US Embassy Iraq Contractor Gets $62 Million in @StateDept Contract Dispute Settlement

Updated 10/19/20 4:12 pm PST with the potential value for the design build construction contracts in Thailand and in Namibia. See below.

In October 2009, State/OIG issued its Audit of the Design and Construction of the New Embassy Compound in Baghdad, Iraq (PDF):

“…[W]e found that although the construction of the approximately $600 million NEC in a war zone in 34 months was a significant accomplishment, consid­erable construction deficiencies remained because designs for the facilities had not been completed and approved and quality control and commissioning procedures were inadequate.
[…]
We recommend the Department attempt to recover an estimated $43.2 million from First Kuwaiti to bring construction deficiencies to contract standards.
[…]
we estimated that approximately $33 million should attempt to be recovered from First Kuwaiti for incomplete and undocumented design work. Also, we identified that as a result of First Kuwaiti’s inadequate quality control program, it should be held accountable for additional maintenance charges of approximately $38 million that could carry over into future years. Further, we estimated recovering ap­proximately $3.8 million from First Kuwaiti because commissioning activities either were not performed or were performed incorrectly.

In it’s response, the State Department’s Bureau of Administration said:

“The Contracting Officer will prepare a letter to the Contractor, detailing each of [the OIG] recommendations and request consideration from the Contractor in each amount recommended by the OIG.” The A Bureau requested that OIG provide the Contracting Officer infor­mation detailing the basis for computing the $132 million in costs recommended for recovery from First Kuwaiti. The A Bureau also stated, “The formal process to recover any funds from the contractor will be assessed in terms of overall benefit to the government.”

At that time, State/OIG said:

“The A Bureau’s response meets the intent of OIG’s recommendations to recover $132 million from the contractor attributable to construction deficiencies; incom­plete and undocumented work; additional maintenance charges incurred because of inadequate quality control and commissioning procedures; and contract noncompli­ance, including liquidated damages and interest for an unauthorized advance. OIG and USACE will provide the contracting officer the requested support for the $132 million in questioned contract costs.”

We don’t know what happened to that recommendation for recovery of funds in 2009.
Fast forward to April 23, 2013, the Civilian Board of Contract Appeals (CBCA) issued a decision in First Kuwaiti Trading & Contracting W.L.L. v. Department of State contract dispute (CBCA 3069):
“Appellant, First Kuwaiti Trading & Contracting W.L.L. (First Kuwaiti), filed the instant appeal from a decision of a Department of State (State) contracting officer dated August 10, 2012, denying a claim by First Kuwaiti relating to two unpaid invoices for work performed for State under two contracts at the United States New Embassy Compound in Baghdad, Iraq, contract number SALMEC-06-0049, and its modifications, and contract number SALMEC-05-0020, and its modifications. The parties entered into a settlement agreement with respect to the appeal and filed with the Board a stipulation of settlement, reflecting their amicable resolution of the issues that are the subject of the appeal. The parties have jointly moved the Board to issue a judgment in favor of First Kuwaiti in the amount of $2,547,745.20, to be paid from the permanent indefinite judgment fund, 31 U.S.C. § 1304 (2006). Under their settlement agreement and stipulation, they have agreed that Contract Disputes Act (CDA) interest shall accrue on said judgment amount, beginning on March 23, 2012, and continuing until payment of the judgment is made, and that such interest shall be paid to First Kuwaiti together with payment of the judgment amount.
First Kuwaiti has waived any other claim to interest and/or for any attorney fees and expenses incurred in connection with the appeal. The parties, in their joint motion and under the terms of the stipulation, have agreed that neither party will seek reconsideration of, or relief from, this Board’s decision under Board Rules 26 and 27, respectively, and that neither party will appeal this Board’s decision.”
See the April 23, 2013 full decision (CBCA 3069) here.
Below are the New Embassy Compound Baghdad Contracts that the OIG audited in 2009. Note that the contract numbers cited by the CBCA decision are SALMEC-06-0049 and SALMEC-05-0020 for the New Embassy Compound in Baghdad. In the 2009 OIG audit, the two contracts are listed as SALMEC-06-C0049 and SALMEC-05-C0020; we note the appearance of the letter “C” in the two contracts listed in the 2009 OIG audit  of the New Embassy Compound in Baghdad. (If you know what that means, do let us know).
So that was 2013. For more litigative payments, see @StateDept’s Litigative Payments FY2018-FY2020 Via Judgment Fund-$72,634,701.57.
Five years later, on December 3, 2018, the CBCA issued a “Motion for Partial Summary Judgment Granted In Part” in the First Kuwaiti Trading & Contracting, W.L.L. v. Department of State new contract disputes  marked “CBCA 3506, 6167”:

