WASHINGTON (CN) - Defense contractor KBR cannot deflect fraud claims by accusing the U.S. government of failing to provide "force protection," a federal judge ruled.
Formerly known as Kellogg Brown & Root Services, the contractor faces up to $300 million in civil penalties and treble damages on charges that it overbilled the government for private security contractors in Iraq.
The Army hired KBR to provide logistical services, such as transportation, maintenance, facilities management and dining facilities, for U.S. military operations around the world. But the contract excluded payment for armed contractors that provide security for KBR and its subcontractors.
Though KBR hired Triple Canopy, Omega Risk Solutions and Al Dhahir to provide security for executives in Iraq, the government says it should have relied on military protection. Its 2010 complaint alleges that KBR collected "more than $100 million in payments related to private security."
In a 2011 answer and a counterclaim, KBR accused the government of not providing enough security.
Chief U.S. District Judge Royce Lamberth dismissed the counterclaim Monday but said the contractor can try revising the claim to pass muster at a later date.
The contractor hopes this defense will help stave off a potential $300 million award to the government if a court finds that it owes treble damages for violations of the False Claims Act.
KBR cannot advance the counterclaim in its current form, however, because it failed to exhaust administrative remedies and failed to state a claim, the court said.
"The court finds that KBR's counterclaim fails to allege facts that would show a breach of the specific standard set out in the contract, which obligates the Army to provide, not 'adequate' force protection generally speaking, but 'force protection to contractor employees commensurate with that given to Service/Agency ... civilians in operations area unless otherwise stated in each task order,'" Lamberth wrote.
KBR's first affirmative defense, which says the government failed to fulfill the force-protection obligation, is also legally deficient.
Lamberth gave both parties two weeks to brief the court on whether it should briefly stay proceedings to give KBR a chance to exhaust its administrative remedies.
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