[00:00:00] Speaker 03:
This morning is 181022, Secretary of the Army versus Kellogg, Brown, and Root.

[00:00:07] Speaker 03:
Mr. Grimaldi.

[00:00:12] Speaker 01:
Thank you and good morning, Your Honors.

[00:00:14] Speaker 01:
May it please the Court, the dispute between the United States and KBR regarding KBR's billing of private security contractor costs returns to this Court following this Court's 2015 decision.

[00:00:27] Speaker 01:
In that decision, this Court found

[00:00:29] Speaker 01:
that the proper interpretation of the contract, the Log Cap 3 contract, was that private security contract or a PSC costs were not allowable.

[00:00:40] Speaker 01:
This court therefore addressed KBR's initial theory of this case.

[00:00:45] Speaker 01:
OK, can I just?

[00:00:46] Speaker 03:
We all know the background.

[00:00:48] Speaker 03:
Of course.

[00:00:48] Speaker 03:
Just a logistical question.

[00:00:51] Speaker 03:
Yes.

[00:00:52] Speaker 03:
If we affirm that the board had jurisdiction, hypothetically, if we affirm that they had jurisdiction over Count 2.

[00:00:58] Speaker 01:
Correct.

[00:00:59] Speaker 03:
And then we agree with the interest.

[00:01:03] Speaker 03:
Does that end the case?

[00:01:04] Speaker 03:
Is that everything or is there?

[00:01:05] Speaker 01:
We have not appealed the summary judgment finding.

[00:01:07] Speaker 01:
Yes.

[00:01:07] Speaker 01:
So that would end the case.

[00:01:11] Speaker 01:
So your honor, I'll skip directly.

[00:01:13] Speaker 03:
Could I start you with the interest question because I think it's a little challenging.

[00:01:21] Speaker 03:
Is your view that the clock should start running 2011?

[00:01:25] Speaker 01:
Correct.

[00:01:26] Speaker 01:
That's correct, your honor.

[00:01:27] Speaker 01:
And the reason for that is that that is the first claim that has alleged a breach of contract.

[00:01:33] Speaker 01:
The 2007 claim, the 2009, the 2010 claims were all the disallowance claims.

[00:01:39] Speaker 03:
But those were, well, can an untimely claim support the award of interest under the statute?

[00:01:50] Speaker 01:
Well, Your Honor, to be clear, our interest is an alternative argument.

[00:01:57] Speaker 01:
presumes that this court would find against us on count two and find that there was actually no need to check the timeliness of count two.

[00:02:07] Speaker 03:
OK.

[00:02:07] Speaker 03:
But let's assume we're at the interest stage.

[00:02:09] Speaker 03:
So the options are 2007 and relying on those claims.

[00:02:13] Speaker 03:
And then your view is the 2011, which I again wanted some clarity as to how we could start the clock running at 2011.

[00:02:21] Speaker 03:
You haven't argued that there should be no interest.

[00:02:26] Speaker 03:
You haven't said, well, in the absence of any, you know, you're not going to count the 2007.

[00:02:30] Speaker 03:
2011, it's odd to count that date because it was untimely.

[00:02:38] Speaker 03:
So you haven't said, and therefore, there should be no interest at all award in this case.

[00:02:43] Speaker 01:
We have not argued that in our briefing, I believe.

[00:02:45] Speaker 01:
That is correct, Your Honor.

[00:02:46] Speaker 03:
Our argument was focused on... Can I ask you, I'm not pushing that argument, but why not?

[00:02:52] Speaker 03:
I mean, is it just because...

[00:02:53] Speaker 03:
I don't know enough about this area.

[00:02:55] Speaker 03:
I mean, this is your specialty not mine.

[00:02:57] Speaker 03:
Is that because there's always got to be some interest, that the equities just suggest, of course, there's interest in this case?

[00:03:04] Speaker 01:
Well, I guess our argument didn't presume the possibility of this court finding that the 2011 claim was untimely, but that there was no need to assert it in order to properly bring it as an affirmative defense.

[00:03:21] Speaker 01:
It is a requirement to, theoretically, going down this path, Your Honor, there is necessarily a requirement to file a certified claim to get interest.

[00:03:29] Speaker 01:
You cannot get interest in defense of a government claim without a certified claim.

