# Kellogg Brown & Root Services Inc. v. United States

> United States Court of Federal Claims · May 2, 2012 · 103 Fed. Cl. 714

URL: https://www.frixlaw.com/law-library/cases/6663030

## Case

- **Full name:** KELLOGG BROWN & ROOT SERVICES, INC. v. United States
- **Court:** United States Court of Federal Claims
- **Decided:** May 2, 2012
- **Citations:** 103 Fed. Cl. 714; 2012 U.S. Claims LEXIS 465; 2012 WL 1570961
- **Precedential status:** Published
- **Opinion:** Opinion of the court by Christinemiller
- **Judges:** Christine, Miller
- **Cited by:** 3 later opinions in the Frix Law Library

## Citator (automated)

- No negative treatment found by the automated citator. That is not the same as a confirmation that the case is good law; read the citing cases.
- Full citator and citing cases: https://www.frixlaw.com/law-library/cases/6663030

## How later opinions describe it (automated extraction)

- stating that costs “were driven by the singular goal of putting DFAC facilities in place to offer warm meals to the troops by July 4, 2003”
- recognizing that costs “were impacted by fluctuating projections for the number of troops on the ground”
- finding two mid-level managers had insufficient authority to impute their knowledge to KBR for purposes of § 55(a)(1)
- acknowledging that the “constantly changing demands required by the Army’s effort were foreseeable to neither the Army nor to KBR”

## Opinion text

*716
MEMORANDUM OPINION AND ORDER
CHRISTINE O.C. MILLER, Judge.
This ease, the first of the Iraq war contract cases to proceed to trial in the United States Court of Federal Claims, involves a claim for the provision of dining facility (“DFAC”) services for the United States Army (the “Army”) at Camp Anaconda, one of the largest United States military bases in Iraq during the troop buildup following the March 2003 invasion.
FACTS 2
1. Background 3
Although this dispute centers around the logistical support provided by Kellogg Brown & Root Services, Inc. (“KBR” or “plaintiff’), during the early years of Operation Iraqi Freedom, the genesis of the issues presented began with the award of the Army Logistics Civil Augmentation Program (“LOGCAP”) Contract No. DAAA09-02-D-0007 (“LOGCAP III”) to Brown & Root Services on December 14, 2001. 4 JX 401.
Work to be performed under LOGCAP III would be in support of what is classified as a “contingency operation.” As defined by federal regulation:
[contingency operation means a military operation that—
(1) Is designated by the Secretary of Defense as an operation in which members of the armed foi’ces are or may become involved in military actions, operations, or hostilities against an enemy of the United States or against an opposing military force; or
(2) Results in the call or order to, or retention on, active duty of members of the uniformed services [under specified sections of the United States Code] ... during a war or during a national emergency declared by the President or Congress.
48 C.F.R. (FAR) § 2.101 (2012) (citations omitted).
LOGCAP III was an umbrella Indefinite Delivery/Indefinite Quantity (“IDIQ”) contract to implement logistics support services for the U.S. Army in Kuwait and Iraq prior to and during Operation Iraqi Freedom in accordance with task orders (“TOs”) issued under the contract. See JX 401; Transcript of Proceedings, Kellogg Brown & Root Servs., Inc. v. United States, No. 09-351C, at 139-40, 161-62 (Fed.Cl. Oct. 11-25, Dec. 1-2, 2011) (“Tr”) (William R. Walter, KBR’s former Vice President of Accounting and Finance, Government Infrastructure Division). Plaintiff provided logistics support services that included DFAC, morale and welfare, laundry, and fuel-delivery services. JX 401, at 7646. 5 LOGCAP III required KBR to be prepared to support a six-month deployment of a maximum of 50,000 troops at no more than eight camps. See id. at 7653; Tr. at 157-58 (Walter). LOGCAP III was a cost-plus-award-fee agreement that incorporated the provisions of 48 C.F.R. § 52.216-7 (2000), whereby the Army would reimburse KBR for all costs that it incurred in contract performance, including payments to subcontractors, along with a fee determined by subcontract costs.
*717 1. Dining facilities in Kuwait and Iraq
Beginning in fall 2002, see Tr. at 2577 (Terry Hall, former Regional Food Service Manager), the Army began staging forces in Kuwait in preparation for the eventual assault into Iraq and called on KBR to provide the logistical services under LOGCAP III, Tr. at 188-89 (Walter). In Kuwait KBR provided, inter alia, laundry, water, building operations and maintenance, fuel delivery, and DFAC services. See Tr. at 168-69 (Walter). As succinctly summarized during trial, a dining facility was “a place where [one] go[es] in-theater and ... is a cafeteria. They cook the foo[d] there, and they prepare the food there, and they store the food there, and you eat the foo[d] there.” Tr. at 184 (Walter). One of the main Army bases in Kuwait at which KBR provided logistics services was Camp Arifjan. KBR performed the DFAC services at Camp Arifjan prior to the Iraq invasion under TO 27 issued under LOGCAP III. See PX 123. Under the Statement of Work (the “SOW”) for TO 27, issued October 2, 2002, prior to the formal execution of LOGCAP III, KBR was to serve as the prime contractor for the DFAC services at Camp Arifjan, and the SOW specifically instructed KBR to subcontract with Tamimi Global Company, Ltd. (“Tamimi”), as the prime vendor at the camp. Id. at 2647 . Prior to bringing the work in under LOGCAP III, Tamimi had been the prime vendor at Camp Arifjan under a direct contract with the Army. Tr. at 189 (Walter). As explained below, this contractual obligation to use Tamimi at Camp Arifjan was not one that enjoyed the whole-hearted support of KBR, and the relationship between KBR and Tamimi at Camp Arifjan was not always smooth. 6
The aerial bombardment of Iraq, christened the “shock and awe” campaign, began on the night of March 19, 2003, and the main contingent of ground troops began the invasion of Iraq from Kuwait on March 20, 2003. By May 2003, the troops had been subsisting primarily on Meals Ready to Eat (“MREs”), and the Army began to focus on establishing dining facilities throughout Iraq to support the burgeoning troop deployment. The provision of food was considered vitally important to troop morale, and DFACs became a top priority. See Tr. at 659 (Betty E. Hayes, KBR’s Senior Manager of Procurement and former Acting Procurement Manager at Camp Anaconda). The Army directed KBR to establish the capacity to serve hot food to “many thousands of troops” by July 4 of that year. Tr. at 1991 (Lynn E. DeRoche, supervisory Contract Specialist, TACOM Contracting Command, TACOM Contracting Center, Rock Island, Illinois). After having only MREs for several months, the generals considered that the troops were due “franks and beans” by the fourth of July. See Tr. at 199 (Walter).
2. Task Order 59 and the Master Agreement System
Given the frenetic pace of events occurring in the first half of 2003, this directive was a challenge for KBR. By the end of May 2003, KBR was receiving logistical support requisitions from the Army “continuously [and] at different locations.” Tr. at 1729 (David L. Hadcock, KBR’s Senior Subcontracts Administrator who served as the Procurement Materials & Property Manager on LOGCAP III). In the month of June, KBR “went from supporting tens of thousands, to supporting hundreds of thousands_” Tr. at 246 (Walter). Although initially KBR had approximately one month to establish over thirty *718 DFACs in Iraq, eventually the Army was calling for more than fifty DFAC sites. See Tr. at 199, 246 (Walter); Tr. at 1334 (Daniel L. Petsehe, KBR’s then-Senior Subcontract Administrator on site in Kuwait); Tr. at 1991-92 (DeRoche). As Ms. DeRoche testified, 7
during that time period things were pretty crazy. The changes that were happening that were being directed from the [SOWs] early on; capacities at different sites, they all changed very quickly. [The Army had] asked KBR to set up this food service capability in an inordinately short period of time; and so, it seemed reasonable that there were limitations about what they could do during that initial time period.
Tr. at 1992 (DeRoche). The DFACs that the Army was calling for were to be located all over the country. One of those sites, in Balad, just north of Baghdad, was known as Camp Anaconda. See Tr. at 1269 (Petsehe). The DFACs at Camp Anaconda, one of the largest military bases in Iraq, are the centerpiece of this case.
By May 2003 KBR had hired Mr. Petsehe to serve as a Senior Subcontract Administrator and sent him to Kuwait to review the existing KBR subcontracts. Tr. at 1252 (Petsehe). Mr. Petsehe was in plaintiffs Procurement Division, which plaintiff attempted to distance from its Operations Division due to the different lines of authority. Procurement personnel were depicted as the KBR employees who implemented contract requirements; the Operations employees dealt with the companies available to provide services as subcontractors. By the end of May, Mr. Petsehe began focusing on the expanding DFAC effort in Iraq. See Tr. at 1252-54 (Petsehe). According to Mr. Petsehe, the procedure in place contemplated that those members of the KBR team in the Operations Division would inform him of the Army’s requirements, and it was his responsibility to “source and manage and administer that requirement after award.” Tr. at 1255 (Petsehe). The principal KBR Operations personnel working on the DFAC eon-tracts in Iraq at this time were Robert (Butch) Gatlin, Regional Project Manager; Terry Hall, Regional Food Service Manager; and Luther Holmes, Deputy Regional Food Service Manager. See Tr. at 1255-56 (Petsehe); JX 102. The principal Procurement personnel in Kuwait at the time, aside from Mr. Petsehe, were Jeff Mazon, Procurement Materials & Property Manager, and Bill Suzuki, Project Manager for Iraq operations. See Tr. at 1251-52 (Petsehe); JX 102.
The first relevant DFAC subcontract involved the DFACs at Camp Cedar 2 and Camp Adder (“Camp Cedar/Adder”) in Na-zareah, Iraq. Tr. at 1254, 1259 (Petsehe). KBR had issued a Request for Proposal (“RFP”) for a competitive award for work to be performed under TO 57 — the TO dealing with the southernmost sites in Iraq, Tr. at 199 (Walter) — and had received proposals from nine potential subcontractors, JX 102. On June 6, 2003, Mr. Petsehe authored a justification memorandum awarding a standalone contract for the dining services at Camp Cedar/Adder to Tamimi. Id. That memorandum memorialized that a review of all of the proposals was conducted by Messrs. Gatlin, Hall, Holmes, Mazon, Suzuki, and Petsehe. Id. Tamimi was awarded the contract because it had submitted the lowest-priced bid and had been strongly recommended by the Food Service Operations personnel (“Food Service”) — i.e., Messrs. Hall and Holmes. Id.; Tr. at 1261 (Petsehe). According to Food Service, Tamimi was a strong choice “because Tamimi Global Co. is already positioned in the Iraq area.” JX 102. One location at which Tamimi was operating prior to KBR’s being tasked to run the logistical support efforts was Camp Anaconda. 8 ' Tr. at 201 (Walter). Therefore, although Mr. Petsehe officially made the decision to award Tamimi the Camp Cedar/Adder contract, the recommendation by the Food Service group was “very important.” Tr. at 1261 (Petsehe).
