No. 4: KBR gets down to business

From laundry to logistics, Kellogg Brown and Root Inc. takes on tough tasks

Kellogg Brown and Root Inc.

Top 100 Revenue: $5.5 billion

20,000 Employees

2006 revenue: $9.6 billion

2006 net earnings: $168 million

2005 revenue: $10.1 billion

2005 net earnings: $240 million

"Logistics, water, roads and transit, wastewater, airports ? these are things we do every day." Bruce Stanski

Rick Steele

Making sure that people get their own laundry, have a hot meal and a clean bed and see their mail ? it sounds like what Mom used to do.

But to the hundreds of thousands of soldiers who have served in Iraq, that and more is why the Army has been paying former Halliburton Co. subsidiary Kellogg Brown and Root Inc.

In places such as Bosnia, Afghanistan and Iraq, KBR goes in with the Army to construct housing, roads and wastewater treatment facilities; provide government services; and expand the civil infrastructure.

"We think of what we do, of our people using their talents, as a human force multiplier," said Bruce Stanski, who leads KBR's government and infrastructure division. "When the coalition forces go into Iraq or Bosnia or anywhere, their job is to win the war, not supply infrastructure."

Stanski has an obvious passion for his mission, but even more difficult to ignore is the money the company makes from its work in Iraq and other government-related contracting.

KBR landed at No. 4 on the Top 100 with $5.5 billion in prime government services revenue.

In the past year, KBR won a $3.5 billion task order under the Army Logistics Civil Augmentation Program, known as Logcap, and a $385 million contingency support contract from Immigration and Customs Enforcement. It also got the U.S. Army Europe Support Contract to continue services to U.S. forces in more than 90 countries.

Abroad, the company also won significant new business, including a $13.9 billion contract with the United Kingdom Defence Ministry.

But despite the good contract news, the past few years have brought difficult times, including allegations of war profiteering.

In 2003, KBR along with Bechtel Corp., Titan Corp. and other companies drew congressional scrutiny when someone leaked a preliminary audit suggesting that the company had overcharged the government for fuel. The leak was "a stark violation of auditing ethics and law," wrote Stan Soloway, president of the Professional Services Council, of Arlington, Va., in a Washington Technology opinion column.

Weeks later, the claim proved untrue as did charges that Vice President Dick Cheney, a former Halliburton chief executive officer, had profited from the contracts.

But the accusations continued. In June 2005, Bunnatine Greenhouse, former U.S. Army Corps of Engineers chief contracting officer, told Congress that her superiors had dismissed her concerns about the award of the Restore Iraqi Oil contract worth more than $1.2 billion to a KBR division in a noncompetitive bid and forced her out of the agency. A former KBR employee charged that the company routinely served expired food rations to troops and charged for unserved meals.

Some charges were disproved, and the company repaid millions of dollars to settle others.

"I don't think that if Dick Cheney and Hallilburton's names hadn't always appeared in the same sentence, there would have been so much heard about KBR," Soloway said.

KBR's work in Iraq has been done under Logcap III.

Logcap logjam

The company won the first contract, Logcap I, in 1992. "At the time, no one else was really interested in contingency operations, so KBR got a sole-source contract," said Ray Bjorklund, senior vice president and chief knowledge officer of Federal Sources Inc., of McLean, Va.

In 1997, Dynamics Research Corp., of Andover, Mass., won Logcap II. But because Halliburton was already supporting troops in Bosnia, the company was given a separate contract to continue.

When Logcap III came up for bid in 2001, Halliburton again won the now 10-year contract.

"Then, in Iraq, when it came time to supply infrastructure, Logcap was there, it was easy to place an order on it, and no one else could really compete," Bjorklund said.

Logcap IV is up for bid now.

Looking Ahead

The kind of big-ticket contingency operation KBR has run in Iraq "is unlikely to continue forever," Bjorklund said. KBR "is going to have to look elsewhere. I think we're going to see KBR reinvent itself."

One area ripe for expansion, the company said in its 2006 annual report, is in state and local government sectors, where "there has been a general trend of historic underinvestment" in civil infrastructure.

"Logistics, water, roads and transit, wastewater, airports ? these are things we do every day," Stanski said. "Wastewater in Mobile, Ala., is pretty much the same as wastewater in Iraq."

Profiles of the Top 20 companies in the 2007 Top 100

No. 1: Lockheed Martin's reinvention

No. 2: With SBInet, Boeing IDS takes flight

No. 3: Northrop Grumman rises to new challenges

No. 4: KBR gets down to business

No. 5: IPO catapults SAIC into a new era

No. 6: Raytheon strives for balance

No. 7: General Dynamics in full sprint

No. 8: Fluor's ready in a pinch

No. 9: L-3 leadership stays the course

No. 10 EDS, Hard-learned lesson

No. 11 CSC, Experience that counts

No. 12: Battelle seeks new frontiers

No. 13: Booz Allen, Quality over quantity

No. 14: Bechtel telecom makes a splash

No. 15: For BAE, persistence pays off

No. 16: ITT makes a push into new markets

No. 17: Dell, Talking about evolution

No. 18: Technology and service fuel IBM

No. 19: Verizon caps off a busy year with a big win

No. 20: United Technologies gains altitude

About the Author

Sami Lais is a special contributor to Washington Technology.

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