“First Kuwaiti Trading & Contracting, W.L.L. (FKTC) appealed the denial of its claims by the Department of State (DOS) arising from the construction of the embassy compound in Baghdad, Iraq. FKTC presented approximately 200 cost claims that totaled $270 million. DOS moved for summary judgment on thirteen of those cost claims, challenging FKTC’s reliance upon the War Risks clause, the superior knowledge doctrine, the Changes clause, and the implied duty of good faith and fair dealing as the basis for these claims. DOS also asserts that actions underlying FKTC’s changes claims constitute sovereign acts, precluding liability pursuant to the sovereign acts doctrine.

We grant DOS’s motion regarding the scope of the War Risks clause and superior knowledge doctrine, thereby denying seven of FKTC’s claims that are premised solely upon these bases. We deny DOS’s motion regarding the claims that are also based upon the Changes clause or the implied duty of good faith and fair dealing, finding that there are disputed issues of fact. We also deny DOS’s motion regarding the sovereign acts doctrine, finding that DOS has not established the applicability of that doctrine on the current record. Six of the thirteen claims subject to the motion survive DOS’s challenge on this basis.”

The “Statement of Facts” include:
  • A. Contract Price and Provisions Allowing for Adjustment of Contract Price
  • B. War Risks Clause
  • C. Security Requirements and Warnings
II. FKTC’s Claims Challenged by DOS (it’s quite a read):
  • A. Duck and Cover Alarms
  • B. Rocket Attacks—Three claims
  • C. Equipment Repositioning
  • D. Extra Security
  • E. Retention Bonuses and Danger Pay
  • F. Air Transport—Labor Hours
  • G. Sand and Gravel Double-Handling
  • H. Truck Convoy Delays, Truck and Driver Protection Requirements, and Truck Convoy Support Requirements
  • I. Superior Knowledge Claims
The CBCA’s discussion includes:
  • I. War Risks Clause Does Not Provide for Recovery on the Thirteen Challenged Claims
  • II. FKTC Has Failed To Identify a Sufficient Basis for Its Superior Knowledge Claim
  • III. Disputed Issues of Fact Preclude Summary Judgment on FKTC’s Changes Claims

A. FKTC Has Shown Disputed Issues of Fact with Regard to Changes Clause on Six Claims

B. DOS Has Not Provided Evidence to Support a Sovereign Acts Defense

  • IV. Disputed Issues of Fact Preclude Summary Judgment on FKTC’s Implied Duty of Good Faith and Fair Dealing Claim
  • V. Purported Lack of Contemporaneous Documentation is not Grounds for Summary Judgment
The Board’s decision is that “Respondent’s motion for partial summary judgment is GRANTED IN PART. Appellant’s claims based solely upon the War Risks clause and the superior knowledge doctrine challenged by Respondent are denied. The hearing in this matter will commence on January 22, 2019.”
See the December 3, 2018 decision (CBCA 3506, 6167 ) here.
HOLD ON. We’re just getting to the best part.
On Monday, April 1, 2019. the Civilian Board of Contract Appeals issued “GRANTED IN PART: April 1, 2019” judgement in First Kuwaiti Trading & Contracting, W.L.L. v. Department of State (CBCA 3506, 6167) dispute:

“On March 28, 2019, the parties submitted to the Board a joint motion for judgment on a stipulated settlement. The parties requested that the Board enter judgment in the amount of $62,500,000, with payment to be made through the permanent indefinite judgment fund in accordance with 31 U.S.C. § 1304 (2012). The amount includes all the interest to which appellant is entitled under the Contract Disputes Act. 41 U.S.C. § 7109. The parties have agreed that they will not seek appeal of, reconsideration of, or relief from the Board’s decision.

Decision: The Board GRANTS IN PART these appeals. In accordance with the parties’ joint motion, the Board awards appellant, First Kuwaiti Trading & Contracting W.L.L., the stipulated judgment amount of $62,500,000.”

See the April 1, 2019 decision (CBCA 3506, 6167) here.
So the CBCA document says the contractor presented approximately 200 cost claims that totaled $270 million. It got $62,500,000.
We’re sure the government would argue that this is a win, yeah? On the other hand, $62.5 million is more than the expected US investment in the local economy for the construction of US Consulate General Chiang Mai in Thailand at $45 million plus change. Or three times the USG investment in the local economy for the construction of the US Embassy in Namibia at $17 million.
(Correction: The US Embassy Namibia design build construction contract has a potential value of $173.4million; the New Consulate Compound (NCC) design build construction contract in Chiang Mai, Thailand has a potential value of $156.8 million. Thanks A!).
Oh … what’s that?