On June 9, 2003, KBR personnel held a meeting to discuss the proposition of establishing a system of “master agreements” with *719 certain subcontractors in order to better meet the Army’s growing demands for DFACs. See JX 103. Messrs. Gatlin, Hall, Mazon, Suzuki, and Petsehe attended. Id. A master agreement was, in effect, a Basie Ordering Agreement by which KBR would “qualify a certain number of resources prior to [an Army directive], so that [KBR] had them already established.” Tr. at 1258 (Petsehe). Although not the ideal system of procurement, the size and scope of the Army’s requirements outpaced the capacity of any one subcontractor and thus, “it was decided to award multiple agreements such that we may have numerous sites going up simultaneously.” JX 103. Once the master agreements with particular vetted vendors were in place, work then could proceed through the issuance of “work releases.” See Tr. at 1057-58 (William J. Jonas, KBR’s former Vice President for Procurement Materials & Property). In this way the procedural process could be greatly abbreviated, thereby allowing KBR to perform more quickly. See Tr. at 212 (Walter). One effect of this system was that if a subcontractor did not have a master agreement with KBR, it would not be eligible for any of the work that the Army required under TO 59. See Tr. at 405 (Walter).
As a framework for determining what subcontractors would receive a master agreement, the attendees decided to examine the competitive bidding proposals submitted the previous week for the DFAC work to be performed at Camp Cedar/Adder. JX 103. On June 10, 2003, a review of those nine proposals was conducted by “the project manager, procurement (subcontracts) and the food service management team,” a group known as the “master agreement board.” JX 103. The members looked at both the price of the bids and the technical ability of the contractors. See Tr. at 1266-67 (Petsehe). In order to be considered for a master agreement, the contractor had to be technically qualified by the Food Service group — essentially Messrs. Hall, Holmes, and Gatlin. Of the nine potential candidates, Food Service found several of the subcontractors to be technically unqualified; none of those subcontractors was considered for a master agreement. Tr. at 2614 (Hall). The reviewing board ultimately decided that five subcontractors would be offered master agreements. JX 103. Those five subcontractors were, “by order of preference”: Tamimi, Renaissance Services, La NouVelle-ESS, The Event Source (“TES”), and KCPC Kuwait Company for Process Plant Construction & Contracting. Id. The memorandum reprising this meeting was signed by Messrs. Suzuki, Holmes, and Petsehe. Id. At this time it was thought that these five subcontractors would help KBR fulfill the Army’s goal to put in place twenty-five DFACs by August 1, 2003. 9
On June 13, 2003, the Army issued TO 59, JX 143, “the order that provided for all the life support services in Iraq,” Tr. at 1983 (DeRoche); see also Tr. at 163 (Walter). Each TO required a SOW, but, because of the scope of the work to be performed under TO 59, the SOW was actually issued with numerous appendices. See JX 403; Tr. at 161-62 (Walter). As an example, all of the work to be performed at Camp Anaconda was listed in the SOW in Appendix A. JX 403; Tr. at 168-69 (Walter). However, between mid-June and July 2003, the Army revised the SOW for TO 59 multiple times, 10 Tr. at 164-66 (Walter), and the final TO 59 was not signed by the Army and KBR until *720 August 12, 2008, see JX 143. The effective period for TO 59 ran from June 13, 2003, through April 30, 2005, see id,.; JX 414, and eventually was replaced by TO 89 in May 2005. All told, the scope of KBR’s effort under TO 59 consisted of support at fifty-six sites requiring KBR to manage, through its subcontractors, over 25,000 employees. See PX 458.
On June 16, 2003, KBR invited Tamimi to participate in its master-agreement system. See JX 487-1. Tamimi was officially awarded DFAC Services Master Agreement No.: LOGCAP-KU-MA00003 (“Master Agreement 3” or “MA 3”) on June 17, 2003, when Mr. Petsche and (Mohammad) Shabbir Khan, 11 the Vice President and Operations Manager of Tamimi, signed the agreement. See JX 201. The effective date for Master Agreement 3 was June 16, 2003. See JX 201.
II. History of kickbacks
Mr. Hall, who previously had worked for KBR for a year as a cook in Bosnia, 12 was rehired by KBR as a Quality Assurance and Quality Control (“QAQC”) supervisor and sent to Kuwait in October 2002. Tr. at 2569-70, 2575, 2577 (Hall). Mr. Hall’s initial duties upon arriving in Kuwait were to supervise the subcontractor providing the DFAC services at Camp Arifjan — Tamimi. Tr. at 2578-79 (Hall). Shortly after arriving in Kuwait, Mr. Hall was promoted to Food Service Manager, and it became his responsibility to “technically qualify subcontractor vendors that provide food service, also to do requisition for upcoming projects in food service, request personnel, equipment and stuff like that ... [and] to make sure that [SOWs were] implemented.” Tr. at 2579-80 (Hall). He testified for the United States as a cooperating witness, having bribed government personnel in connection with other contracts after he left KBR’s employ. Although plaintiff attempted to trumpet him as an experienced supervisor, ready to assume the level of responsibility for Food Service Manager and Regional Food Service Manager, the evidence consisted largely of attorney argument. Mr. Hall fell far short of conveying the background and experience to act as an executive or manager. He was an easy target for Shabbir Khan, as revealed by Mr. Hall’s testimony. Similar to many of KBR’s personnel assigned to Kuwait and Iraq, he was available, willing to work in-theater, and formerly affiliated with the Army.
Mr. Hall’s direct supervisor was Mr. Gat-lin, with whom Mr. Hall enjoyed a “very good relationship.” Tr. at 2580-81 (Hall). When the war ignited, both men’s area of concern expanded from Kuwait to include Iraq. Thus, Mr. Gatlin became the Project Manager over Iraq and Kuwait, and Mr. Hall became the Regional Food Service Manager. Tr. at 2581-82 (Hall). Mr. Gatlin did not testify in person, but his testimony in another trial, United States v. Mazon, No. 05-er-40024 (C.D.Ill. Apr. 15, 2008); United States v. Mazon, No. 05-cr-40024 (C.D.Ill. Sept. 30, 2008), was admitted as JX 547 and JX 548, and established that he was in the approval chain. Defendant, through the testimony of other witnesses and court documents, attempted to insert him as the lead figure in kickback activity. The court finds that Mr. Gatlin and Shabbir Khan were close and that the latter regularly procured alcohol for the former.
Mr. Hall quickly became acquainted with Shabbir Khan. As the head of operations at Tamimi, Shabbir Khan was responsible for Tamimi’s performance at Camp Arifjan. However, by November 2002, KBR was dissatisfied with Tamimi’s performance at Camp Arifjan because their “faulty equipment ... was breaking down [which] could cause a safety violation to the troops.” Tr. at 2582 (Hall). Mr. Hall, as Food Service Manager, was in favor of replacing Tamimi with anoth *721 er subcontractor. Tr. at 2582 (Hall). Tami-mi was not terminated, and after a heated conversation with Mr. Gatlin, Mr. Khan began correcting the problems at Camp Arif-jan. Tr. at 2582-83 (Hall).
In supervising the DFAC operation at Camp Arifjan, Mr. Hall became acquainted with Mr. Holmes. Tr. at 2587 (Hall). At the time Mr. Holmes was a master sergeant in the Army and was serving as the Army’s food service master sergeant at Camp Arif-jan. Working together on many of the same issues, Messrs. Hall and Holmes developed a personal relationship, which led Mr. Hall to recruit Mr. Holmes to come work for KBR. Tr. at 2587-88 (Hall). Around the beginning of November 2002, Mr. Hall formally offered Mr. Holmes a job with KBR. Tr. at 2588 (Hall). Upon the expiration of his tour of duty, Mr. Holmes returned stateside and retired from the Army and accepted the job at KBR, returning to Kuwait around the end of January 2003. Tr. at 2588-89 (Hall); see also JX 476; JX 501. Mr. Holmes’s initial position at KBR was as a supervisor, but because of his military experience, he was promoted to serve as the Deputy Regional Food Service Manager. Tr. at 2589 (Hall). In this position, Mr. Holmes served directly under Mr. Hall and shared the same job responsibilities. Tr. at 2589 (Hall). Mr. Holmes also had the authority to sign documents on Mr. Hall’s behalf. Tr. at 2589 (Hall); see JX 101 (example of signature pm-porting to be of Terry Hall, but not by his hand).
Shortly after the Arifjan DFAC incidents were resolved, Mr. Hall met with Shabbir Khan at the Tamimi office in Kuwait. Tr. at 2583 (Hall). Mr. Khan showed Mr. Hall plans for what was known as a “Red Sea dining facility,” which greatly impressed Mr. Hall as being superior to the DFAC plans currently in use. Tr. at 2583-84 (Hall). While discussing the new facility, Shabbir Khan told Mr. Hall that “we can make a lot of money,” which Mr. Hall understood to mean Mr. Khan and himself. Tr. at 2584 (Hall). Interpreting this as an offer to enter into an illicit kickback arrangement, Mr. Hall declined, but he did not report the offer to anyone else at KBR. Tr. at 2584 (Hall).
In April 2003 Mr. Hall accompanied Shab-bir Khan and two Army contracting officers, holding the rank of colonel, from Camp Doha in Kuwait to Camp Anaconda to observe the state of affairs at the base. Tr. at 2590-91 (Hall). Because this trip occurred prior to the implementation of TO 59, its purpose was to discuss the logistics of the troop support in Iraq. According to Mr. Hall, the colonels were not enamored with KBR’s performance and wished to directly contract all of the work that would become TO 59 to Tamimi. Tr. at 2591 (Hall). Mr. Khan demurred and advised the colonels to include the work under LOGCAP III because Tamimi could not handle work throughout the entire country of Iraq. Tr. at 2591-92 (Hall). Approximately three weeks after this trip to Camp Anaconda, Mr. Hall traveled by air to Dubai to deal with a subcontract issue. Tr. at 2592-93 (Hall). Mr. Hall testified that Mr. Khan informed him that there was a particular vendor in Dubai that could meet KBR’s need of pork products to serve in the DFACs (apparently a delicate issue in a Muslim country). Tr. at 2593 (Hall).
After Mr. Hall relayed this information to Mr. Gatlin, the latter refused to authorize Mr. Hall’s travel, stating, “Let Tamimi pay for it.” Tr. at 2593 (Hall). Mr. Khan agreed to finance Mr. Hall’s trip to Dubai. This included not only purchasing his airline ticket, but also giving him an envelope of cash totaling approximately $10,000.00 at the airport. Tr. at 2594 (Hall). Of this money, Mr. Hall took $5,000.00, and he gave the remaining $5,000.00 to his deputy, Mr. Holmes, who had driven him to the airport. Tr. at 2594 (Hall). Mr. Hall testified that, on the four-day Dubai trip, he spent two days with the subcontractor on the precipitating issue of the pork products and the remaining two days “hav[ing] fun” and spending the entire $5,000.00. Tr. at 2595-96 (Hall). Mr. Hall informed Mr. Gatlin that Tamimi was paying for his trip to Dubai, but no objections were raised. Tr. at 2596 (Hall).
Mr. Hall took another Tamimi-paid trip in early-summer 2003, when he, Mr. Khan, and an unnamed third party traveled by air to Jordan. Tr. at 2603 (Hall). According to Mr. Hall, Mr. Khan had some business to *722 conduct with a firm name Daoud & Partners regarding a dining facility, and, as the head of Food Service, Mr. Hall was asked to accompany Tamimi’s representatives. Tr. at 2603 (Hall). As with the Dubai trip, Tamimi paid for the airline tickets, and Mr. Khan also gave Mr. Hall some “party money” in the amount of $3,000.00. Tr. at 2604 (Hall). Similar’ to the Dubai trip, half of the four-day trip was spent on business matters, and the other half on more enjoyable pursuits. Tr. at 2604 (Hall).
