Office 

housing officer, and others including DoS personnel appointed as the contracting 

officer’s technical representatives. 

• Functional support personnel with the Joint Area Support Group-Central who are 

involved with Task Orders 130 and 151, to include JASG-C personnel appointed as the 

contracting officer’s technical representatives. 

• Personnel with the Camp Victory Logistics Support Element, such the Task Order 151 

LOGCAP Support Officer. 

• Personnel at the Army Center of Excellence, Subsistence, U.S. Army Quartermaster 

Center and School, Fort Lee, Virginia.

• Personnel at the Army’s G-4 (Logistics) office and the Army Budget Office. 

• KBR managers and operational personnel. 

We visited KBR work sites in the International Zone; observed their ongoing operations and the 

methods used by KBR to capture, maintain, and report data; and examined reports KBR provided 

to the government. We also requested, received, analyzed, and evaluated KBR’s internal reports 

and databases, such as the fuel database, the dining facilities subsistence account, and the 

billeting assignment database. 

We conducted various tests to assess the effectiveness of contract oversight and internal 

management controls, and followed up on the actions taken to address control weaknesses we 

had previously identified. 

We also reviewed the Federal Acquisition Regulation (FAR) and information maintained by the 

defense acquisition community to identify FAR clauses and other potential contract documents 

applicable to conditions we noted during this review. We reviewed the following significant 

22
Army regulations, pamphlets, and other guidance applicable to the performance and oversight of 

Task Orders 130 and 151: 

• Army Regulation 30-22, The Army Food Program, May 10, 2005 

• Department of the Army Pamphlet 30-22, Operating Procedures for the Army Food 

Program, August 30, 2002 

• Army Regulation 710-2, Inventory Management: Supply Policy Below the National 

Level, July 8, 2005 

• Department of the Army Pamphlet 710-2-1, Inventory Management: Using Unit Supply 

System (Manual Procedures), December 31, 1997 

• Memorandum of Agreement Between Department of State and Department of Defense 

for Support Services in Iraq, dated June 10, 2004 

• Joint Department of State and Multi-National Force-Iraq Memorandum for Record, 

Subject: Task Order 130 Cost Allocation Study, dated August 8, 2006 

• Defense Contract Management Agency Contract Management Office Quality Assurance 

Surveillance Plan for DCMA Iraq, June 2005 

• Commander, Defense Contract Management Agency Iraq/Afghanistan Memorandum, 

Subject: LOGCAP III Quality assurance (QA) Surveillance & Inspections, dated August 

22, 2007 

We performed this review from July 5, 2007 to October 3, 2007, in accordance with generally 

accepted government auditing standards. 

Prior Coverage 

Special Inspector General for Iraq Reconstruction (SIGIR) 

Reports issued by the Office of the Special Inspector General for Iraq Reconstruction (SIGIR) 

can be accessed on its website http://www.sigir.mil. 

• SIGIR Report No. 05-003, Task Order 0044 of the Logistics Civilian Augmentation 

Program III Contract, dated November 23, 2004, noted that weaknesses in KBR cost 

reporting process used for Task Order 0044 prevented SIGIR from effectively addressing 

the audit objectives. That audit was terminated and addressed only the issue of cost data 

submitted by KBR to the Coalition Provisional Authority for work performed under Task 

Order 0044. The report noted that KBR did not provide the administrative contracting 

officer with sufficiently detailed cost data to evaluate overall project costs or to determine 

whether specific costs for services performed were reasonable. This occurred because 

both the basic LOGCAP contract and Task Order 0044 required detailed cost data and the 

LOGCAP contract was awarded to KBR even though the contractor did not have certified 

billing or cost and schedule reporting systems. As a result, the administrative contracting 

officer did not receive sufficient or reliable cost information to effectively manage Task 

Order 0044. In addition, the lack of certified billing or cost and schedule reporting 

23
systems hampered the administrative contracting officer from effectively monitoring 

contract costs. Finally, due to the lack of contractor provided, detailed cost information to 

support actual expenses incurred, resource managers were unable to accurately forecast 

funding requirements to complete Task Order 0044. 

