KBR's monopoly contract to support military operations will be broken up in the next version of the award, now in dispute.

The next iteration of the U.S. Army’s huge, lucrative and controversial outsourcing contract for global military construction and logistics support is on hold as public and private parties battle over contracting decisions.

The U.S. Government Accountability Office (GAO), the federal watchdog agency and contract protest clearinghouse, agreed last month to side with two firms unhappy with the Army’s choices to win the contract, better known as LOGCAP IV and worth up to $150 billion over the next ten years. But GAO then subsequently agreed to take another look at its own ruling, according to parties involved.

The latest twist in the saga over LOGCAP IV comes in GAO’s recent decision to accept a request from KBR Services Inc., Houston, that the agency reconsider its earlier defense of the two protests. KBR was one of three winners of the new contract last summer, along with Fluor Corp. unit Fluor Intercontinental Inc., Greenville, S.C.; and DynCorp International LLC, Fort Worth.

The awards, announced June 27 by the Army Sustainment Command in Rock Island, Ill., are worth up to $50 billion each to the firms over a 10-year period. The indefinite delivery-indefinite quantity contracts are for one base year and nine option years. Each has a ceiling of up to $5 billion per year.

Soon after award, however, the selection process was opposed by two losing bidders--IAP Worldwide Services Inc., Cape Canaveral, Fla., and Contingency Management Group APS LLC, a Fort Worth-based joint venture of Lockheed-Martin subsidiary PAE, AECOM unit AGS and Shaw Environment & Infrastructure. GAO ruled Oct. 5 that it supported the protestors’ concerns claiming flaws in the Army’s evaluation process.

This generation of LOGCAP procurement, which dates back to 1992, represents the first time the Army has split the cost-plus task order contracts among several firms rather than award just to one. Under LOGCAP, short for Logistics Civil Augmentation Program, the military outsources to private contractors responsibility for everything from engineering and construction and facilities maintenance to supply and communication operations, cargo services, dining and laundry operations and even “morale, welfare and recreation” activities. The Army says it has paid out $21.5 billion under LOGCAP III to date. For that sum the military has received 627 million meals served and 10.1 billion gallons of potable water, 648 mill of fuel and 44.3 million bags of mail delivered, among other things.

DynCorp and KBR each held previous versions of LOGCAP; the former from 1997 through 2001, and the latter from 2001 through this year. The Iraq war escalated KBR’s critical and more risk-laden role in military logistics support, but it also focused attention because of the firm’s political connections, the huge dollars built into the contract and haphazard oversight of billing and service delivery. Until KBR was spun off in April into a stand-alone entity, the firm was a unit of Halliburton Co. Vice President Dick Cheney was CEO of the multinational conglomerate before joining the Bush Administration. KBR has come under intense media and congressional scrutiny for contracting irregularities.

The Army contends that the multiple awards will “more effectively manage the number and scope of LOGCAP actions required to fight the Global War on Terror.” In announcing the round four winners, the Sustainment Command says the three contractors would “compete” for individual task orders, “creating a competitive environment meant to control costs and enhance quality.”

The Army also awarded a separate “support” contract in February to Serco Inc., Virginia Beach, Va., to assist with contractor cost review and performance assessment, among other tasks. That contract is valued at up to $45 million per year for up to five years.

A “redacted” text of GAO’s Oct. 5 ruling on the CMG and IAP protests was kept from public disclosure for several weeks because government and company parties in the dispute could not agree on language that would not compromise sensitive procurement or competitive information, says one involved firm. However, GAO issued on Oct. 29 a “summary” of why it opted to side with the protestors and its recommendations for how the Army should proceed.

GAO contends that the Army’s review of Fluor’s technical proposal “was unreasonable and evidenced unequal treatment,” claiming that the firm’s approach “expressly differed” from assumptions contained in a “hypothetical scenario” in the request for proposals issued in August 2006.

GAO also ruled that the Army “misunderstood” KBR’s technical approach” in providing equipment, and that its evaluation of the firm’s proposal “was inconsistent” with its review of a competitor. GAO also says the Army “misevaluated” KBR on its management plan and on its approach to LOGCAP staffing, particularly how the firm planned to use host country nationals, third country nationals and expatriates.

In its public summary, GAO says it “recommended” that the Army “reopen discussions, request and review revised proposals, evaluate those submissions consistent with the terms of the solicitation and make a new source selection.”

The watchdog agency cautions the Army that it would have to “terminate one or more” of the awarded contracts and reaward if another bidder was found “to represent best value to the government.” GAO also says the Army should reimburse IAP and CMG for protest-related costs.

A spokesman for the Sustainment Command says officials are “reviewing the impact and evaluating our options.” He says the military will continue with logistics support under the KBR LOGCAP III contract “while we work through this issue.” One protesting firm official speculates that the Army “won’t take corrective action” until after GAO rules on KBR’s reconsideration request, expected sometime this month.

A KBR spokeswoman would not confirm nor comment on the firm’s request to GAO. She says KBR is “awaiting the Army’s direction.” But she also contends that the firm’s “service to the troops is unmatched and we remain proud of the work we have performed.”

A spokesman for Fluor declined further comment until “GAO responds to the reconsideration request, the Army decides what corrective action is necessary, and Fluor is given the opportunity to review the decision.” However, he says, Fluor continues “to be confident” in its LOGCAP IV proposal.