Later, in August or September 2003, Mr. Khan provided Mr. Hall with an ATM card with a substantial amount of money on it. Tr. at 2604-05 (Hall). Mr. Hall initially bought Christmas decorations for the dining facilities with the money, but also spent approximately $3,500.00 on himself. Tr. at 2605 (Hall). Having used the card for personal expenditures, Mr. Hall then gave the card to Mr. Holmes for his personal use. Tr. at 2605 (Hall). Mr. Holmes then complained to Mr. Hall that the card had only “about $1500[.00]” left on it, and that it had already run out of money. Tr. at 2606 (Hall). Notes of an investigation from the Department of Defense Office of Inspector General interview with Mr. Holmes on January 8, 2010, reflect that Mr. Holmes, after having been advised that he was a target of the investigation, stated that Shabbir Khan “gave him a debit card with money on it for [him] to use.” JX 476, at G-0397354. While he had received the ATM card and tried to use it, “the debit card did not work” so he returned it to Mr. Khan. Id. Mr. Holmes also told investigators that Mr. Khan had upgraded his airline seats when he vacationed. Id.; Tr. at 1578-79 (Whitney L. Cumpson, Defense Criminal Investigative Service special agent). The court received ample evidence to establish Mr. Holmes’s knowing acceptance of a kickback, i.e., he attempted to use the debit card. 13
Throughout his tenure with KBR in the Middle East, Mr. Hall constantly was thinking ahead to what he would do after leaving KBR. Tr. at 2608-12 (Hall). Around June and July 2003, Mr. Hall began discussing with Mr. Khan his desire to open a Golden Corral restaurant franchise in the United States. Tr. at 2609 (Hall). Given its popularity in the South and his previous professional experience with running dining facilities, Mr. Hall believed that this was a promising avenue for him to pui’sue. Tr. at 2609 (Hall). In December 2003 Mr. Gatlin left KBR, and, with KBR’s assignment of the “Tiger Team” — to be discussed in more detail — charged with imposing order on KBR’s avalanche of contract documents involved in implementing TOs, Mr. Hall deemed his role in Food Service to be one of diminishing responsibility and input. Tr. at 2615 (Hall). Mr. Hall requested a new position and was once again assigned as a QAQC in January 2004. Tr. at 2615 (Hall). At the same time in January 2004, Mr. Khan presented Mr. Hall with $20,000.00 in cash for him to use for “exploratory” research on opening a Golden Corral franchise. Tr. at 2610 (Hall).
Mr. Hall made several trips to the United States to try and generate the additional capital necessary to purchase a franchise— roughly $2.3 million — but ultimately his efforts fell short, and he was unable to secure the necessary financing. Tr. at 2611 — 12 (Hall). After Mr. Hall spent approximately $7,000.00 of the cash on his research for the Golden Corral franchise, he never returned any of the other money to Shabbir Khan. Tr. at 2611 (Hall). In April 2004 Mr. Hall left KBR to set up his own consulting business. Tr. at 2616 (Hall). With his departure from KBR, Mr. Khan’s interest in Mr. Hall’s Golden Corral franchise dissipated, and Mr. Khan — presumably without irony — informed Mr. Hall that he had to respect KBR’s policy of not allowing him to invest in or hire any *723 one formerly in higher management at KBR for at least a year after the employee’s departure. Tr. at 2611 (Hall).
Mr. Hall thereafter ran into legal problems in connection with conspiracy to commit bribery and money laundering. He pleaded guilty to bribing several Army contracting officer personnel, and his plea agreement required him to testify truthfully in this trial. This testimony may factor into Mr. Hall’s upcoming sentencing for these offenses. The court found Mr. Hall to be straightforward and only minimally self-serving in his expressed commitment to fulfilling his duty to the troops, lending his utmost to assure that Food Service operated to the troops’ benefit, and otherwise attempting to distance the kickbacks from influencing the discharge of his duties. As will be discussed, the court found no basis to credit defendant’s allegations of disingenuousness on Mr. Hall’s part when he denied that he acted for Tamimi’s benefit during his tenure as Regional Food Service Manager. 14
III. Tamimi at Anaconda
1. Initial work at Anaconda
Once the master agreement system had been implemented, KBR decided that work orders for specific DFACs would be awarded based partly on the geographic location of the DFAC within Iraq; different master agreement holders generally would be responsible for different areas of the country. See Tr. at 1058-60 (Jonas); Tr. at 1340-58 (Petsche). Thus, it was determined early on that TES would be largely responsible for those DFAC contracts in northern Iraq, see Tr. at 1342-43, 1354-58 (Petsche), whereas Tamimi would be assigned those in central Iraq. Under this system, while pricing for specific contracts was a factor to be considered, it was not the only criterion governing the decisions. See Tr. at 1275-76 (Petsche). Not uncommonly, work release awards were made to the master agreement holders that were not actually the lowest bidders for the work. In those eases the rationale was that geographic and other logistical considerations weighed in favor of the higher-priced vendor thereby making it the “best value” to the Army. See, e.g., PX 147; PX 148; PX 473; PX 474.
Shortly after the implementation of the master agreement system, the Army issued a requirement for a DFAC at site C-6 in Kir-kuk, Iraq, located in the northern region. Tr. at 1270-71 (Petsche). KBR issued a “condensed ... RFP” asking for costs and an implementation schedule. Tr. at 1271 (Petsche). On June 18, 2003, based on the responses from its master agreement subcontractors, KBR awarded Master Agreement 4 Work Order 1 to TES over the low bidder, Tamimi. PX 473. However, on July 8, 2003, the Defense Contract Management Agency (the “DCMA”) sent a letter to Jim Spore, the KBR LOGCAP III Regional Project Manager for Northern Iraq, and later Camp Manager at Anaconda, directing KBR to relocate the DFAC from Site C-6 to Site A, i.e., Anaconda. See PX 475. Initially, Mr. Petsche considered simply relocating the TES team that already had mobilized for the work at Kirkuk to Camp Anaconda. See Tr. at 1273-75 (Petsche). Although the evidence ultimately showed that the decision to use Tamimi was sound and practically justified, the court found Mr. Petsehe’s testimony credible that this idea was met with strong resistance by Messrs. Hall and Holmes in Food Service, both of whom advocated retaining Tamimi at Anaconda. 15 Tr. at 1275- *724 76 (Petsche). Eventually, Mr. Petsche relented, and on July 20, 2003, he authored a justification memorandum supporting Tami-mi’s retention as the vendor at Camp Anaconda. JX 147. Mr. Petsche’s memorandum explained that “[i]t was determined that due to the short notice to proceed and the fact that [Tamimi] was already located in the area with all necessary equipment and supplies, that this firm would best carry out the expectations of the client.” Id. He continued, “It is also to be noted that this company was presently performing food service functions within the area of operations ... for the client.” Id. 16
2. Work Release 3
On July 22, 2003, the Army issued TO 59 SOW Change 4. See JX 403. This modification to the TO 59 SOW required KBR to provide DFAC services at Camp Anaconda for 18,700 personnel in four separate DFACs. Id. Transitioning from direct Army control to KBR control under TO 59, 17 Tamimi submitted a pricing proposal for DFACs A1-A3 at Anaconda on August 25, 2003. See JX 187. On that same date, KBR issued Master Agreement 3 Work Release 3 (“WR 3”) to Tamimi for the A-3 DFAC at Anaconda. See JX 154. According to Mr. Jonas, KBR’s former Vice President for Procurement Materials & Property, 18 “because of the danger and the hazards associated with [Anaconda] ... going with the company who was already there and already performing made the most sense.” Tr. at 1079 (Jonas). WR 3 provided that KBR would pay Tamimi a fixed per person/per day (“PPPD”) price based upon either the actual headcount of troops served at the Anaconda DFAC or the projected headcount provided by the Army, whichever was greater. See JX 71; JX 154. On September 1, 2003, Tamimi began providing DFAC services as a KBR subcontractor at facility A-3. See JX 86, at 14. On September 15, 2003, Tamimi began serving food as a KBR subcontractor at the A-l and A-2 facilities at Anaconda. See id. at 12-13 . However, “[i]n the rush to stand up DFACs, MA 3 WR 3 was awarded to Tamimi without prior KBR ‘greensheet’ approval.” PL’s Br. filed Dee. 22, 2011, at 8. The practical effect of this circumstance was that, at the time Tamimi began operating the DFACs at Anaconda under KBR supervision, it did so despite the fact that KBR officials had yet to approve the payment of any money to Tamimi for its efforts.
On September 4, 2003, the Army issued a Letter of Technical Direction instructing KBR to plan for and execute DFAC service for 24,900 personnel at four facilities at Anaconda. See JX 238. During that same time, Army personnel instructed KBR to replace two of the Anaconda DFAC facilities (A-l and A-4) with new, more permanent structures. Tr. at 350-51 (Walter). As a result, Mr. Spore, the LOGCAP III Regional Project Manager for Northern Iraq, and Laszlo Tibold, Subcontract Administrator at Camp Anaconda, instructed Prime Projects International (“PPI”) to begin construction of the new DFAC structures, but PPI did so without a contract or a SOW. Tr. at 1286 (Petsche). This contravention of procurement procedures would prove to be a primary cause of the ensuing issues surrounding Camp Anaconda and the root of great frustration over the coming years for KBR. 19 *725 Construction on the new A-l facilities commenced on October 4, 2003, and on the new A-4 facility on October 16, 2003. See JX 86, at 12,15.
There was, however, a practical problem. Because of the costs of the new facilities, KBR encountered a “color of money” issue in that it could not directly seek reimbursement under LOGCAP III under which it was operating. On October 3, 2003, Administrative Contracting Officer (“ACO”) Derek Bonenc-lark sent an e-mail to Mr. Spore regarding the construction of the new facilities. See JX 50. ACO Bonenclark reminded KBR that
KBR is not in the business of procuring buildings for the army. KBR is in the business of providing services. Construction of facilities in the pursuit of services provided under LOGCAP should be done with facilities that are temporary in nature and should be done in order to provide the best value to the army.
Id. Because the Army wanted KBR to provide only “turnkey” food service at Anaconda, Tr. at 235, 264, 480-81 (Walter); Tr. at 654-55 (Hayes), and at this stage saw no need to own any facilities in Iraq, an issue arose as to who would pay for — and thus own — the new DFAC facilities. Mr. Spore devised a solution whereby Shabbir Khan and Tamimi would take on PPI as Tamimi’s subcontractor and pay PPI for the new DFAC facilities and then work the costs of the buildings into the PPPD rates that Tami-mi was charging KBR at Anaconda. See Tr. at 1286-88 (Petsche); JX 381. Tamimi agreed to this process, and KBR understood that Tamimi ultimately paid PPI $5 million for the shells of A-l and A-4. Tr. at 653-54 (Hayes); JX 48, at 2845; see also JX 85; JX 335. The new facilities eventually were completed, and A-l served its first meal on February 4, 2004, and A-4, on April 16, 2004. 20 See JX 86, at 1215. Further complications arose when, as the war dragged on, the Government changed its corporate mind and decided that KBR should own the faeilities. The negotiations between KBR and Tamimi regarding the construction costs of these buildings played a significant role in the present dispute.
In the meantime Tamimi continued to operate the DFACs at Anaconda without actually being under contract. As early as October 18, 2003, “serious violations of [KBR’s] procurement system” had been identified by KBR Procurement personnel. JX 327. KBR procedure at the time was for the Army, through the Contract Administrator, to send a requirement to the KBR Operations personnel. See Tr. at 1288 (Petsche). The Operations personnel then would generate what was known as a “requisition,” a key instrument that “provides a general outline and description of work to be performed. It provides the authorization, the signatures. It provides [the Procurement personnel] an estimate, a rough order of magnitude, price, cost.” Tr. at 1289 (Petsche). Further, the requisition was a necessary step in the process because, without one, the Procurement personnel were not actually authorized to issue or award a subcontract for the work to be performed. Tr. at 1289 (Petsche). Although Tamimi had been operating as a KBR subcontractor since September 1, 2003, at Anaconda, the Operations personnel still had not generated a requisition for the DFAC services by the end of October 2003.
