By Robert Brodsky rbrodsky@govexec.com July 10, 2009

One of the Defense Department's largest contractors has failed in its bid for a pair of lucrative task orders for logistical support work in Afghanistan that could be worth up to $15 billion.

The Army announced this week that DynCorp International LLC was awarded a contract for work in southern Afghanistan while Fluor Intercontinental Inc. will handle services for U.S. troops in the northern section of the country.

KBR Inc., the third firm on the massive LOGCAP IV contract, bid on the work but failed to secure a task order for Afghanistan.

The former Halliburton subsidiary is the largest contractor in Iraq but has been repeatedly criticized by lawmakers for poor contract performance and questionable bookkeeping.

KBR's checkered record in Iraq could be at the heart of the Army's decision this week, according to Sen. Byron Dorgan. The North Dakota Democrat said Pentagon officials told his office on Tuesday that "past performance and cost" criteria drove their decision to bypass KBR.

"This decision suggests that the Pentagon is finally beginning to give a contractor's past performance the consideration it deserves when awarding contracts," Dorgan said. "But we need more evidence of that. Time will tell whether this is a serious change in policy that sends a strong message that a Pentagon contract is not a blank check and that contractors will be held accountable."

As chairman of the Senate Democratic Policy Committee, Dorgan held 19 congressional oversight hearings on waste, fraud and corruption in Iraq and Afghanistan contracting, including several focused exclusively on KBR.

A spokesman for the U.S. Army Sustainment Command, which issued the contracts, said the service considered multiple factors, all of which were outlined in the task order solicitation, in choosing DynCorp and Fluor.

"The selection process was an integrated source task order competition encompassing technical management proposals, past performance, and costs," spokesman Daniel Carlson said. "From this, a ... decision is then made that will benefit the soldiers and other personnel in theater, and give taxpayers the most value."

The new task orders have one base year and four option years; each is worth as much as $1.5 billion annually. The scope of work includes construction services, power, water, meals, housing, sanitation, laundry and transportation.

In a statement, KBR spokeswoman Heather Browne said the company has requested a debriefing from the Army on the selection process, after which it will determine whether to protest the decision with the Government Accountability Office. The company has unsuccessfully protested two task orders issued under LOGCAP IV for work in Kuwait.

"We remain proud of the work we have performed and we are humbled to serve our troops," Browne said. "KBR has a proven track record of serving the military in austere and unpredictable environments. Our commitment in this regard will continue."

KBR still maintains a single-source contract for services in Iraq under the previous LOGCAP III contract. The Army has said it plans to issue a new task order for Iraq under LOGCAP IV but that circumstances on the ground, including the removal of troops from the region, will dictate the timing.

"Complex details and specific dates to transition to LOGCAP IV in Iraq are being worked [out] with theater commanders," Carlson said. "The scope of work is vital to soldiers and other personnel in theater. Hence, it is crucial to maintain a seamless flow of services to them."

If used, option years for the LOGCAP III contract end Dec. 13, 2011, according to the Army.

Dorgan said his office will closely monitor how, and to whom, the LOGCAP IV contract for Iraq is awarded, noting that the Pentagon must do a better job of holding contractors accountable for their logistical support work.

"KBR's poor performance became the issue so frequently at our hearings that I came to wonder why the Pentagon keeps awarding it contracts," Dorgan said.

In June 2007, under pressure from Congress to include greater competition, the Army split the LOGCAP contract among the three firms. Under LOGCAP IV, the three contractors compete for individual task orders.

The Army already has moved all LOGCAP support work in Kuwait to the new contract. The task orders issued this week complete the changeover in Afghanistan. To date, there have been 10 task orders awarded under LOGCAP IV, with this week's contracts being the most lucrative.