MichaelMoore.com

DynCorp, Fluor Win Afghan Work Worth $7.5 Billion

By Tony Capaccio

July 8 (Bloomberg) -- DynCorp International Inc. and Fluor Corp. have been selected over KBR Inc. for five-year contracts worth as much as $7.5 billion for each company to support the U.S. troop build-up in Afghanistan, an Army official said.

Falls Church, Virginia-based DynCorp International Inc. and Irving, Texas-based Fluor Corp. each won basic one-year contracts worth as much as $1.5 billion that include four one- year options for the same annual amount, Jim Loehrl, executive director of the Army's Rock Island, Illinois, Contracting Center, said yesterday in a telephone interview.

The awards are the sixth and seventh -- and the largest -- since the program was revamped in April 2008 into a competition that now pits Houston, Texas-based KBR, the incumbent contractor that won the original logistics contract in 2001, against DynCorp and Fluor for individual tasks.

DynCorp rose $2.28, or 14 percent, to $18.13 at 9:47 a.m. in New York Stock Exchange composite trading. Earlier the shares gained as much as 17 percent, the biggest intraday increase since June 4. Fluor gained 15 cents to $46.48, and KBR fell 9 cents to $16.75.

KBR "remains committed to providing the Army quality service," KBR spokeswoman Heather Browne in an e-mail response to a request for comment. "We remain proud of the work we have performed and we are humbled to serve our troops."

Browne said the company looked forward to receiving a detailed briefing on the Army's latest contract decision.

Laundry, Food Services

DynCorp will take over services KBR provided for tasks such as laundry, food services and maintenance for existing base camps in southern Afghanistan. It also will build new bases as needed to accommodate an increase to about 68,000 troops from about 57,000 today. Fluor will take over similar services in northern Afghanistan.

Asked why KBR didn't win any of the new orders, Loehrl declined to provide specifics.

The selection process took into account the technical aspects of a proposal, past performance and cost, Loehrl said. "The Army awarded contracts to the companies that provided the best value," he said.

Houston-based KBR, then a unit of Halliburton, won the prior competitive logistics contract in December 2001 and has since become the largest contractor in Iraq. That contract is worth $31.7 billion this year, according to Army figures.

"KBR has a proven track record of serving the military in an austere and unpredictable environment," Browne said in her e-mail. "Our commitment in this regard will continue."

KBR Criticized

KBR has drawn continued criticism from Pentagon auditors for its bookkeeping practices and costs incurred with the contract even as it has been praised by troops and commanders for the services provided.

A congressionally mandated independent panel on wartime contracting concluded in its first report last month that KBR wasted billions of dollars through inefficiencies, lax oversight and poor management of its contract.

"The services could have been delivered for billions of dollars less," the commission said in a report released at a hearing of the House Oversight and Government Reform's national security panel. "Substantial evidence supports the view" that KBR's services "cost too much."

Loehrl said KBR was entitled under the law to protest the awards.