On November 3, 2003, KBR Operations personnel issued a material requisition for WR 3, pricing six months of DFAC services for all four DFACs at $111,650,000.00. 21 See JX 371, at 2270. This requisition was not forwarded to Mr. Petsche until November 17, 2003, JX 193, and he did not receive the signed requisition until November 19, see JX 233, at 0432. On November 18, 2003, Mr. Tibold e-mailed Mr. Petsche to inform him that the requisition for MA 3, WR 3 had been approved and that the budget was for six months. See JX 192. Tamimi then submitted its proposal to KBR, which Mr. Petsche received on November 19, 2003, for all of the *726 DFAC work to be performed at Anaconda. See JX 187. That proposal indicated a total price of $223,377,120.00 for one year-. Id. Mr. Petsehe testified that the proposal raised his suspicions for two reasons: (1) Tamimi had been asked to provide a proposal only for six months, not for a full year of work; and (2) the dollar value proposed was almost identical to the amount stated in the requisition form from Operations. See Tr. at 1303-04 (Petsehe). 22
On November 21, 2003, Mr. Petsehe responded via e-mail to inquiries from Mr. Walter about the state of contractual affairs at Anaconda. 23 See JX 233. Mr. Petsehe informed Mr. Walter, KBR’s Vice President of Accounting and Finance, Government and Infrastructure Division, that the work release had not issued yet and that, generally, the procurement situation at Anaconda was “a mess.” Id. In addition, Mr. Petsehe related to Mi’. Walter that the PPPD rate of the proposal, with food, was $25.43, which multiplied out by a 24,400 headcount yielded a product that was $38,000.00 over the requisition amount. Id. Mr. Petsehe testified that this was significant because “at this point there was an initiative within KBR to start working towards pushing the prices down. We were rolling from a contingency into a sustainment type program and so they wanted us to start working on ... beating the subcontractors down on their price.” Tr. at 1310 (Petsehe).
On November 26, 2003, the Food Service personnel — Messrs. Gatlin, Hall, 24 and Spore — signed a Justification for Other Than Full and Open Competition justifying the sole source-selection of Tamimi for the Anaconda work. See JX 101. By December 6, 2003, Mr. Petsehe had completed the WR 3 paperwork — superseding the WR 3 issued on August 25 — awarding Tamimi the work at all four DFACs at Anaconda. See JX 558. By this date WR 3 contemplated a period of performance backdated from September 1, 2003, through March 1, 2004, and it had been signed by Shabbir Khan of Tamimi. However, Mr. Petsehe refused to sign WR 3 without the proper authorization from his superiors. See Tr. at 1314-15 (Petsehe); JX 232. In a December 8, 2003 e-mail to various KBR personnel, Mr. Petsehe stated that, aside from WR 3’s being beyond his signature authority, even at this date no SOW existed for WR 3 — a responsibility of Food Service— thereby making the finalization of a contract impossible. See JX 232. Mr. Petsehe later expressed uncertainty about his ability to justify the high cost of this contract at the time, opining that he “could not present it with the data and support [he] had,” JX 329; see also Tr. at 1438 (Petsehe), and foreshadowed the inevitable examination of this chaotic effort by the Defense Contract Auditing Agency (“DCAA”).
On December 23, 2003, Mr. Jonas fired Mr. Petsehe for requesting that a subcontractor, LaNouVelle, procure an airplane ticked for his cousin — a breach of KBR Procurement’s zero-tolerance policy regarding favors from subcontractors. See Tr. at 1319 (Petsehe); Tr. at 1065 (Jonas). By that date WR 3 had still not been approved formally by KBR.
3. The Tiger Team
To say that the war in Iraq did not proceed as initially conceived is an understatement, and the constantly changing demands required by the Army’s effort were foresee *727 able to neither the Army nor to KBR. As Mr. Walter colorfully explained, KBR was at the front of a “power curve” to provide support that the Army could not. Tr. at 258, 402-03 (Walter). Within a six-month window, KBR was issued thirty TOs. 25 This contingency-type operation placed severe demands on KBR and its personnel in-country, and, in attempting to provide adequate services to the troops, the procurement paperwork often was neglected and vendors were not paid immediately. Tr. at 258-59 (Walter). Because of the numerous deficiencies in the subcontract files from the previous year, on January 2, 2004, KBR sent to Iraq a “Tiger Team,” led by Charles A. Carr, to begin putting the procurement paperwork in order and bring the files into compliance so KBR could begin paying its subcontractors. 26 Tr. at 258-63 (Walter); Tr. at 524-25 (Hayes); Tr. at 1100-01 (Jonas); Tr. at 1862-63 (Jill E. Pettibone, then-consultant to KBR who assisted Mr. Carr on the Tiger Team). Among the objectives of the Tiger Team was ensuring that each procurement file also contained the requisite “greensheet approval”— the procurement document that reflected that the expenditure of a particular amount of company funds had been approved at the appropriate level of management — in other words, proof that KBR contractually was bound to pay the subcontractor. 27 See Tr. at 261-62 (Walter).
The unenviable task of reviewing the Anaconda files and attempting to justify the award of WR 3 to Tamimi to secure green-sheet approval fell to David L. Hadcock, KBR’s Procurement Materials & Property Manager, who was called by defendant. Tr. at 1715-16 (Hadcock). Tamimi still had not been paid at all for its work under MA 3 WR 3. Tr. at 1755-56 (Hadcock). In an effort to better understand the history of the Anaconda DPAC situation, Mr. Hadcock reached out to Mr. Petsche. Mr. Petsche responded in an e-mail statement dated February 16, 2004, that fueled the Government’s fraud counterclaims, as will be discussed. See JX 329. Cogent to the work of the Tiger Team, Mr. Petsche discussed his frustrating experience at Anaconda and the travails he endured with the Operations personnel to get an approved contract in place. See id. Based on the information submitted by Mr. Petsche, Mr. Hadcock reported to his supervisor, Mr. Jonas, that in Mr. Hadcock’s upcoming meeting with Tamimi, his two immediate goals were to
(1) Develop a Price Reasonableness Summary so that a proper Green Sheet Package can be sent to [Mr. Jonas] for [his] review and approval.
(2) Try to secure a complete set of daily headcount records based on actuals [headcounts] which we can use as a basis to pay outstanding invoices. (Note: The headcount records submitted with the invoices are based on projected headcount only (signed by the military)[) ].
Id. ■
Mr. Hadcock — along with Jamal Nasery, KBR Subcontract Administrator, and KBR’s Wayne Agness, Project Manager-Food Service — met with Tamimi representatives Shabbir Khan and Ilyas Khan, Tamimi’s General Manager, on February 19, 2004, to discuss the new DFAC facilities at Anaconda and the status of WR 3. See JX 200; JX 335 (Nasery memorandum dated Feb. 19, 2004). 28 According to Mr. Nasery’s memorandum, KBR and Tamimi determined, inter alia, the *728 following relevant points: (1) Tamimi was instructed by KBR to make a full payment for the new DFAC facilities at Anaconda directly to PPI, and Tamimi had paid PPI $2,445,763.00 for one structure (the second structure, being identical, was the same price); (2) Tamimi agreed to continue to operate in accordance with the terms of the December 6 WR 3, which was set to expire on March 1, 2004; (3) Tamimi “submitted a meal price per headcount per day that incorporates all of their costs (buildings, kitchen equipment, labor, infrastructure, maintenance, operation[,] etc.) and applied it to all DFACs at Anaconda,” and the price structure was accepted by KBR, which obtained the necessary funds under the December 6 WR 3, although Tamimi agreed to provide a complete cost structure for review; (4) Tami-mi had submitted invoices that exceeded $50 million for the work performed in September, October, and November and was awaiting payment; (5) KBR had been the owner of DFAC A-3 as of September 1, 2003; and (6) KBR would become the owner of DFACs A-1 (new), A-2, and A-4 (new) on October 1, 2004, and ownership would include the structure, infrastructure, and equipment. Id.
On March 1, 2004, KBR and Tamimi executed Change Order 1 to MA 3 WR 3, which extended Tamimi’s subcontract performance at Anaconda from March 2 through March 31, 2004. See JX 406. On March 3, 2004, Mr. Hadeoek sent an e-mail to Tom Quigley, Procurement Materials & Property Manager, summarizing his efforts. JX 546. According to Mr. Hadeoek, the main obstacle to green-sheet approval was that the “files do not contain any documentation justifying that the prices submitted by Tamimi for the performance of the services [under WR 3] on a single source basis were fair and reasonable.” Id. Mr. Hadeoek then set forth his method for providing that price justification “after the fact.” Id. Essentially, Messrs. Hadeoek and Nasery laid out a chart that compared the unit prices at Anaconda with those at Camp Cedar/Adder — a competitively awarded subcontract. See JX 563. Messrs. Hadeoek and Nasery found that the prices at Anaconda were considerably more expensive than at Cedar/Adder, but they believed that they could justify most of the price elements. Mr. Hadeoek’s justifications for the higher costs of services at Anaconda compared to the costs for similar services at Cedar/Adder are, as follows:
—KBR will assume ownership of four (4) DFAC facilities at Anaconda in September 2004. Two of which are new Kirby Facilities. KBR will not own any of the Cedar/Adder facilities.
—Tamimi incurred higher cost of operation while establishing the Anaconda DFAC, primarily due to increased hazards from September[] 2003 onward. 29 Little risk was encountered when performing the Cedar/Adder DFACs.
—There are four (4) DFAC facilities at Anaconda, hence, higher labor and management cost is incurred. There are two (2) smaller facilities at Cedar/Adder.
—The menu mandated at Anaconda is of [a] higher price than Cedar/Adder.
—Mobilizing to Anaconda is a 1200 km distance from Kuwait, versus 200 km to Cedar/Adder.
JX 546, at 9880.
However, Mr. Hadeoek determined that he was not able to justify all of the price elements at Anaconda. Id. Those categories which he deemed lacking were “Garbage[;] Staff Transportation^] Staff Meals[;] Overhead and Profitf;] [and] Construction Price for Two Kirby Facilities.” Id. Regarding the new DFACs, Mr. Hadeoek was troubled that, while KBR had instructed Tamimi to pay PPI for the structures, it had not instructed Tamimi to manage the PPI SOW, effectively meaning that there was no SOW for PPI. Id. The result was that neither KBR nor Tamimi could justify the $5 million cost of the new DFAC structures at Anaconda. Id. None *729 theless, Mr. Hadeoek requested greensheet approval for WR 3, but only based on the satisfaction of four conditions. Id. Mr. Had-eoek advised that approval of WR 3 would be appropriate if all of the following conditions were met:
1. Tamimi will not adjust its unit prices for the period 1 September] [2003] through 1 March [2004]. Due to the fact that KBR solicited a proposal from Tami-mi; Tamimi submitted a proposal which was accepted by KBR; KBR issued a Work Release which was accepted by Tam-imi; Tamimi commenced work; Tamimi has been performing the work continuously since 1 September] [2003].
2. Payments should be made based on current unit prices but extended only against actual head count. As of 1 March [2004], Tamimi has unpaid invoices totaling over $60,000,000. Nevertheless, Tamimi has been performing the services in good faith since 1 September]. Any future delays in payments will certainly cause disruptions in service.