[00:03:35] Speaker 01:
If said claim that you file is untimely, I guess that the problem here would be, Your Honors, with that untimely claim is that the purpose, one of the purposes of the CDA interest provision

[00:03:50] Speaker 01:
is to get the parties to the table to discuss, to give the contracting officer an opportunity to resolve the issue prior, at a prior point.

[00:04:00] Speaker 02:
In this case, I mean there was a claim that was presented to the contracting officer.

[00:04:04] Speaker 02:
It was determined that that claim was not a valid claim, but it nonetheless was a claim.

[00:04:12] Speaker 02:
So wouldn't that serve the purposes of getting the parties to the table?

[00:04:17] Speaker 01:
in 2011.

[00:04:19] Speaker 02:
But even in the earlier claim.

[00:04:21] Speaker 02:
I know there was an earlier claim that was made.

[00:04:24] Speaker 02:
Correct.

[00:04:24] Speaker 02:
This court ultimately said that, you know, that was not a proper, under the contract, did not award that, said that that claim was not properly awardable claim.

[00:04:33] Speaker 02:
But nonetheless, there was a claim that was made.

[00:04:36] Speaker 02:
So one could argue that there was notice provided to the government.

[00:04:39] Speaker 02:
The government surely knew that there was a claim for damages here.

[00:04:43] Speaker 01:
Correct.

[00:04:44] Speaker 01:
In the 2007, 2009, and 2010,

[00:04:47] Speaker 01:
Three claims, Your Honor, in fact.

[00:04:49] Speaker 01:
All three, though, alleged that there was unlawful disallowment, that the PSC costs were permissible underneath the contract.

[00:04:56] Speaker 01:
A different claim.

[00:04:58] Speaker 01:
In fact, two of those claims, the 2007 one and the 2010 one, actually argued that there was no force protection obligation for subcontractors on the part of the Army, which is the opposite of the 2011 claim.

[00:05:13] Speaker 02:
What do you think the purpose is behind this statute?

[00:05:16] Speaker 02:
What is the purpose?

[00:05:17] Speaker 02:
Why is it?

[00:05:18] Speaker 02:
I mean, I've looked at other statutes that talk about interest and they say, for example, from the time that the complaint is filed.

[00:05:25] Speaker 02:
Right.

[00:05:26] Speaker 02:
So isn't this kind of serving the same purpose?

[00:05:29] Speaker 02:
Even if that complaint is later amended, you're still looking at from the time that the suit is initiated.

[00:05:37] Speaker 01:
Right.

[00:05:37] Speaker 01:
But if you look at the language that talks about same operative facts, if we're talking about whether a claim comes from another claim,

[00:05:44] Speaker 01:
One of the key distinctions of whether a claim has different operative facts and is a very different claim is whether or not there is a required to prove conflicting facts.

[00:05:53] Speaker 01:
So for the 2007 and 2010 claims by KBR, KBR alleged specifically that, and this is pages 345 to 46 and 395 to 97, specifically,

[00:06:09] Speaker 01:
that there was no contractual obligation on the part of the Army to provide force protection for subcontractors under Log Cap 3.

[00:06:18] Speaker 01:
Cut to their alternative argument, the argument that we're talking about today, the argument that there was summary judgment and there was an award of interest.

[00:06:24] Speaker 01:
The argument there by KBR is that exact opposite, that there is a force protection obligation on the part of the Army to provide protection for subcontractors and that obligation was violated.

[00:06:38] Speaker 01:
is the complete opposite claim, opposite factual scenario that must be proven.

[00:06:45] Speaker 01:
It does not give the contracting officer notice of what KBR is actually going to be arguing for the breach of contract theory.

[00:06:53] Speaker 02:
So you would say that under this statute, the interest statute, section 7109, when we say interest in the amount found due a contractor on a claim, it must be the actual claim that ultimately they succeed on.

[00:07:06] Speaker 01:
Yes, Your Honor.

[00:07:07] Speaker 01:
That's correct.

[00:07:08] Speaker 03:
But on your just following up on just still, because I have similar questions, is where she started was kind of the policy reason.

[00:07:16] Speaker 03:
So not that we do policy here, but to the extent that we want to consider that, no matter what names you put to it or legal theories, starting in 2007, we were all talking about the same thing.

[00:07:31] Speaker 03:
They were arguing facts.

[00:07:33] Speaker 03:
They were presenting different legal theories.

[00:07:34] Speaker 03:
But we were talking about the same pot of money in the same

[00:07:37] Speaker 03:
facts that resulted in the costs here.