• SIGIR Report No. 06-035, Interim Audit Report on Inappropriate Data Markings by the 

Logistics Civilian Augmentation Program (LOGCAP) Contractor, dated October 26, 

2006. This reported noted that KBR routinely marks almost all the information it 

provides to the government as KBR proprietary data, citing the FAR section 3.104 as the 

justification. This provision of the FAR, however applies to the protection of bid or 

source selection information during the procurement process, while the information KBR 

is marking as proprietary is data produced by KBR for the government related to its 

performance under a contract that has already been awarded. This practice is not 

consistent with FAR direction as to what constitutes proprietary data. The routine use of 

proprietary markings when the data marked is not internal contractor information, such as 

indirect costs, labor rates, or internal processes is an abuse of FAR procedures, inhibits 

transparency of government activities and the use of taxpayer funds, and places 

unnecessary requirements on the government to both protect from public disclosure 

information received from KBR and to challenge inappropriate proprietary markings. The 

result is that information normally releasable to the public must be protected from public 

release just because the information gathered for the government by KBR, pursuant to its 

contractual obligations, was marked as proprietary. In effect, KBR has turned FAR 

provisions designed to protect truly proprietary information, and to enhance procurement 

competition by protecting proprietary data from unauthorized disclosure, into a 

mechanism to prevent the government from releasing normally transparent information, 

thus potentially hindering competition and oversight. 

U.S. Army Audit Agency (AAA) 

• AAA Audit Report A-2006-0099-ALL, dated April 25, 2006, Audit of Program 

Management in the Iraq Area of Operations, Audit of Logistics Civil Augmentation 

Program Operations in Support of Operation Iraqi Freedom, concluded that the current 

management structure over LOGCAP operations in the Iraq area of operations was not 

fully conducive to ensuring the program is managed in the most effective and efficient 

manner to provide the greatest potential for being a force multiplier for the battle space 

commander. Specifically, contracting activities in theater have been fragmented and too 

understaffed to effectively furnish overall integrated support to component commands. At 

the same time, more centralized control over LOGCAP operations is needed within the 

Multi-National Forces-Iraq command to ensureensure that requirements are properly 

managed and contract support is effectively integrated into its combat service support 

mission. 

• AAA Audit Report A-2006-0168-ALL, dated August 4, 2006, Report on the 

Subsistence Prime Vendor Contract, Audit of Logistics Civil Augmentation Program 

Operations in Support of Operation Iraqi Freedom, concluded that the operations related 

to providing subsistence items under the Prime Vendor Contract to dining facilities in 

Kuwait and Iraq were effective and efficient for the prime vendor-owned products. The 

management of government-owned operational rations inventory at the prime vendor’s 

24
warehouses could be improved. The inventory balances and locations of operational 

rations in the bulk storage facilities at the Kuwait Free Trade Zone did not match what 

was recorded in the work management structure database because those facilities did not 

have an automated inventory tracking system or an adequate warehouse identification 

system to manage and store operational rations. Operational rations with more than one 

national stock number were not being pulled according to the first-to-expire inventory 

method required by the Prime Vendor Contract. The prime vendor did not maintain 

adequate and accurate supporting documentation for the destruction of governmentowned operational rations. The government has incurred excess storage fees due to 

inadequate monitoring of expired government-owned products in the prime vendor’s 

warehouse. There were over 400,000 cases of government-owned operational rations, 

worth approximately $34 million stored in the prime vendor’s warehouse that were on 

hand or were en route to the warehouse. These rations exceeded the average quantity that 

the prime vendor ships out each month plus the 3-month safety stock that the Army 

attempts to maintain in the prime vendor’s warehouses. The government was not 

adequately monitoring contractor performance. The administrative contracting officer 

and the contracting officer’s representative were not using a Quality Assurance 

Surveillance Plan to monitor contractor performance. In addition, this report noted that 

the designation memorandum appointing each of these officials lacked specifics on their 

quality assurance requirements. The overall approach to monitoring the requirements of 

the contract was not reviewed to ensure that the terms of the contract were fulfilled.

• AAA Audit Report A-2006-0022-ALL, dated November 28, 2005, Logistics Civil 

Augmentation Program, U.S. Army Materiel Command, concluded overall that the 

Army’s management of the LOGCAP contract was adequate. LOGCAP was providing 

essential support to soldiers and doing a good job of meeting the Army’s needs. In 

addition, the contract was competitively awarded; the contract type was appropriate for 

the type of work performed; appropriate pre-award reviews were conducted on the 

contractor’s proposals, management controls, and accounting system; and appropriate 

structures were in place to manage the contract. Although the contract was adequately 

managed, some problems did occur up front because of the volume of work involved and 

the need to process contract actions quickly. Specifically, independent government cost 

estimates were not prepared in sufficient depth to evaluate contractor cost estimates, and 

task orders awarded under the contract often were not definitized in a timely manner. 