 


The Sad Saga of US Consulate Jeddah’s New Consulate Compound via USASpending.gov

We previously blogged about USCG Jeddah  (see 2005 Jeddah ARB Recommended “Remote Safe Areas” for Embassies – Upgrades Coming … Or Maybe Not and New US Consulate in Jeddah – Under Construction Since 2007?)

There was a December 6, 2004 terrorist attack on USCG Jeddah where gunmen killed four locally employed staff members and injured nine others working outside the consulate building. At least six months before that, a $319,197 contract was awarded for the Jeddah facility upgrade.

Screen Shot 2013-04-20

On May 12, 2006, there was another attack on USCG Jeddah.  A number of shots were fired at the consulate compound but no casualties were reported.  Sixteen months after this attack and almost three years after the deadly 2004 attack, a $122,292,510 contract was awarded to Grunley Walsh for the design/build project in Jeddah.

Screen Shot 2013-04-20

Ten months later, a $390,000 contract was also awarded to Grunley Walsh for the design/build project in Jeddah. The reason for the modification was for “funding only action” whatever that means.

Screen Shot 2013-04-20
On February 11, 2009, the $122,205,676 contract with the Grunley Walsh Limited Liability Company was again modified. The reason indicated for modification was “change order.” USASpending data indicates that the current contract value at the time of modification was $19,000 with $122,205,676 obligated.

Grunley-Walsh was renamed Aurora-LLC after it was sold.  At least, by April 29, 2010, Grunley-Walsh had become Aurora-LLC because according to McClatchy News, Aurora-LLC lawyers at that time were then dealing with the State Department’s Bureau of Overseas Building Operations on its subcontractor issue with First Kuwaiti.

On May 10, 2010, Aurora was terminated from the Jeddah contract according to McClatchy News citing a State Department official, “after 90 percent of the contract period had expired, with only 54 percent of the work done.”

On November 18, 2010, Aurora LLC was mentioned in a letter from the Project on Government Oversight (POGO) to the White House questioning the independence of the State Department’s Inspector General.

As an aside — the website grunley-walsh.com is currently an online parking lot. Aurora-LLC is now a “page not found” although you can still find the cache version of the website here.  Findthecompany.com has an online snapshot of Aurora-LLC here showing $240 million in revenue in 2011.

The planned USCG Jeddah (image from state.gov/obo)

The planned USCG Jeddah (image from state.gov/obo)

We are unable to locate information on what happened to this project after the contract was reportedly terminated on May 10, 2010. We presumed incorrectly that there was another contractor after the contract was terminated in 2010; there does not appear to be one.  But two years and four months after that May 10, 2010 termination, there is a new contract and a new contractor.

On September 27, 2012, a $100,543,000 contract was awarded to American International Contractors, Inc.  While the USASpending page only states that this is for the construction of a New Consulate Compound in Saudi Arabia, the publicly available document on FDCD 2012 Fiscal Year OBO Capital Project Awards does indicate that SAQMMA-12-C-0221 for $100,543,000 is for the Jeddah NCC with an expected completion date of 24 months.

Screen Shot 2013-04-20

So excluding the facility upgrade in 2004, it looks like the Jeddah NCC which has been on the planning/construction/hold/construction/delivery phase since 2007 now amounts to $233,225,510. We’re terrible at math, but it looks like this project is now years delayed and almost double the original contract.

In addition, this project has now spanned the tenures of three secretaries of state – Rice, Clinton, and Kerry. Neither the State Department’s Inspector General Office nor the oversight people in Congress appears terribly bothered by the delay or the expanded cost of this project.

If anyone has the stories beyond the paper trail, we’d like to hear about it.

Meanwhile, a trip down memory lane —

In 2005, then Secretary Condoleeza Rice said this:

[W]e will also make sure that the tremendous charge that we have to lead the diplomatic effort, to support those diplomatic efforts, to train people well, to make sure that people are safe and secure in the embassies, to make sure that our nationals abroad have access to us so that they can be secure in dangerous times, that those will be very high priorities. I know they are very high priorities for me. They are high priorities for the President, as well. We will do everything we can to make sure that we’ve got the resources that we need.

Then there’s Secretary Hillary Clinton who said this:

[P]lease know that nothing is more important to us than your safety, and making sure you have secure places to live and work is our top priority.

Current Secretary of State John Kerry said this not too long ago:

I guarantee you that, beginning this morning when I report for duty upstairs, everything I do will be focused on the security and safety of our people. 