[00:07:41] Speaker 03:
So in terms of being able to settle, and when would parties have known there was some sort of dispute about this?

[00:07:47] Speaker 03:
That was the case in 2007.

[00:07:49] Speaker 03:
The legal theories may not have been perfected by that time, but we're still talking about the same thing here where we were then.

[00:07:58] Speaker 03:
So why isn't that enough to have satisfied whatever policy concerns

[00:08:02] Speaker 03:
served as the impetus for Congress to award interest?

[00:08:05] Speaker 01:
Well, because there is an impediment to settlement if the argument presented by KBR is solely a contract interpretation issue, which the United States believed was flat out wrong and which this court ultimately agreed with in 2015.

[00:08:20] Speaker 01:
The argument presented by KBR in 2007, 2009, and 2010 was solely that the

[00:08:29] Speaker 01:
Cod cap contract itself permitted the use of PSEs and that by not paying for PSEs or withholding them afterwards to recoup them, the United States violated the contract, the clear terms of the contract.

[00:08:42] Speaker 01:
The United States knew this argument to be incorrect, and it was ultimately vindicated on that.

[00:08:47] Speaker 01:
So that didn't serve as a proper, I think, inducement, let's say, to settlement, Your Honor, because it is a completely different argument, and in fact opposite argument,

[00:08:59] Speaker 01:
then that KBR ultimately received summary judgment on and an interest award.

[00:09:02] Speaker 02:
What is your basis for saying that the purpose for this statute, the way it's written, is to support getting the parties together to try to resolve the issues?

[00:09:18] Speaker 02:
I mean, is there any legislative history or anything else that you could identify?

[00:09:22] Speaker 01:
I believe the fidelity matter that we cite in our briefs, Your Honor, discusses

[00:09:27] Speaker 01:
the purpose of the interest award.

[00:09:31] Speaker 01:
And it is, you know, to be fair, Your Honors, it's twofold.

[00:09:34] Speaker 01:
The first, one of the key reasons we have a CDA interest is to make a contractor whole, and to be very clear about that.

[00:09:40] Speaker 01:
That is a key purpose of it.

[00:09:42] Speaker 01:
But the other purpose is to get the parties to the table.

[00:09:45] Speaker 01:
And I apologize, Your Honors, I'm just turning to our briefing right now to pull up

[00:09:58] Speaker 01:
And we discussed this on pages 32 to 34 of our briefing.

[00:10:04] Speaker 01:
Your Honor, the basis and the purpose of it in legislative history that was looked at showed that the point of it was to get to the parties at the table to discuss.

[00:10:19] Speaker 02:
Which page are you looking at?

[00:10:20] Speaker 01:
We can get 34, Your Honor.

[00:10:27] Speaker 01:
Well, maybe I have it in my reply brief, Your Honor, because it does not appear here.

[00:10:39] Speaker 01:
Oh, yes, fidelity appears in our reply brief.

[00:10:42] Speaker 01:
I apologize, Your Honor.

[00:10:43] Speaker 03:
22 and 23.

[00:10:46] Speaker 03:
22, 23.

[00:10:48] Speaker 01:
And we can see in footnote five on page 23, that's where we discuss the

[00:10:55] Speaker 01:
first purpose that I mentioned to you, and that's making the contractor whole.

[00:10:59] Speaker 01:
But the CDA provision provides an incentive or inducement according to the fidelity matter, which did look at the legislative history for the CDA interest.

[00:11:11] Speaker 03:
So I'm sure you wanted to start by talking about jurisdiction.

[00:11:14] Speaker 03:
I would, yes.

[00:11:16] Speaker 01:
I always like to start with my primary argument.

[00:11:19] Speaker 01:
Your honors, just briefly about, just in general, whether or not count two was correctly before the ASBCA.

[00:11:28] Speaker 01:
We do note that the board did recognize this court's precedent in M. Maripakis and his progeny, that the affirmative defense to a government claim is a claim itself requiring a timely certified claim.

[00:11:41] Speaker 03:
But you recognize, and I guess we all have to recognize, we've got at least four cases that are in play here that speak to this issue.

[00:11:49] Speaker 03:
yet we do abide by a principle of the first precedent if there's a conflict applies.

[00:11:54] Speaker 03:
But we've done a fair, I think, tried at least in Laguna and then certainly in SecuraForce, which is the most recent case, to sort of reconcile those precedents.