3. Direct Tamimi to continue the work from 2 March [2004] through 16 September [2004] with the understanding that unit prices will be subject to review and negotiation. Mutually agreeable pricing will be established by 31 March [2004].
4. Upon KBR ownership of the DFACs in September, a new [requisition] will be issued on a competitive basis.
Id. Mr. Hadeock’s testimony reaffirmed the unvarnished businesslike approach reflected in this memorandum. Tr. at 1748-59 (Had-eoek). He was, and is, a conscientious KBR employee; he exhibited candor, and the court accorded due weight to his testimony.
On April 22, 2004, Mr. Jonas communicated to John Townsend, head of KBR Procurement, via e-mail that the greensheet for WR 3 was approved. See JX 546, at 9879. On April 26, 2004, all required signatures for final greensheet approval had been obtained, and WR 3 officially was sanctioned within KBR. See JX 109.
4. Follow-up of the “drug deal” aspersion
As discussed above, Mr. Petsche responded to Mr. Hadcock’s inquiries regarding Anaconda via e-mail on February 16, 2004. See JX 329. In that e-mail, aside from providing his own personal lamentations regarding his experience trying to get WR 3 approved, Mr. Petsche also made several statements suggesting that criminal improprieties were occurring in the procurement process at Camp Anaconda. Provocatively, Mr. Petsche began his recollection by labeling Anaconda “the Mother of all DFAC Drug Deals.” 30 Id. Mr. Petsche explained that “[i]t was predestined and out of control from the start.” Id. When describing how the Food Service Operations personnel were telling him that the Anaconda work should go to Tamimi, Mr. Petsche cryptically related that “[t]here is more to that story, but it would take me a few hours and a couple of beers to go through all of that.” Id. Regarding the proposal from Tamimi that was so close in amount to the one on the supposedly confidential Food Service requisition, Mr. Petsche commented to Mr. Hadeoek that he “thought it odd, but [he] needed to get the issue over with, so [he] did not question it. It seemed to [him] that the deal had already been worked out....” Id. Lastly, in concluding his recollection, Mr. Petsche stated that “[t]here is a whole lot more to this story, and others that can be told, but again, [that] would take more time.” Id.
Mr. Hadeoek forwarded Mr. Petsche’s email to Messrs. Jonas and Carr because he felt that these revelations might require investigation by KBR. See id. Although it *730 appears delay ensued, on September 7, 2004, Mr. Jonas contacted Mr. Petsehe by telephone relating to KBR investigations of fraud. On September 24, 2004, Mr. Jonas followed up with an e-mail to Mr. Petsehe, JX 484, who by this time was working in Kuwait and Iraq with a different subcontractor. Tr. at 1329-30, 1419-20 (Petsehe). Mr. Jonas explained in his e-mail:
[Ljegal is trying to conduct investigations regarding several individuals and allegations of kickbacks and fraud. They believe that you may be able to clear the air or provide insight on some of this. You are NOT the subject of this effort. It would be helpful to get the bad eggs out of the group but first we have to know what is happening. We would conduct this interview in some place away from Iraq, such as Amsterdam or London. We will keep your participation quiet. Let me know if you would be willing to talk. I can either be at the meeting or not, at your discretion.
JX 484. On November 10, 2004, Mr. Petsehe responded via e-mail, declining to speak with any KBR officials. Id. According to his email, Mr. Petsehe could only provide “rumor and speculation” and did not have any relevant information to discuss. Id. Although Mr. Petsehe stated that he was willing to discuss the “merits and processes of the contracts that [he] administered,” he did not wish to involve himself in “serious rumors” swirling at the time concerning illegal activity. Id. Mr. Petsehe informed Mr. Jonas that he wanted to move on with his life post-termination from KBR. Id. Mr. Petsche’s testimony confirmed his assessment of the situation in late 2004. See Tr. at 1331-32, 1446 (Petsehe).
IV. Tamimi’s prices become an issue
1. The negotiation of Change Order 6
Despite the greensheet approval for WR 3, the prices that Tamimi were invoicing to KBR for DFAC services throughout Iraq came under scrutiny due in large part to the Army’s and DCAA’s growing objections to the costs. By early to mid-2004, KBR began recompeting many of the DFAC contracts, and awarding new, “SK” contracts at lower prices than the initial round of contracts under TO 59. See Tr. at 1892, 1940-41 (Pet-tibone). In some of those contracts, KBR was able to secure prices that were up to 40% lower than the original round of contracts. See JX 352. However, this process of recompeting all of the DFAC contracts was a slow one, and, because many of the original subcontracts were beginning to expire at about the same time, KBR had to resort to issuing Change Orders (“COs”) to extend the period of performance under the old subcontracts. This, according to Ms. Pettibone’s August 8, 2004 e-mail, was “to buy some breathing room to conduct negotiations and competitions.” JX 351, at 1148.
One group of subcontracts that had been extended, yet was recognized to need renegotiation, was Tamimi’s, including WR 3. See id. at 1148-49 . DCAA had taken particular interest in the Tamimi subcontracts because Tamimi was billing on a PPPD based on either projected or actual headcount, whichever was higher. See JX 419. When informed by KBR that the Government was questioning the amounts being billed, rather than attempt to work toward a resolution, Tamimi indicated that it would not sign any new COs or submit new pricing to KBR, instead preferring to continue billing under the old pricing structure, which was highly favorable to Tamimi. Id. KBR then stopped all payments to Tamimi until KBR would be able to negotiate successfully. Id. Although Tamimi was willing to come to the table, its strategy was to present unreasonable “all or nothing” demands to KBR, presumably in an attempt to continue invoicing under the old pricing structure. See id. (discussing negotiation meeting between KBR and Tamimi officials on July 22, 2004); JX 334 (illustrating KBR’s frustrations in attempting to negotiate with Tamimi, which, by constantly shifting its position, appeared not to be acting in good faith). Rather than present a reasonable position, Tamimi threatened KBR that it was willing to take the matter to court or binding arbitration if KBR did not accede to its demands. JX 334.
Burt Metzler, the Subcontract Administrator involved in awarding and administering contracts for all of KBR’s DFACs, was the *731 KBR employee responsible for the last attempt at renegotiating the pricing of the Tamimi DFAC contracts prior to KBR resigning itself to litigation. See JX 334; Tr. at 434-45 (Walter); Tr. at 1166 (Jonas). The record of the negotiations can be gleaned only from documents, although some witnesses gave their understanding about what transpired. Mr. Metzler, who did not testify, began his negotiations with Tamimi in July 2004 with the goals of restructuring the pricing under the Tamimi contracts to align with the structure under the new SK subcontracts, lowering the prices Tamimi was invoicing, and resolving the facilities issues of the two new Anaconda DFACs. See JX 353. However, according to documents authored by Mr. Metzler, Tamimi refused to negotiate the COs for each of the DFAC contracts individually and, instead, would only negotiate regarding a discount to be applied across all nine of its KBR subcontracts. See JX 334, at 6712. During the negotiations Tami-mi continued to invoice KBR under the old pricing system. However, KBR executives continued to refuse to pay Tamimi “because [KBR] could not bill it because we could not certify it to the Government] as an appropriate price (because our position was it should be repriced).” JX 351, at 1149 (Pettibone email chain).
Eventually, KBR and Tamimi were able to come to an agreement, see JX 419, although Mr. Metzler expressed both considerable frustration about dealing with Tamimi and regret at not having achieved more substantial savings for KBR. See JX 334, at 6711-12 (Metzler e-mail to his supervisor, Tom Don-ley, Procurement Material & Property Manager, dated July 22, 2004). As set forth in Mr. Metzler’s Justification Memorandum dated August 4, 2004, 31 for the soon-to-be-signed CO 6 modification to WR 3, Tamimi agreed to an overall price reduction of $16,560,000.00. See JX 419, at 2950. KBR personnel had analyzed the Tamimi invoices; of the unpaid Tamimi invoices, approximately $137,000,000.00 represented the costs based on actual headcounts at the DFACs through June 30, 2004. Id. Tamimi had invoiced approximately $170,000,000.00 by using the projected headcounts — the amount to which Tamimi considered itself entitled. Id. The final negotiated position was that KBR would allow Tamimi to invoice “actual headcount plus 12%,” which amounted to approximately $153,440,000.00 in total accepted invoicing. Id. Thus, $170,000,000.00 less $153,440,000.00 equaled the approximate savings of $16,560,000.00. Id.
When Tamimi would not assist KBR in allocating that reduction over the nine Tami-mi subcontracts, that task fell to Mr. Met-zler. Id. at 2950-51 . Mr. Metzler’s goal was to allocate those savings across the nine subcontracts in a way such that each of the separate subcontracts could be justified as fair and reasonable to the DCAA. Id. at 2950 . According to Mr. Metzler, in his efforts to justify all of the pricing as fair and reasonable, the discount “was allocated to the contracts on a percentage basis. The contracts which were billed closest to actual headcount versus projected were allocated a smaller percentage of the [savings] discount ... [and] [t]he contracts that had the biggest variance between actual headcount versus projected headcount were allocated a bigger percentage” because those contracts were likely the ones most difficult to justify as fair *732 and reasonable. Id. Under Mr. Metzler’s method, WR 3 at Anaconda received a $4,907,319.00 discount (approximately 30% of the total savings), the second highest invoice offset of the nine Tamimi subcontracts. Id. at 2951 .
On August 12, 2004, following the August 4, 2004 Metzler Justification Memorandum, KBR and Tamimi executed CO 6 to WR 3. See JX 411. CO 6 modified the agreement between Tamimi and KBR in several ways. First, CO 6 extended Tamimi’s period of performance at Anaconda from June 12 through September 15, 2004. Id. CO 6 also implemented the negotiated price reduction assigned to the Anaconda DFACs. This discount was distributed such that “the invoice values [were reduced] by 5% for invoices ... from March 2, 2004 through 31 April 2004 ... [and a] 10% discount toward invoices from May 1, 2004 through June 30, 2004.” Id. Mr. Metzler’s Justification Memorandum recounted the facts that had led the parties to their current positions, following which Mr. Metzler began his attempt to justify the prices as fair and reasonable, claiming that KBR had “successfully reduced Tamimi’s pricing bringing the costs closer to the current market.” JX 419, at 2946. Mr. Met-zler’s 5% discount represented a savings of $1,936,906.00, and the 10% discount equaled a savings of $2,970,413.00. JX 411. In addition, CO 6 incorporated a new contract pricing structure — one more in line with the new “SK” contracts that KBR began implementing in early 2004. 32 Id. As explained by Mr. Metzler:
Tamimi agreed to the new definitized pricing moving forward. The original contract was based on a [PPPD] rate. KBR has since changed the pricing to reflect definitive costs and variable costs. The defini-five costs are for items such as Power Generation, Reefers [refrigeration units], Facilities costs, and other CLINs [“Contract Line Item Numbers”] that should not vary with the number of troops fed. The variable costs are for CLINS where the cost should increase or decrease with the troop numbers fed. These are items, such as Co[n]sumables and Food.... The 10% discount toward invoice values from May 1, 2004 thru [sic ] 30 June 2004 ... is based on the same facts given above. The discount was built into the new pricing structure proposed by Tamimi which will be used from May 1, 2004 until the end of the contract....
JX 419, at 2947.