• AAA Audit Report A-2005-0043-ALE, dated November 24, 2004, Audit of Logistics 

Civil Augmentation Program in Kuwait, concluded that the program management office 

did not provide adequate oversight to the LOGCAP Support Unit to ensure 

implementation of procedures for effective performance-based contracting. The audit also 

found that the basic contract and the statements of work for task orders specified that the 

contractor was to provide a variety of reports and plans at various intervals throughout 

the contract. The contract reports and plans either were not provided or were not useful. 

The LOGCAP Support Unit did not have established goals and objectives or standing 

operating procedures to define its program support role in Southwest Asia. Moreover, the 

support unit’s mission-essential task list included tasks that could not be performed in 

Southwest Asia. Consequently, support unit personnel were not sure of their roles and 

responsibilities and frequently performed tasks that fell outside their authority.

25
U.S. Government Accountability Office (GAO) 

• Report GAO-04-854, DoD’s Extensive Use of Logistics Support Contracts requires 

Strengthened Oversight, dated July 19, 2004, found that the effectiveness of DOD’s 

planning to use the logistics support contracts during contingency operations varies 

widely between the commands that use them and the contracts themselves. In many 

cases, planning was done effectively, in close coordination with the respective 

contractors. For LOGCAP, however, the Army Central Command did not develop plans 

to use the contract to support its military forces in Iraq until May 2003, even though 

Army’s LOGCAP guidance calls for early planning and early involvement of the 

contractor. These plans, moreover, have undergone numerous changes since that initial 

planning. In Kuwait, as well, the Army has made frequent changes in its use of 

LOGCAP. The report noted that DoD’s contract oversight processes were generally 

good, although there is room for improvement. DoD customers have not always ensured 

that contractors provide services in an economic and efficient manner, although they have 

a responsibility to do so. GAO found that when the customer reviews the contractor’s 

work for economy and efficiency, savings are realized. Under the LOGCAP contract, 

months-long delays in definitizing contract task orders have frequently undermined the 

contractor’s cost control incentives, and the absence of an Army award fee board to 

comprehensively evaluate the contractor’s performance has further limited DoD’s 

oversight. 

• Report GAO/NSAID-00-225, Army Should Do More to Control Contract Costs in the 

Balkans, dated September 29, 2000, found that both the Army and its contractor, Brown 

& Root Services, had taken various actions to control the cost of services provided under 

the Balkans Support Contract. These actions included a contract provision requiring the 

contractor to regularly identify cost savings, such as recycling materials from elsewhere 

in the Balkans and Europe and using soldiers to perform such tasks as building 

construction whenever possible. Nevertheless, the Army should have done more to 

control costs. One step it should have taken was to give more consideration to costs in 

making decisions on the extent of services to be provided by the contractor. 

26
Appendix B—Acronyms 

ACO Administrative Contracting Officer 

AR Army Regulation 

BDFA basic daily food allowance 

COM Chief of Mission 

COR contracting officer’s representative 

COTR contracting officer’s technical representative 

DA Department of the Army 

DCMA Defense Contract Management Agency 

DoD Department of Defense 

DoS Department of State 

GAO U.S. Government Accountability Office 

GSO General Services Office 

JASG-C Joint Area Support Group-Central 

KBR Kellogg Brown & Root Services Inc. 

LOGCAP Logistics Civil Augmentation Program 

QAR quality assurance representative 

SIGIR Special Inspector General for Iraq Reconstruction 

SOW statement of work 

27
Appendix C—Report Distribution 

Department of State 

Secretary of State 

Senior Advisor to the Secretary and Coordinator for Iraq 

Director of U.S. Foreign Assistance/Administrator, U.S. Agency for International 

Development 

 Director, Office of Iraq Reconstruction 

 Assistant Secretary for Resource Management/Chief Financial Officer, 

 Bureau of Resource Management 

U.S. Ambassador to Iraq* 

 Director, Iraq Transition and Assistance Office 

Mission Director-Iraq, U.S. Agency for International Development 

Inspector General, Department of State 

Department of Defense 

Secretary of Defense 

Deputy Secretary of Defense 

Under Secretary of Defense (Comptroller)/Chief Financial Officer 

 Deputy Chief Financial Officer 

 Deputy Comptroller (Program/Budget) 

Deputy Assistant Secretary of Defense-Middle East, Office of Policy/International Security 

Affairs 

Inspector General, Department of Defense 

Director, Defense Contract Audit Agency 

Director, Defense Finance and Accounting Service 

Director, Defense Contract Management Agency* 

 Commander, Defense Contract Management Agency – Iraq* 

Department of the Army 

Assistant Secretary of the Army for Acquisition, Logistics, and Technology 

Principal Deputy to the Assistant Secretary of the Army for Acquisition, Logistics, and 