[00:12:04] Speaker 03:
So what we said in Laguna and what we said of SecuraForce is not helpful to you in your case, right?

[00:12:10] Speaker 03:
And you're relying on the earlier cases, which- I would disagree with that, Your Honor.

[00:12:14] Speaker 01:
I think that they are helpful.

[00:12:17] Speaker 01:
Situation we have here is a request by KBR for an adjustment to the contract and a request for $44 million on top of what is allowed by the contract.

[00:12:26] Speaker 01:
Now the limitation on the M. Maripakis rule that an affirmative defense requires a certified claim by the contractor is a request for money or a request for adjustment to the terms of the contract.

[00:12:39] Speaker 01:
Now in Laguna, this court found that when the government was asserting fraud as a defense,

[00:12:46] Speaker 01:
that was not seeking an adjustment to the terms of the contract or additional money.

[00:12:50] Speaker 01:
In secure force, when this court found that the challenge to the termination for cause saw only an excuse for failure to perform, what KBR is doing here is asking for this court to find that unallowable costs, PSC costs, are actually allowable in response to the government's breach of the Force Protection Act.

[00:13:13] Speaker 01:
So that is $44 million on top of what is owed under the KBR contract.

[00:13:18] Speaker 01:
To think about it is if a breach of contract claim had actually been filed in 2003 when these events occurred.

[00:13:25] Speaker 03:
I understand your argument, but I guess it's also, and I think the similar observation was made by our court in Laguna, that in some sense,

[00:13:38] Speaker 03:
Any defense in some sense seems to be a claim for money in the sense that it has an effect of reducing one's liability.

[00:13:47] Speaker 03:
Absolutely.

[00:13:48] Speaker 03:
So it's a little hard to sort of, you know, it's a little hard to think of these.

[00:13:54] Speaker 01:
Well, this case is unique.

[00:13:56] Speaker 01:
And the reason why this case is unique is because KBR's affirmative defense is a mirror image to what its affirmative CDA claim could have been in 2003.

[00:14:05] Speaker 01:
Instead of pursuing a breach of contract claim in 2003, KBR billed the United States through firm fixed price subcontractor costs for this PSC costs.

[00:14:18] Speaker 01:
The costs were hidden in the mix.

[00:14:20] Speaker 01:
The United States paid the $44 million without knowing, Your Honor.

[00:14:25] Speaker 01:
There's been no fact finding that the United States knew it was paying PSC costs in 2003.

[00:14:30] Speaker 01:
Paid the money.

[00:14:32] Speaker 01:
And then years later, in response to questioning from Congress, received notice from a subcontractor that the United States had been paying PSE costs.

[00:14:40] Speaker 01:
So then it withheld to retake the money back.

[00:14:43] Speaker 01:
Basically, what the ruling by the ASBCA condones is a contractor hiding costs that are unallowable by a contract in billing, having the United States pay them.

[00:14:55] Speaker 01:
The United States later withholds them.

[00:14:58] Speaker 01:
And then the KBR is absolved of filing a timely certified claim

[00:15:01] Speaker 01:
to allege breach of contract and seek these costs at a later date.

[00:15:05] Speaker 01:
What should have happened, Your Honor?

[00:15:07] Speaker 03:
There's a whole lot of nefarious or motivation underlying the statements you made.

[00:15:14] Speaker 03:
Well, whether or not it was intentional or not, I mean, certainly we... When you say they were hiding, that word kind of suggests something.

[00:15:26] Speaker 01:
hidden in the sense that the subcontractor billings were firm fixed price, so they weren't broken out.

[00:15:33] Speaker 01:
So there was no line item.

[00:15:34] Speaker 03:
You're not suggesting there was anything fraudulent or anything nefarious?

[00:15:37] Speaker 01:
No.

[00:15:38] Speaker 01:
There was a litigation decision, as far as I can tell, to pursue only a breach, excuse me, a contract interpretation issue.

[00:15:45] Speaker 01:
And basically, a piecemeal approach was taken raising breach of contract in 2011.

[00:15:50] Speaker 01:
Your Honors, I believe I'm over.

[00:15:52] Speaker 01:
Thank you.

[00:15:52] Speaker 01:
We'll restore some of that.

[00:16:04] Speaker 00:
Good morning, Your Honors.

[00:16:05] Speaker 00:
May it please the Court.

[00:16:07] Speaker 00:
My name is Jason Workmaster.