Under this new contract structure, Tami-mi’s prices were $38.90 per person with food and $29.26 per person without food, which, when compared with other contracts “awarded in the same period,” reflect the high end of the pricing. 33 Id. at 2948 . Mr. Metzler’s attempt to justify the prices, however, was, at best, confused. Mr. Metzler stated: “Tamimi’s new proposal is based off pricing which was originally considered fair and reasonable due to adequate competition and the fact that they were the low bidder. The new pricing proposed by Tamimi is 10% less than the original pricing and considered fair and reasonable.” Id. It appears that Mr. Metzler was mistaken regarding the specific circumstances surrounding Anaconda. The initial award of WR 3 was not competed, thus foreclosing Tamimi from being the “low bidder.” 34 Furthermore, one of the roots of the problem for DCAA was its position that the prices in the initial round of subcontracts were not fair and reasonable, so to use the initial award as an anchor of what was fair *733 and reasonable was a questionable proposition.
Finally came the issues of ownership of the new DFACs at Anaconda. Mr. Metzler wrote in his Justification Memorandum that the initial idea was that “confirmation of [the] commitment made by Shabb[i]r Khan on behalf of Tamimi that DFAC[ ]s Al, A4 would become the property of KBR/U[S] Military on 15 September 2004” was to be included in CO 6. Id. at 2947 . However, Mr. Khan reversed himself on this position, with Mr. Metzler speculating that “[t]his commitment [wa]s being disputed [during negotiations] due to the fact that Tamimi does not want to honor the said agreement in fear of being displaced at th[e] site,” id., a real possibility given KBR’s collective attitude toward Tami-mi at the time, see JX 334 (July 22-25, 2004 inter-KBR e-mail chain). Thus, because the parties could not agree on the facilities ownership issue, KBR and Tamimi agreed only “to negotiation meetings to discuss and defi-nitize ownership of facilities: DFAC Al & A4. KBR and Tamimi agree to negotiation in good faith to accomplish this task by September 15, 2004.” JX 411.
After CO 6 was executed, the record reflects that not all cognizant executives of KBR were satisfied with the CO 6 price reductions. Two KBR high-level personnel unenthused by CO 6 were Mr. Walter and Ms. Pettibone. When CO 6 was forwarded to KBR’s Arlington, Virginia office for green-sheet approval, it was met with resistance. 35 See JX 353. According to Ms. Pettibone,
Burt justified all the prices based on them being lower than the past. But when you do the comparison of the renegotiated prices against current competitive prices (from Tamimi, sometimes for the same site), there are vast differences. 2 were OK, and I recommended they be paid, but they are small compared to the others.
I figured i[f] I could get within the competitive price plus 20%, I could probably justify it. 2 sites — Anaconda and ISG — are 30-35% higher than the competitive price. I was looking for a way to get those in the competitive range, and am losing it trying to figure it out among other things.
Id. To meet these mounting concerns, it appears that Mr. Metzler’s initial Justification Memorandum was revised in response to dissatisfaction from personnel such as Cheryl C. Ritondale, who ultimately succeeded Mr. Jonas and was the Director of Procurement Compliance and Training in 2004. See JX 543. However, the new justification was itself apparently thin on the details of how Tamimi’s prices were justifiable. Mr. Don-ley’s e-mail, which refers to the revised justification memorandum that was not presented at trial, conceded that, “[i]f the Memo were to go into more detail, it would only invite more questions whose answers will never be satisfactory due to the nature of this beast.” Id. (Aug. 18-27, 2004 inter-KBR e-mail chain). In response Ms. Ritondale indicated her frustration: “I must be confused because the ‘new price justification memo contains less information than the original.... KBR has still not demonstrated that the new pricing structure or the negotiated amount is fair and reasonable.” Id.
By September 20, 2004, Mr. Walter, still unsatisfied with the amount of the invoices compared with the DCAA Form Is, would not approve any payment to Tamimi, even at reduced rates that better approximated actual headcounts. Tr. at 436-37 (Walter); JX 354. As Ms. Pettibone wrote also on September 20, 2004, “[n]either he nor Cheryl Ritondale are satisfied with the Anaconda [price justification], and based on that [Mr. Walter] has told us no payments on any of them. No invoice payments, no partial payments, no payments of any kind on any of the 9.” JX 352. Essentially, KBR believed that the Tamimi prices, including those at Anaconda, were still too high to merit payment on their invoices. According to Mr. Walter, “[w]e had gotten a 10 percent reduction from Tamimi on their prices, and we felt that we could get some additional price concessions from Tamimi,” Tr. at 448 (Walter), most likely because “[u]nder competitive bids ... Tamimi has reduced prices up to 50%,” JX 89. This would eventually lead to the negoti *734 ation of CO 9, the prices agreed to therein being a iynchpin to plaintiffs claim that its costs, reflecting the underlying Tamimi prices, were reasonable.
2. KBR’s failed self-performance
While KBR was attempting to negotiate with Tamimi regarding the structure and pricing of its DFAC contracts, KBR simultaneously was attempting to recompete the work at Anaconda. On July 15, 2004, KBR issued an RFP for the work at Anaconda to begin around September 15. JX 356. On July 19, 2004, Biji Fenn, Tamimi’s Operations Manager, sent an unsolicited proposal to the Army Contracting Officer at Anaconda — Michelle Rainey — offering to contract directly with the Army to provide the DFAC services at Anaconda at just $12.64 PPPD. See JX 357. Two days later, on July 22, 2004, Mr. Fenn emailed Ms. Rainey informing her that Tamimi owned all of the DFAC structures, material, utility systems, and controlled the DFAC employees at Anaconda. JX 65. Irked by Mr. Fenn’s efforts, that same day Ms. Rainey e-mailed Gerald Warner, the Project Manager at Anaconda, to inform him that Tamimi was soliciting work directly from the Army, an illegal course of conduct while still working under LOGCAP III. JX 136. Ms. Rainey instructed Mr. Warner to enlighten Mr. Fenn on “the proper contractual relationship between Prime Contractor, Subcontractor, and the customer.” Id.
Duly chastised, Tamimi submitted its competitive proposal to KBR for the Anaconda DFAC services on July 31, 2004. See JX 168. KBR also received two competitive proposals from other vendors. However, while waiting on proposals from the vendors, KBR was assessing whether it would be more beneficial — and less costly — simply to self-perform the DFAC work at Anaconda. JX 74, at 9865. The KBR management at Anaconda — evidently frustrated by dealing with Tamimi — was one contingent within KBR that favored a shift to self-performance. See JX 334. Several managers did not believe that it would be prudent for KBR to try and take on the work itself and that it should maintain its role as prime contractor only. See Tr. at 1178-79 (Jonas). Ultimately, it was predicted that KBR would save the Government approximately $17 million if it self-performed the work, so KBR management approved the plan for KBR to begin self-performance when Tamimi’s subcontract at Anaconda expired on September 15, 2004. JX 74, at 9865. As a result, KBR solicited proposals from vendors that would provide KBR with the labor pool necessary to implement the self-performance plan, and, of the four proposals that it received, KBR awarded the contract to Eurest Support Services (“ESS”) in August 2004. Id.
ESS quickly encountered logistical problems trying to mobilize the considerable foreign workforce required for the DFAC services at Anaconda. Id. ESS found its traditional labor pool to choose from diminished because certain countries were precluding their citizens from entering Iraq. Id. It became readily apparent that KBR would not be able to begin self-performance by mid-September, and KBR was forced to extend Tamimi’s period of performance on September 10, 2004, via CO 7, through November 30, 2004. Id.
At the same time, KBR also was cognizant of the growing discord and friction between KBR and Tamimi because of KBR’s refusal to make payments on any of Tamimi’s invoices. As reflected in a KBR Memo to File, for which Ms. Pettibone may have been responsible, by October 11, 2004, KBR was reconsidering its position to withhold all payments from Tamimi. See JX 89. KBR had backed off its previous position, “reeog-niz[ing] that Tamimi has provided services at the DFACs for which the invoices were submitted.” Id. Further, KBR appears to have conceded that “[tjhose services should be compensated in some manner ... [because] KBR does not wish there to be operational impacts on the clients or financial impacts on the subcontractor and its suppliers.” Id. As such, KBR adopted the “conservative approach” of “making partial payments to the subcontractor on 7 subcontracts and work releases. These partial payments were computed using the actual headcounts at the site and the average [PPPD] rate paid by KBR to its subcontractors.” Id. However, KBR recognized that “[o]n average, these partial pay *735 ment[s] represent about half of what the subcontractor has requested in payment for the invoices covered.” Id. In other words, KBR was still holding a substantial amount of money that Tamimi had billed for its services. According to Mr. Jonas, these “slow rolling payments” were effected in order to give KBR leverage over Tamimi in future negotiations for price reductions. 36 Tr. at 1177 (Jonas).
Even with the extension of time, ESS was unable to perform under its contract with KBR. Tr. at 1177 (Jonas). As documented in an October 29, 2004 Memorandum for Record written by Betty E. Hayes, who on September 23, 2004, became the Acting Procurement Manager at Camp Anaconda, ESS could not provide the requisite number of laborers. JX 222. Ms. Hayes records that, on October 28, 2004, Ted Lawrence and another representative of ESS met with Ms. Hayes and Mr. Warner regarding the state of affairs. See id. At this point some ESS laborers had arrived at Anaconda, but they were without proper hygiene items; unable to call home to notify their families that they were safe; and, most troubling to KBR, under contract to work twelve-hour shifts for only six days a week. Id. The impediment was that ESS had contracted with KBR to provide workers on twelve hour shifts for seven days a week. Id.
On November 4, 2004, as recorded in Ms. Hayes’s Memorandum for Record dated November 4, 2004, Mr. Lawrence had another meeting with KBR at Anaconda. See JX 455. Mr. Lawrence informed KBR that “due to the Sheik of UAE’s [ (the “United Arab Emirates”) ] untimely death ... ESS would not be able to get the remaining personnel into Dubai and on to Iraq until after 20 November 04” because the government offices responsible for issuing the necessary visas were closed in mourning. Id. Moreover, the workweek issue had not been resolved because “most of the personnel do not get a break for a year and ... 7/12 is too much to ask.” Id. As a result, KBR would need more laborers and housing in order to fulfill its obligation to the Army, and at this point ESS had secured less than half of the original number of. laborers needed for the job. See JX 455; see also JX 220. By November 8, 2004, ESS informed KBR that because of the logistical standstill in the UAE, ESS could not obtain the visas for the remaining workers in sufficient time to furnish a functional number of laborers trained and ready to begin the DFAC service at Anaconda by the end of November. JX 220. On November 11, 2004, KBR issued a stop-work order to ESS and terminated ESS on November 13, 2004. See JX 218.
As affirmed in Mr. Walter’s certified claim from KBR to the Army dated July 17, 2008, JX 74, KBR was left in a vulnerable position. Tamimi once again had been approached about a short-term extension of its contract so that KBR would have time to hold a competition for the Anaconda DFAC services, but Tamimi indicated its willingness to continue performance at Anaconda only if it were given a long-term contract extension. See JX 74, at 9865-66. If no long-term extension were forthcoming, Tamimi would walk off Anaconda when its subcontract expired on November 30, 2004. Id. at 9865 . Given the short period of time, it would have been impossible for another vendor to mobilize in time to begin providing DFAC services by December 1, so KBR was forced to accede to Tamimi’s demands for a long-term extension or risk breaching its own obligations under TO 59. Id. Although KBR agreed to a long-term extension with Tami-mi, the extension was contingent upon the negotiation of two items: (1) a retroactive discount on prices from July through November 2004, and (2) a competitive price for the new period of performance. Id. at 9866 . Tamimi agreed to yet another negotiation on this basis and continued providing DFAC services at Anaconda.