 

Somebody please put Jeddah on his agenda.  Of course, we can’t expect the secretary of state to be hammering nails at wherever place, but all that talk  and years on this … it’s sad to see that  USCG Jeddah is still missing a new secure building and no one seems to be upset about it.

— DS

Correction: USASpending.gov not/not USASpending.com

New US Consulate in Jeddah – Under Construction Since 2007?

We recently blogged about the US Consulate General in Jeddah, Saudi Arabia (see 2005 Jeddah ARB Recommended “Remote Safe Areas” for Embassies – Upgrades Coming … Or Maybe Not).  Then, as often the case, a reader writes; this time with a question  —  hey, do you know that we have constructed the shell of a new consulate in Jeddah on a big compound that just sits empty?

Nope, didn’t know that. We’ve been looking around and saw this:

The planned USCG Jeddah (image from state.gov/obo)

The planned USCG Jeddah (image from state.gov/obo)

The OBO website has few details about the Jeddah New Consulate Compound (NCC):

Estimated Construction Completion:  February 29, 2012
General Construction Contractor:  TBD
Architectural Firm: [blank]

Back in 2007, Arab News actually covered this new site. The NCC according to the news, citing a statement from USCG Jeddah, was supposed to  start construction in late 2007, and be completed in 2009:

JEDDAH, 13 August 2007 — The US Consulate in Jeddah is to be relocated within two to three years at a new site on the corner of King Road (Al-Malik Road) and Sari Street. Work is currently under way to prepare the new location, which will also serve as the consul general’s residence.

According to a press release posted on the consulate’s website, the newly appointed US Ambassador to Saudi Arabia Ford M. Fraker visited the new site on May 20 accompanied by Consul General Tatiana C. Gfoeller. The press release, however, did not identify the location.

“The visit follows a recent agreement approved by the Government of Saudi Arabia to purchase land for the new Consulate General compound. Construction for the new facilities will begin later in 2007 and is expected to be completed in 2009,” the statement said.

Then on June 10, 2010, in an article titled, Did the State Dept go to bat for First Kuwaiti? McClatchy News added a piece to the Jeddah puzzle:

“The official noted that Aurora was terminated from the Jeddah contract on May 10 this year, after 90 percent of the contract period had expired, with only 54 percent of the work done. (Aurora, according to other letters we obtained, is demanding $10.5 million in breach damages from the government, as well as $5.7 million for work it performed).”

If First Kuwaiti sounds familiar, that’s because in August 2011, the Project on Government Oversight (POGO) also reported about this in Contractor Behind Bungled Embassy Construction Sends State Dept. List of Claims Totaling $375 Million.  

The State Department official who spoke to McClatchy News in June 2010 confirmed that the  Jeddah contract was terminated in May 2010 with only 54% of the work done.

The Bureau of Overseas Buildings Bureau of Overseas Building  Operations’ Design and Construction Program for FEDCon 2013 – The Market Outlook on Federal Construction dated January 9, 2013 listed the Jeddah NCC (see slide 24) as one of the recently awarded projects.  The contractor listed for the project is the American International Contractors (AIC). According to its website, in 2012 AICI-SP was awarded contracts for construction of Department of State facilities in Jeddah, Saudi Arabia and Taipei, Taiwan. It looks like the Jeddah NCC contract was for $100,543,000.00 awarded on 28 Sep 2012 for  a 24 month duration.

If the Jeddah NCC originally started construction in 2007 with a 2009 completion date, and the original contractor was terminated in 2010, the termination happened when it was already behind schedule. We presumed though cannot confirmed  that a new contractor was selected after that with an expected delivery date of February 29, 2012. If that worked out, there would not have been a reason to re-award this contact in 2012.  But there it is.

If anyone has a clearer and more straight-forward timeline for this project, please feel free to leave a comment or drop a line via contactify.  This new consulate is supposed to replace the old consulate which was attacked by terrorists on Dec. 6, 2004 and again on May 12, 2006.  We’d like to understand how this NCC can be 3-5 years behind schedule.  And if the 2012 contract is for $100,543,000.00, how much would be the total cost of Jeddah NCC when you add all the previous contracts for this facility alone? Is this phase whatever of one contract?

We don’t know anything more than what we’ve written here, which is not a lot, but — if this facility has been under construction since 2007 and in 2013 you can walk around in there and not a creature is stirring, something is the matter. And not knowing the answers to the what and whys are nagging us, um, literally to death!!

Now on the off chance that you’re reading this from Jeddah and doing your visa and ACS interviews from inside this new NCC, please send us a note and tell us when you moved in.

— DS