[00:16:08] Speaker 00:
I'm with the law firm of Covington and Burling.

[00:16:11] Speaker 00:
With me at council table is Alex Riegel and Ed Fenster, also of my firm.

[00:16:15] Speaker 03:
Why don't you start with the interests, since that's where we started the last time.

[00:16:20] Speaker 00:
Certainly, Your Honor.

[00:16:21] Speaker 00:
So on the interest point, Your Honor, I think that really starts with what Mr. Grimaldi was just saying, that KBR somehow should have

[00:16:32] Speaker 00:
been filing claims as long ago as 2003.

[00:16:34] Speaker 00:
The facts here are, Your Honor, that as the board found, the government knew about the use of private security, knew it was paying for private security no later than June of 2005.

[00:16:48] Speaker 00:
The government appealed that decision of the board.

[00:16:52] Speaker 00:
The last time this case was before this court.

[00:16:55] Speaker 00:
And this court affirmed that finding of the board.

[00:16:57] Speaker 03:
No, we know that.

[00:16:58] Speaker 03:
But can we look at the language of the statute

[00:17:00] Speaker 00:
Certainly.

[00:17:01] Speaker 03:
So then this is where Judge Stull started as well.

[00:17:06] Speaker 03:
The relevant provision refers explicitly to the contractor's claim.

[00:17:15] Speaker 03:
Yes, Your Honor.

[00:17:16] Speaker 03:
Do a contractor on a claim.

[00:17:18] Speaker 03:
Next it says the contractor's claim.

[00:17:21] Speaker 03:
And it concludes by saying until the date of payment of the claim.

[00:17:26] Speaker 00:
Yes, Your Honor.

[00:17:27] Speaker 03:
So we're repeatedly, clearly talking about where is that

[00:17:30] Speaker 03:
Why does that lead us to go back to 2007?

[00:17:33] Speaker 00:
All right, Your Honor.

[00:17:34] Speaker 00:
So when the government, as the board found, when the government asserted its claim in February of 2007, at that time, the contracting officer issued a letter.

[00:17:46] Speaker 00:
We cite it in our papers.

[00:17:49] Speaker 00:
We cite it in our briefs on page 12.

[00:17:52] Speaker 00:
She issued a letter to KBR asserting the government's claim, and she said in that letter,

[00:17:57] Speaker 00:
As noted within the basic contract, clause H-16, and as noted in several task orders, security was to be provided by the government to those employees performing duties under the Law Cap 3 contract.

[00:18:10] Speaker 00:
As such, costs associated with privately acquired security should not be charged or paid under the contract.

[00:18:16] Speaker 00:
That was the government's claim.

[00:18:18] Speaker 00:
The government then executed on that claim and took approximately $20 million from KBR at that time.

[00:18:24] Speaker 00:
In response to that recoupment of cost,

[00:18:28] Speaker 00:
KVR then submitted its 2007 claim demanding return of that exact same amount.

[00:18:36] Speaker 00:
That was a proper claim.

[00:18:38] Speaker 00:
It asserted the legal theory that Mr. Grimaldi was mentioning.

[00:18:41] Speaker 00:
But Your Honor, that was not the only thing that was in that 2007 claim.

[00:18:46] Speaker 00:
As we pointed out in our papers, in our brief at pages 30 and 31, in addition to that contract interpretation theory, as a factual matter,

[00:18:57] Speaker 00:
Those 07, and then when the government took more money, in 09, another claim was submitted demanding return of that exact amount.

[00:19:04] Speaker 00:
And then in 2010, the government took more money, another claim was submitted demanding return of that exact same amount.

[00:19:11] Speaker 00:
In each one of those 07, 09, and 10 claims, KBR expressly said, KBR representatives had discussions with Brigadier General Scout West about the fact that the Army lacked the necessary resources

[00:19:25] Speaker 00:
to provide military escorts for transport vehicles provided by KBR and its subcontractors.

[00:19:32] Speaker 00:
The Army was fully aware that the total number of KBR and subcontractor convoys leaving Kuwait for Iraq was greater than the number of convoys for which the military provided armed escorts.

[00:19:44] Speaker 00:
And KBR also alleged the Army PCO, the Procuring Contracting Officer in Rock Island, had constructive knowledge that KBR's Law Cap 3 subcontractors

[00:19:53] Speaker 00:
were using armed private force protection.