*736 3. The negotiation of CO 9
On November 7, 2004, representatives of KBR and Tamimi met to negotiate a host of disputed issues, including the prices of Tami-mi’s food stock at Anaconda 37 and the ownership of the new Anaconda DFAC facilities. See JX 85. Ms. Hayes, as Procurement Manager at Anaconda, was asked by Mr. Warner to attend the meeting. Tr. at 575-77, 582-88 (Hayes). Ms. Hayes previously had become acquainted with Shabbir Khan and Tamimi from their shared time spent working in Kuwait. See Tr. at 514, 517 (Hayes). Hired by KBR in November of 2001 to serve as a Senior Subcontract Administrator, Ms. Hayes first traveled to Kuwait in November 2002 to help with the procurement activities at Camp Aifjan under TO 27. Tr. at 514-15 (Hayes). Subsequently, Ms. Hayes worked on the Tiger Team in Kuwait and Iraq before being assigned to work as the Procurement Manager at Anaconda. Tr. at 524-33 (Hayes). Prior to attending this meeting, Ms. Hayes had not been involved personally with the DFAC procurement issues and, aside from the food-stock issues, was not personally informed or knowledgeable about the other issues surrounding the work at Anaconda. Tr. at 577 (Hayes).
Ater working through the issues with the food-stock prices, see Tr. at 582-86 (Hayes), discussion turned to the DFAC facilities at Anaconda, see Tr. at 582 (Hayes); JX 85. “Shabbir was still adamant that he owned the buildings, he never got paid for the buildings, and that [KBR] just couldn’t take his buildings.” Tr. at 586-87 (Hayes). Because the Tamimi representatives — Shabbir Khan and Zubir Khan, Tamimi’s Operations Manager, Baghdad, a deputy to Shabbir — were becoming agitated discussing the issue, Ms. Hayes tried to calm them down and stated that they would need to come to an understanding. Tr. at 587-88 (Hayes). At this point Remo Butler, the KBR Project Manager for LOGCAP III in Iraq, asked if Shabbir Khan would be willing to sit down and negotiate ownership of the buildings, to which Mr. Khan agreed, provided that Ms. Hayes would negotiate for KBR. Tr. at 588 (Hayes). Mr. Butler agreed and directed Ms. Hayes to “coordinate with Tamimi to analyze the cost of the [PPPD] Rate with food to ascertain a shared cost association and to formulate a possible ‘Buy Out’ cost determination regarding the[] [Anaconda DFAC] facilities.” JX 85. Ms. Hayes conditionally agreed, provided that her supervisor, Mr. Jonas, approved. Tr. at 589 (Hayes). Mr. Jonas subsequently approved Ms. Hayes as the KBR representative to negotiate with Tamimi, expressing the opinion at trial that Ms. Hayes was a “very experienced and knowledgeable negotiator ... who knew what her job was and would do her job straight up.” Tr. at 1132-34 (Jonas). Mr. Jonas “had no concern” about Ms. Hayes’s negotiating with Mr. Khan by herself. Tr. at 1134 (Jonas).
The court found that the enthusiastic endorsement of Ms. Hayes by Mr. Jonas and plaintiffs counsel was borne out by neither her testimony nor the record of her negotiations that she included in her Negotiation Memorandum dated March 29, 2005. See JX 48. Her testimony was in the nature of summations on the topics, flavored with anecdotes. Ms. Hayes’s considerable experience with Air Force procurements before her retirement in 2001 at the rank of Master Sergeant after twenty-three-and-one-half years of service, coupled with a decade in contract-management positions with plaintiff, did not inform her testimony. This was a witness in whom plaintiff reposed enormous confidence and upon whose shoulders plaintiff laid one of its core arguments — that the CO 9 settlement would support the reasonableness of the costs passed on to the Army. As will be examined further, Ms. Hayes was more general than specific, did not appreciate or use KBR’s leverage, fundamentally misunderstood some important facts, and stood up to Shabbir Khan’s posturing, but could not explain what she accomplished other than in *737 overall monetary terms. The court was impressed with this witness as a person, but Ms. Hayes did not convey that she was informed about the history of KBR-Tamimi-Anaeonda or savvy about the parties’ respective negotiating leverage. Her Negotiation Memorandum was discounted by defendant’s surgical cross-examination, as well as by the key DCAA auditor, George W. Duggan (“the most senior working level auditor in Iraq,” PX 478, Deposition of George William Dug-gan, Nos. 09-351C, 09-428C, 09-578C, Kellogg Brown & Root Servs., Inc. v. United States, at 194 (Fed.Cl. Sept. 1, 2010); see also id. at 46, 127, 129, 192-93, 246 ), who testified by deposition.
Initially, Ms. Hayes’s negotiations with Mr. Khan involved only the facilities issue at Anaconda, but, with the contemporary realization that KBit’s self-performance effort was an enormity, Ms. Hayes also was given the task of negotiating an overall reduction of Tamimi’s DFAC prices and a long-term extension of its Anaconda contract, as well as the negotiation of she other contracts that KBR and Tamimi were disputing. 38 See Tr. at 591, 595 (Hayes); Tr. at 1179 (Jonas). Regarding Anaconda, Mr. Jonas instructed Ms. Hayes to negotiate further reductions of the prices that were definitized in CO 6 because he considered that “there was enough leverage” to finally get Tamimi to come down. Tr. at 1179-80 (Jonas). Mr. Jonas estimated that KBR had approximately $40,000,000.00 in leverage over Tamimi because of KBR’s strategy of slow rolling payments. As a target goal, Mr. Jonas instructed Ms. Hayes to get Tamimi down to the rates that it had directly proposed to the Army in its unsolicited proposal sent in July 2004, rates far below what Tamimi was charging KBR. Tr. at 1180 (Jonas).
Ms. Hayes consulted several sources for information in an attempt to familiarize herself with the situation at Anaconda and to learn what KBR should seek in terms of pricing. In an effort to educate herself about the DFAC structures at Anaconda, Ms. Hayes conducted Internet searches for similar units to obtain square-footage prices. Tr. at 592 (Hayes). Ms. Hayes also attempted several similar searches pertaining to the prices for other DFAC equipment, but had difficulty finding vendors that published their prices online since most invited potential customers to call to receive an individualized quote for a specific job. Id. Ms. Hayes reviewed the Anaconda DFAC contract file, the competitive proposals submitted for the Anaconda work in July 2004, KBR’s DFAC master agreement files, and pricing sheets from other food service vendors. Tr. at 607, 626-28, 635-36, 640-45 (Hayes).
Ms. Pettibone assisted Ms. Hayes in preparing for negotiations by sending Ms. Hayes several e-mails with information about the state of contractual affairs at Anaconda. See JX 138; JX 339. On November 9, 2004, Ms. Pettibone sent Ms. Hayes an e-mail with an attachment that detailed the history of the pricing situation at Anaconda. JX 138; see also JX 89 (containing spreadsheet of DFAC prices at several other sites referenced by attachment to JX 138 for comparative purposes). Ms. Pettibone gave a brief description of the contractual history at Anaconda and, most importantly, tried to chart a history of the prices that Tamimi had been charging. See JX 138. She broke down the different contractual periods at Anaconda— original WR 3 period of performance, March-April 2004, May-June 2004 — and listed actual and projected headcounts at the site, along with the PPPD that Tamimi charged under the projected headcount billing methodology that it had embraced and the effective price rate resulting to the Government. See id. Ms. Pettibone then broke down the Tamimi rates at Anaconda and attempted to give them perspective with a comparison to the imputed PPPD rates at other sites throughout Iraq under the new lower-priced SK contracts in order to afford Ms. Hayes a range to consider when negotiating. Id. Lastly, Ms. Pettibone provided a *738 breakdown of the cost allocation in the pricing elements under CO 6 — as allocated by Mr. Metzler — and juxtaposed them with the pricing of those elements under Tamimi’s July 2004 competitive proposal. 39 Id.
Ms. Pettibone reiterated in her e-mails that she believed that, if she “could get to within 20% of the competitive cost, [she] could probably make a case” for the price reasonableness and that she was having trouble justifying the prices at Anaconda, particularly in light of the facilities issue and the manner whereby Mr. Metzler allocated the cost among different items. JX 138; see also JX 339. According to Ms. Pettibone, she did not obtain her benchmark of within 20% of the competitive-bid-pricing from an official source, such as the FAR; rather, it reflected her own personal opinion. Tr. at 1971-72 (Pettibone). With that target in mind, Ms. Pettibone on November 9, 2004, sent Ms. Hayes two additional spreadsheets, titled “Tamimi Pricing Renegotiations.” See JX 339. Ms. Pettibone thereby detailed the prices under contract at the nine Tamimi sites, and she compared those prices with the prices that had been proposed in the recom-petes for the DFAC services at each of the nine sites. See id. For example, regarding Anaconda, the spreadsheet reflects that the negotiated monthly cost of DFAC services under CO 6 was $13,146,830.94, but that Tamimi’s July proposal listed a monthly price of only $9,112,050.00 — a price that was roughly 30% lower than what it was charging to KBR. Id.; Tr. at 1964-65 (Pettibone). In order to aid those conducting further negotiations with Tamimi, such as Ms. Hayes, Ms. Pettibone populated the last column of one of the spreadsheets with a “Target Monthly Cost (80%)” that she believed represented the maximum amount that could be justified as reasonable. JX 339; Tr. at 1965-66 (Petti-bone). Believing the prices to be justifiable as reasonable if within 20% of the competitive bid, Ms. Pettibone calculated the Target Monthly Cost for Anaconda to be $11,390,062.50. See JX 339.
Ms. Hayes had only a general sense of Ms. Pettibone’s analysis, see, e.g., Tr. at 746-47, 758-59 (Hayes). Ms. Hayes could not explain the information that was in her negotiating arsenal other than generalized comments about the type of document she consulted. See, e.g., Tr. at 748 (Hayes) (“Well, the problem was I didn’t know how change order 6 was even allocated, how they came about with the numbers that they allocated.”). She did not relate that she drew on her experience with the Anaconda DFACs. In these circumstances it was unfortunate for the record and in contravention of KBR’s procurement policies, see generally JX 47 (KBR Government Operations Procurement Policy & Practices Manual), that Ms. Hayes did not prepare a pre-negotiation memorandum, although she was sure about her objectives going into the negotiation. Tr. at 646 (Hayes). Ms. Hayes explained that her objectives were to lower the overall price of the Tamimi Seven, with particular emphasis on lowering the price for the work at Anaconda and to resolve the DFAC ownership issue at Anaconda. Tr. at 646-47 (Hayes). 40
The negotiations between Ms. Hayes and Mr. Khan, which took place in Kuwait, spanned from approximately mid-December 2004 to the third week of January 2005. See Tr. 592, 641, 659, 675 (Hayes). Ms. Hayes conducted the negotiation sessions alone and did not ask for analytic support from any other KBR officer or employee. Tr. at 726-27 (Hayes). Regarding the overall tenor of the negotiations with Mr. Khan, Ms. Hayes testified that “[sjometimes they were amicable, and then there were other times where [Mr. Khan] wouldn’t be amicable.” Tr. at *739 651 (Hayes). Completely unaware of how much money that KBR was withholding from Tamimi, Tr. at 655 (Hayes), Ms. Hayes believed that KBR’s negotiating position was “weak” because Tamimi had a valid contract (the definitized CO 6) with KBR under which KBR was withholding payments — thereby risking a lawsuit — and that Tamimi currently was operating at Anaconda without a contract and could walk off at any time to the detriment of the troops who depended on the dining services, Tr. at 657-58 (Hayes). Ms. Hayes stated that she firmly believed that “food is one of the most important things [at] any site ... and the most important thing to the soldiers.” Tr. at 659 (Hayes). Ms. Hayes continued, “[o]ne of my concerns was that Shabbir kept saying that they would walk out, and not provide food services.” Tr. at 660 (Hayes). In addition, Ms. Hayes was also wary that Mr. Khan already had cut KBR out of the procurement chain at Camp Arifjan, going around KBR and securing a direct contract with the Army when KBR tried to shift to another vendor; she was concerned that he would attempt the same tactic at Anaconda, thus depriving KBR of the business. Tr. at 660 (Hayes). In sum, Ms. Hayes approached the negotiations with a view that KBR would have to make some concessions to Tamimi.
