Iraq Contingency Contracts
Ball Janik LLP’s Government Contracts lawyers sued the United States Government in the Court of Federal Claims on behalf of the Laudes Corporation, which provided vital services to the coalition and Iraqi forces in 2003 and 2004 under undefinitized letter and fixed-price contingency contracts. Despite fulfilling its obligations under difficult and often dangerous conditions, the client was paid less than half the money it was owed. As a result of our creative legal theories, Laudes ultimately recovered $11 million in payments from the U.S. Government.
The Baghdad Police Services Academy (BPSA) Contracts
After the liberation of Iraq, the coalition established the Coalition Provisional Authority, or CPA. It was an essential part of CPA strategy to have trained Iraqis performing police duties, which meant the CPA needed to provide the training. The Baghdad Police Services Academy was one location where the CPA would house, feed and train Iraq’s new police forces.
After another contractor failed to provide adequate support to the BPSA and was terminated, CPA officials handpicked our client, the Laudes Corporation, to provide it. On June 4, 2004, our client signed a letter contract with the CPA to provide life support services to the BPSA for a period of 11 months for up to 2,500 students. Unlike the cost-reimbursement contracts given by the CPA to large defense contractors, this letter contract was a fixed-price contract, placing all the performance risk on our client.
The then growing insurgency heightened the need for more Iraqi police officers. After the June 28, 2004 transition of authority from the CPA to the Interim Iraqi Government, U.S. officials entered into a second contract with our client to provide support for an even greater level of troops than initially required. Laudes performed both BPSA contracts in ever-changing and life-threatening conditions. At the end of the BPSA contracts, U.S. officials refused to pay our client more than the original contract price, even though these officials knew that Laudes provided work well in excess of that required by the contracts. They knew this because U.S. personnel had signed receipts (DD Forms 250) for the goods and services provided.
The East Fallujah Iraqi Camp (EFIC) Contract
In late October 2004, U.S. procurement officials approached Laudes directly about building and maintaining a battlefield camp to support the Iraqi forces during the Second Battle of Fallujah. It was not until Laudes had already reluctantly agreed to do the work that it learned the Iraqi government would sign the contract, even though U.S. officials drafted the contract requirements and handled everything related to the contract. To induce Laudes to sign the contract, U.S. officials promised that the U.S. would facilitate payment from the Iraqis.
Building the Iraqi camp and providing everything the soldiers needed proved to be much more difficult than U.S. officials planned. Despite these challenges, Laudes successfully did the job. However, at the end of the EFIC contract, Laudes was paid less than half the money it was owed. Our client later learned that U.S. procurement officials had secretly instructed the Iraqis not to pay our client the balance of the contract price.
The Legal Action
We filed two lawsuits in the Court of Federal Claims, one for the BPSA contracts and one for the EFIC contract. Each case presented novel issues.
In the BPSA suit, the first contract had been awarded by the CPA and later transferred by the CPA to the Interim Iraqi Government (IIG). The second BPSA contract had been awarded directly by the U.S. Government and was not transferred to the IIG. The Department of Justice (DOJ) was able to persuade the court that the U.S. Government could not be liable under the first contract because it had been transferred to the IIG. However, because the services provided under the two contracts were identical and the periods of performance overlapped, we were able to argue that the increased services ordered and accepted by the U.S. Government could have only been ordered and accepted under the second BPSA contract, because the U.S. Government no longer had contract authority over the first BPSA contract as it had been transferred to the IIG.
The EFIC suit presented more significant challenges, as the contract itself was between the Interim Iraqi Government and Laudes. For both legal and practical reasons, it was simply not possible to file suit against the IIG. As a result, we determined that Laudes could sue the U.S. Government on its breach of an express oral contract—under which in return for Laudes signing a contract with the IIG, the U.S. Government agreed to facilitate payment to Laudes, an agreement Laudes believed the U.S. government did not honor. In addition, we included a second, alternative theory of breach of contract against the U.S. government because the U.S. Government, separate from the EFIC contract itself, directed Laudes to hire security forces at the EFIC project site and failed to pay Laudes for doing so.
After surviving multiple motions to dismiss filed by the DOJ, the DOJ ultimately agreed to settle the cases, and paid Laudes $11 million.