[00:19:56] Speaker 00:
Each one of those three claims, Your Honor, even if it wasn't, even if this court finds that those claims needed to be submitted, each one of those claims put those facts at issue.

[00:20:09] Speaker 00:
And then when you get to... Can I interrupt you for a minute?

[00:20:12] Speaker 00:
Yes, yes.

[00:20:12] Speaker 02:
Okay, so I think your point is that the operative facts in the 2007, 2009, 2010 claims

[00:20:21] Speaker 02:
Those are the same as the operative facts in the 2011 claim, and therefore you should be able to go back to 2007.

[00:20:29] Speaker 02:
What is the language in the statute that you think allows you to do that?

[00:20:34] Speaker 00:
So in the statute, the statute provides for the payment of interest for the submission of a contractor claim.

[00:20:41] Speaker 00:
There is a long line of board precedents, Your Honor, that we cited in our papers, the Martin Marietta decision, among others, that stands for the proposition.

[00:20:51] Speaker 00:
When the government executes, as it chose to do here, the government did not have to execute on its claim.

[00:20:57] Speaker 00:
The government could have issued a final decision to KBR demanding return of the money and KBR could have remained the stakeholder.

[00:21:06] Speaker 00:
That could have happened.

[00:21:07] Speaker 00:
That is not what the government did.

[00:21:08] Speaker 00:
The government executed on its claim, took the money back, and there's a long line of precedent with the Martin Marietta decision among others that say,

[00:21:18] Speaker 00:
that in that instance, when the government takes money from the contractor in executing on a government claim, the contractor then submits its own claim to start the running of interest, consistent with the language of the statute.

[00:21:31] Speaker 02:
I understand that, but that law is not binding on us.

[00:21:33] Speaker 00:
I understand your argument.

[00:21:34] Speaker 02:
And so I'm looking at the statute, and so you're saying this is a long established practice.

[00:21:40] Speaker 02:
I guess that's your argument.

[00:21:41] Speaker 00:
It is a long established practice, long recognized by the board.

[00:21:44] Speaker 00:
And because each of those three claims, four claims are, seven, nine, 10, and 11, each of them meet all of the procedural formal requirements of a Contract Disputes Act claim.

[00:21:57] Speaker 00:
Therefore, they are proper claims within the meaning of the CDA submitted by the contractor and therefore consistent with the interest statute to start the running of interest.

[00:22:06] Speaker 02:
Your point is that even though it says a claim, it could be any claim, it doesn't have to be the ultimate claim that you're successful.

[00:22:13] Speaker 00:
I would say, Your Honor, in the facts of this case, the fact that those first three were all submitted and demanded only the amount that the government had taken and were otherwise proper claims, that would be enough.

[00:22:27] Speaker 00:
If this court were to find that in addition to that, those claims needed to include within their scope the breach argument, Your Honor, I would say that the first three claims also included within their scope the breach argument.

[00:22:39] Speaker 02:
And what is your view of the purpose behind this provision that awards interest?

[00:22:44] Speaker 02:
And you could go beyond this provision.

[00:22:46] Speaker 02:
Obviously, there's lots of other areas of law where statutes provide for the award of interest to the successful plaintiff.

[00:22:54] Speaker 00:
I do think, Your Honor, with a run of interest, there is the incentive there for the government.

[00:23:02] Speaker 00:
So in this situation, when the government takes the money,

[00:23:06] Speaker 00:
We file a claim demanding its return.

[00:23:08] Speaker 00:
That starts the running of interest.

[00:23:10] Speaker 00:
I think the hope there would be, the purpose of that, would be to bring the parties, since interest is running, to bring the parties to the table to try to resolve the dispute since interest has continued to run.

[00:23:22] Speaker 00:
And now, in this case, Your Honor, interest has been running back to 2007 for 12 years.

[00:23:27] Speaker 02:
What about making the parties whole?

[00:23:30] Speaker 00:
And that, of course, too, Your Honor.

[00:23:31] Speaker 00:
I mean, since KBR had been the stakeholder,

[00:23:36] Speaker 00:
The government, through self-help, decided to change that situation.

[00:23:40] Speaker 00:
And so, yes, KBR, this is money that otherwise should have been in KBR's pocket for the last 12 years.

[00:23:45] Speaker 00:
And the government's had the use of it.

[00:23:47] Speaker 00:
So it is to make the contractor whole.

[00:23:49] Speaker 03:
I wanted to then, following the other side, turn to the jurisdictional issue.