Technology 

Deputy Assistant Secretary of the Army (Policy and Procurement) 

Commanding General, Joint Contracting Command-Iraq/Afghanistan 

Assistant Secretary of the Army for Financial Management and Comptroller 

Chief of Engineers and Commander, U.S. Army Corps of Engineers 

 Commanding General, Gulf Region Division 

Chief Financial Officer, U.S. Army Corps of Engineers 

Auditor General of the Army 

U.S. Central Command

Commanding General, Multi-National Force-Iraq 

Commanding General, Multi-National Corps-Iraq 

Commanding General, Multi-National Security Transition Command-Iraq 

Commander, Joint Area Support Group-Central* 

*Recipient of the draft audit report 

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Other Federal Government Organizations 

Director, Office of Management and Budget 

Comptroller General of the United States 

Inspector General, Department of the Treasury 

Inspector General, Department of Commerce 

Inspector General, Department of Health and Human Services 

Inspector General, U.S. Agency for International Development 

President, Overseas Private Investment Corporation 

President, U.S. Institute for Peace 

Congressional Committees and Subcommittees, Chairman and 

Ranking Minority Member 

U.S. Senate 

Senate Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on State, Foreign Operations and Related Programs 

Senate Committee on Armed Services 

Senate Committee on Foreign Relations 

Subcommittee on International Operations and Organizations, Democracy and Human 

Rights 

Subcommittee on International Development and Foreign Assistance, Economic Affairs 

and International Environmental Protection 

Subcommittee on Near East and South and Central Asian Affairs 

Senate Committee on Homeland Security and Governmental Affairs 

Subcommittee on Federal Financial Management, Government Information, Federal 

Services and International Security 

Permanent Subcommittee on Investigations 

Subcommittee on Oversight of Government Management, the Federal Workforce, and 

the District of Columbia 

U.S. House of Representatives 

House Committee on Appropriations 

Subcommittee on Defense 

Subcommittee on State, Foreign Operations, and Related Programs 

House Committee on Armed Services 

House Committee on Oversight and Government Reform 

Subcommittee on Government Management, Organization, and Procurement 

Subcommittee on National Security and Foreign Affairs 

House Committee on Foreign Affairs 

Subcommittee on Middle East and South Asia 

Subcommittee on International Organizations, Human Rights, and Oversight 

29
Appendix D—Audit Team Members 

This report was prepared and the review was conducted under the direction of Joseph T. 

McDermott, Assistant Inspector General for Audit, and Glenn Furbish, Acting Assistant 

Inspector General for Audit, Office of the Special Inspector General for Iraq Reconstruction. 

The staff members who conducted the review and contributed to the report include: 

Ronald L. Rembold 

Nelson Reyes 

Frank W. Slayton 

30
Management Comments 

U.S. Embassy-Iraq 

31
Management Comments 

Joint Area Support Group-C 

32
Management Comments 

Defense Contract Management Agency 

33
34
35
SIGIR’s Mission Regarding the U.S. reconstruction plans, programs, 

and operations in Iraq, the Special Inspector General 

for Iraq Reconstruction provides independent and 

objective: 

• oversight and review through comprehensive 

audits, inspections, and investigations 

• advice and recommendations on policies to 

promote economy, efficiency, and effectiveness 

• deterrence of malfeasance through the prevention 

and detection of fraud, waste, and abuse 

• information and analysis to the Secretary of 

State, the Secretary of Defense, the Congress, 

and the American people through Quarterly 

Reports 

Obtaining Copies of SIGIR 

Reports and Testimonies 

To obtain copies of SIGIR documents at no cost, go 

to SIGIR’s Web site (www.sigir.mil). 

To Report Fraud, Waste, 

and Abuse in Iraq Relief 

and Reconstruction 

Programs 

Help prevent fraud, waste, and abuse by reporting 

suspicious or illegal activities to the SIGIR Hotline: 

• Web: www.sigir.mil/submit_fraud.html 

• Phone: 703-602-4063 

• Toll Free: 866-301-2003 

Congressional Affairs Hillel Weinberg 

Assistant Inspector General for Congressional 

 Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1059 

Email: hillel.weinberg@sigir.mil 

Public Affairs Kristine R. Belisle 

Director for Public Affairs 

Mail: Office of the Special Inspector General 

 for Iraq Reconstruction 

 400 Army Navy Drive 

 Arlington, VA 22202-4704 

Phone: 703-428-1217 

Fax: 703-428-0818 

Email: PublicAffairs@sigir.mil 

36