[00:23:55] Speaker 00:
Yes, Your Honor.

[00:23:56] Speaker 00:
On the jurisdictional issue, Your Honor, the first point I'd like to make is simply that in the facts of this case, there is no dispute.

[00:24:05] Speaker 00:
that the September 2011 claim asserted the breach argument on which the board ruled in our favor.

[00:24:11] Speaker 00:
There is no dispute on that point.

[00:24:14] Speaker 00:
The government's only issue with the September 2011 claim is their argument that it was somehow untimely.

[00:24:22] Speaker 00:
But here, Your Honor, the facts are the government knew, so back up to the beginning of the Iraq war in 2003,

[00:24:35] Speaker 00:
The government admits, acknowledges it had an obligation under the Log Cap 3 contract to protect KBR and its subcontractors as they were performing vital life support services in support of the American Warfighter in theater.

[00:24:53] Speaker 00:
The government then breached that obligation, as the board found and as the government does not challenge any longer.

[00:25:02] Speaker 00:
In response to that breach,

[00:25:04] Speaker 00:
KBR and its subcontractors over and over and over again asked for force protection from the government.

[00:25:11] Speaker 00:
When that was not available, and in order to continue to perform their mission, they did go out at times and hire private security.

[00:25:19] Speaker 00:
The government knew about that.

[00:25:21] Speaker 00:
The government approved it.

[00:25:23] Speaker 00:
In particular, in the board's 2014 decision, the board found that an administrative contracting officer

[00:25:31] Speaker 00:
expressly approved the subcontractor using private security and charging the government for that cost.

[00:25:39] Speaker 00:
And then the government paid the cost.

[00:25:41] Speaker 00:
That was the state of play from 03, 04, 05, and 06.

[00:25:45] Speaker 00:
The government knew, approved, and paid for the use of private security over and over and over again.

[00:25:49] Speaker 00:
And as Mr. Grimaldi mentioned in the hearing in 2007, it wasn't until then that the government changed its mind and recouped the cost and began recouping costs.

[00:26:01] Speaker 03:
Mara.

[00:26:03] Speaker 00:
Yes, I will.

[00:26:04] Speaker 00:
The Maripocas case.

[00:26:05] Speaker 03:
Why don't you get to that case?

[00:26:06] Speaker 03:
Sure, Your Honor.

[00:26:06] Speaker 03:
The government relies heavily on which seems to.

[00:26:09] Speaker 03:
Absolutely, Your Honor.

[00:26:11] Speaker 00:
Absolutely.

[00:26:11] Speaker 00:
So just on the September 2011 claim, Your Honor, because the government did not recoup money until February of 2007, there was no claim for KBR to file until that time.

[00:26:23] Speaker 00:
This court found in another KBR case, the KBR versus Murphy case,

[00:26:28] Speaker 00:
that in order for a claim to accrue and start the statute of limitations clock running, there has to be a some certain associated with that claim.

[00:26:35] Speaker 00:
There was no some certain until the government started recouping in February 2007.

[00:26:39] Speaker 00:
September 2011 is within six years of February 2007.

[00:26:44] Speaker 00:
Therefore, that claim is timely.

[00:26:46] Speaker 00:
And if the court resolves this case on that basis, it need not reach the Mayor Pockets question, which I will now turn to.

[00:26:55] Speaker 00:
On the Mayor Pockets question, Your Honor,

[00:26:57] Speaker 00:
as we explained in our papers.

[00:27:00] Speaker 00:
And as I've already been discussing today, in this case, from the beginning, KBR has been playing defense.

[00:27:08] Speaker 00:
That is all we have been doing.

[00:27:10] Speaker 00:
From the moment the government asserted its claim in that letter that I read earlier from the contracting officer in February 2007 to this day for 12 years, all we've been trying to do is to get back the money the government took in executing its claim against the contractor.

[00:27:27] Speaker 00:
And among other things, we asserted your breach, government, by not providing us the force protection you were required to provide, materially breached the contract, and therefore, to the extent that our use or our subcontractors use, the private security was a breach of the restriction on the ability to do that, that breach was excused.

[00:27:50] Speaker 00:
And under this court's cases, most principally, as Your Honor was noting, Laguna and SecureForce

[00:27:57] Speaker 00:
This court has held that the defense, every time this question of whether the defense of prior material breach must be submitted to the contracting officer, this court has said no.

[00:28:10] Speaker 00:
And that is all we are doing here.

[00:28:13] Speaker 00:
And Your Honor, just to make a couple other points, Mr. McGrimaldi was mentioning, and the government also mentioned in its papers, that in this case, we're somehow seeking

[00:28:25] Speaker 00:
an adjustment of contract terms, Your Honor, we are not doing that.

[00:28:29] Speaker 00:
We are simply asking for the application of the common law doctrine of prior material breach, just like the parties that were invoking that defense in the Laguna and Secura Force cases were doing.

[00:28:41] Speaker 00:
We're doing the exact same thing.

[00:28:43] Speaker 00:
And in fact, Your Honor, in the Laguna case, it was the government that was invoking the defense and the government that was arguing that it did not need to be submitted to the contracting officer.

[00:28:53] Speaker 00:
With respect to the question

[00:28:55] Speaker 00:
of the payment of money, Your Honor, in secure force, this court expressly found a defense is not a claim for money.

[00:29:05] Speaker 00:
Your Honor, again, all we're doing here is defending ourselves and asking that the government return, of course, the money that it took.

[00:29:14] Speaker 00:
But that is not, we are asserting the defense, that is not a claim for money within this court's prior cases.

[00:29:21] Speaker 00:
Just a couple of other points, Your Honor, this is also consistent

[00:29:26] Speaker 00:
as we pointed out in our papers with the lower tribunals that have been applying this court's Mayor Pacus line of cases, the Jane Mobley case from the Civilian Board, the Total Engineering case from the Court of Federal Claims.

[00:29:43] Speaker 00:
Those cases also have made clear that when all the party that's invoking a given argument, all they're doing is challenging the factual underpinnings

[00:29:56] Speaker 00:
of the claim that's being asserted against them.

[00:29:58] Speaker 00:
That's not a new claim that has to go through the CDA process.

[00:30:02] Speaker 00:
Again, that's all that we are doing here is challenging the factual underpinnings of the government's assertion that we should not have used private security because they were obligated to protect us.

[00:30:14] Speaker 02:
Thank you.

[00:30:24] Speaker 01:
Your honors, I'll be quick.

[00:30:27] Speaker 01:
Should we start with interest again?

[00:30:29] Speaker 01:
Yeah, please.

[00:30:30] Speaker 01:
OK.

[00:30:30] Speaker 01:
So as we discussed and as counsel discussed, the purpose is to bring the parties to the table.

[00:30:37] Speaker 01:
Get the parties to the table.

[00:30:39] Speaker 01:
That's why there's a CDA interest provision in there, because there's a penalty of paying extra money the longer this takes.

[00:30:44] Speaker 01:
One of the key reasons why in 2018 we're still talking about events, 2019, sorry, still talking about events in 2003,

[00:30:53] Speaker 01:
is because although on appendix page 38 in the board's decision, there's a finding that KBR knew of a breach in 2003, KBR pursued only a contract interpretation issue.

[00:31:06] Speaker 01:
Only in 2011, in response to a False Claims Act suit, did KBR file a, quote, protective claim alleging breach of contract.

[00:31:16] Speaker 01:
KBR sat on its rights for eight years regarding breach of contract.

[00:31:22] Speaker 01:
That's why there's been such a significant delay in receiving interest, if you will.

[00:31:29] Speaker 01:
Turning to the discussion of returning money to KBR.

[00:31:33] Speaker 01:
This isn't a case about returning money to KBR.

[00:31:36] Speaker 01:
In 2015, this court found that the PSC costs were unallowable under the contract.

[00:31:41] Speaker 01:
These are not contract costs.

[00:31:44] Speaker 01:
They are not billable under the Log Cab 3 contract, yet KBR billed for them.

[00:31:49] Speaker 01:
So the United States withheld to recoup them.

[00:31:52] Speaker 01:
This is not a situation where KBR is trying to get money back from underneath the contract.

[00:31:57] Speaker 01:
It is attempting to get 44 extra million dollars from the Log Cap 3 contract, dollars that are unallowable PSE costs.

[00:32:07] Speaker 01:
That's why they are seeking an adjustment to the terms of the contract.

[00:32:10] Speaker 01:
That's why they are seeking 44 million dollars and not simply asserting a pure defense to a government claim.

[00:32:17] Speaker 03:
Thank you, Your Honor.

[00:32:19] Speaker 03:
Thank you.

[00:32:20] Speaker 03:
We thank both parties, and the case is submitted.