Relevant to the case at bar, the Hayes-Tamimi negotiations can be separated into three distinct phases, which will be discussed in sequential order, despite the likelihood that the negotiations themselves were not so structured: (1) the contract extension for Tamimi at Anaconda going forward; (2) the DFAC ownership issue at Anaconda; and (3) the retroactive price discounts on the Tami-mi invoices submitted through November 2004. Beginning with the contract extension, Mr. Khan initially had declined a short-term extension when CO 7 expired on November 30, 2004, although prior to the start of the negotiations he had been receptive to the idea of a three-month extension with a six-month option. Tr. at 665-66 (Hayes). However, when negotiations began, Mr. Khan withdrew his support for this idea, manifesting a fear that KBR would never utilize the option if it could complete a reeompete for Anaconda during the three-month period. Tr. at 666 (Hayes). Eventually, Ms. Hayes offered him a December 2004-December 2005 extension with the pricing from his July 2004 proposal — or lower for certain line items — in exchange for his continuing to negotiate retroactive price discounts and facilities ownership, and Mr. Khan accepted. Tr. at 667-68, 690, 735 (Hayes); JX 48, at 2848-49 (Negotiation Memorandum dated Mar. 29, 2005). Ms. Hayes was comfortable offering these prices to Mr. Khan “[bjecause at the time when he proposed, he knew that he was in a competitive environment, and generally a contractor will use their best price when they know that they are being competed against.” Tr. at 668 (Hayes). Ms. Hayes chose not to draw on any of the other proposals that were submitted by Tamimi’s competitors in response to KBR’s RFP because they included mobilization costs and thus were not “apples to apples” with what Tami-mi proposed. Tr. at 668-69 (Hayes).
Concerning the DFAC ownership issue, Mr. Khan’s negotiating position was that KBR had instructed him to pay PPI for the shell of the building, which cost $5 million, but that Tamimi also was required to foot the additional expense of building the kitchens, walls, and other interior amenities. Tr. at 653-54 (Hayes). Mr. Khan insisted that Tamimi had not been paid anything from KBR on Tamimi’s expenses incurred and paid because, up to that point, Tamimi was only under contract to provide the turnkey service, not ownership of the buildings. Tr. at 654 (Hayes). According to Mr. Khan, Tamimi was owed more than $40 million for the DFACs and the subsequent, necessary costs associated with outfitting them. JX 48, at 2847. Ms. Hayes stated that this explanation resonated with her “[b]eeause that [was] actually what we were trying to do. We went out and we ordered services, and we didn’t put in a construction plan. We pretty much told the contractor that you will operate DFACs, and everything that it takes to operate a DFAC.” Tr. at 655 (Hayes). Initially, given that Mr. Khan was able to show her a check in the amount of $5 million, Ms. Hayes offered $3.5 million for the DFACs, amortized from March through September 2004, but Mr. Khan balked at this proposal. *740 Tr. at 663-64 (Hayes). When confronted with the statements in CO 6 that he would negotiate KBR ownership of the buildings by September 2004, Mr. Khan stated that he only agreed to negotiate by September, not to convey ownership by then. Tr. at 665 (Hayes).
Regarding the DFAC pricing, Ms. Hayes initiated the negotiations by asking for a 45% decrease across all invoices, simply as a starting point, and, predictably, Mr. Khan rejected this request. Tr. at 662-63 (Hayes). Ms. Hayes began the back-and-forth negotiations using Tamimi’s July 2004 proposal, but made little headway in terms of concessions from Mr. Khan. Tr. at 663-64 (Hayes). 41 Mr. Khan objected to using Tamimi’s July 2004 proposal as a baseline for reductions in the March-to-November invoices because the July 2004 proposal was not inclusive of the costs that Tamimi had incurred for the facilities at Anaconda. Tr. at 672 (Hayes). According to Ms. Hayes, the RFP issued by the KBR DFAC team did not include a line item for facilities cost — presumably because the team assumed KBR’s ownership of the facilities — but did include line items for refrigeration, power generation, waste water, and the like. Tr. at 670-71 (Hayes). Thus, Tamimi had not included any facilities costs in its July 2004 proposal, and the line items relevant to the DFACs were only for maintenance and upkeep, not the initial purchase price. Tr. at 670-72 (Hayes). Ms. Hayes responded that she searched for comparable sites to which she could anchor her downward price negotiations; however, “there was nothing similar to Anaconda that was out there at the time.” Tr. at 672-73 (Hayes). Anaconda was the largest DFAC site in Iraq, and also had four separate DFACs, meaning that four sets of fixed costs were involved, rather than just one. Tr. at 674 (Hayes).
Eventually, Ms. Hayes and Mr. Khan were able to come to an agreement on the facilities and discount issues. Although Mr. Khan was more agreeable regarding the discounts at some of the Tamimi Seven sites, he was intractable on the Anaconda pricing. Tr. at 675 (Hayes). However, by mid-January 2005, Ilyas Khan, the General Manager of Tamimi, came to Kuwait in order to speak with Ms. Hayes concerning the negotiations. Tr. at 675 (Hayes). When Ms. Hayes pressed her case to Ilyas Khan, Ilyas instructed Shabbir that what Ms. Hayes was offering was beneficial enough for Tamimi and that he should accept the deal. Tr. at 675-76 (Hayes). Despite reaching their agreement in January, what became CO 9 under WR 3 for Anaconda was not signed until April 2, 2005. See JX 414 (CO 9 to WR 3). When questioned about this delay, Ms. Hayes said that, subsequent to the negotiations, Tamimi was asked to submit credit memoranda to KBR reflecting the discounts that Ms. Hayes had negotiated. However, Tamimi began submitting credit memoranda with further caveats to the effect that Tami-mi would not agree to any further decrements in payment. Tr. at 677-78 (Hayes). When Ms. Hayes questioned Mr. Khan on point, Mr. Khan stated that a government representative had warned him that KBR was contemplating further decrements in payment. Tr. at 678 (Hayes).
In January 2005 Ms. Hayes began drafting her Negotiation Memorandum pertaining to WR 3 at Anaconda, Tr. at 686 (Hayes), which was not completed until March 29, 2005, almost three months after the negotiations had concluded, JX 48; PX 286 (Feb. 11, 2005, to Mar. 19, 2005 inter-KBR e-mail chain). This Negotiation Memorandum served as both a record of Ms. Hayes’s negotiations with Mr. Khan and a price-justification memorandum supporting the prices at Anaconda as fair and reasonable. Tr. at 729-30, 737-38 (Hayes). On March 31, 2005, Mr. Jonas approved CO 9. JX 7, at 3685. As noted above, CO 9 was executed by Ms. Hayes and *741 Shabbir Khan on April 2, 2005. See JX 414. CO 9 officially extended Tamimi’s period of performance at Anaconda until December 31, 2005, incorporating Tamimi’s competitive proposal pricing structure as of January 1, 2005. Id. at 0174-75 . CO 9 reflects that the DFAC ownership issue was finally resolved, with Tamimi agreeing that ownership of DFAC 1 and DFAC 4 transferred to KBR as of November 30, 2004. Id. at 0175 . Finally, CO 9 lists the pricing discounts that Ms. Hayes negotiated. 42 Id. at 0174 . The discounts officially included those discounts that Tamimi conceded under CO 6 (approximately $4,907,319.00) and added another $22,721,827.54, to the end that the original WR 3 pricing had been reduced by a total of $27,629,146.50 from March 2004 through December 2004. Id. at 0174-75 .
V. The “boots through the door” controversy
Beginning in October 2003, DCAA began questioning the costs incurred at the DFAC facilities under at least fifteen TOs in Iraq and Kuwait. See JX 74, at 9863; Tr. at 193 (Walter) (“The questions on the DFAC pricing began in Kuwait, and the DCAA auditors were looking at headcount, or boots through the door, and making those types of comparisons against the bills that were coming in.”). As explained by Mr. Walter, the head of the KBR team addressing DCAA’s concerns:
DCAA’s position on the boots through the door was that there were fewer people coming through the door than the company was being billed for. They looked at the subcontract because KBR used a [PPPD] ... tool to get the fixed-price contract amount. We had a [PPPD] [which was] multiplied] ... [by] the statement of work quantity of soldiers at each one of the dining facilities [and multiplied again by the length of the subcontract].... That’s the cost for that service....
As the DCAA came in, they found that there were fewer people coming through the door than the government estimated in the statement of work for [TO] 59. So, DCAA began questioning the difference between the amounts.
Tr. at 234-35 (Walter).
Testimony established that the genesis of this controversy was a misunderstanding about the services to be provided at the DFACs. KBR worked from the standpoint that these were fixed-price contracts that provided the Army with a turnkey service; it would retain a subcontractor to establish a DFAC wherever the Army requested one — a fixed cost — and that subcontractor would be prepared to serve the number of troops that eventually were present at that location, regardless of the number of troops that actually utilized the facility. See Tr. at 235-36 (Walter). DCAA, however, viewed the DFACs as variable-priced contracts where the costs were based on the number of soldiers actually coming through the DFAC doors. Tr. at 235-36 (Walter).
The court also gleaned from the testimony and documentary evidence that political considerations intruded when Congress learned that the Army was paying KBR and other prime contractors for paying subcontractors like Tamimi on the basis of the Army’s estimates, not actual DFAC utilization. Irrespective of whether DCAA’s concerns bore any causative relationship to congressional interests, the record contained ample evidence that both the Army and DCAA were responsive.
*742 Because of DCAA’s interest in the DFAC contracts, Mr. Walter began investigating the DFAC contract situation beginning in November 2003. Tr. at 127, 202-04 (Walter). He met with Mr. Petsche to discuss the master agreement plan and the contractual situation at Camp Anaconda. Tr. at 204, 216 (Walter); see also JX 233 (Nov. 15-21, 2003 e-mail chain between DCAA personnel and KBR personnel). In response to the DCAA investigations, KBR in early 2004 began implementing a new “SK”-type format for its DFAC contracts in order to move from the PPPD pricing structure toward a more transparent pricing structure that KBR hoped would drive down the cost of the subcontracts. See Tr. at 346-50 (Walter). Rather than pricing all of the services under the PPPD system, KBR moved under the SK contracts to a line-item pricing methodology that captured the fixed costs in discrete categories. See Tr. at 349 (Walter). For example, the SK contracts included separate line items for labor, power generation, refrigeration, and the like. See Tr. at 349 (Walter). The variable pricing items, such as consumables — paper plates, plastic utensils, and so forth — were priced separately. Thus, each cost element of the DFAC services became transparent, which helped to eliminate DCAA’s concern that too many variable costs were being priced as fixed costs. However, this contractual modification came too late to satisfy DCAA, and on February 14, 2004, DCAA issued its first Form 1 against all prior DFAC payments, claiming that KBR was owed only what was spent on meals actually served. Tr. at 1873 (Pettibone). Other Form Is followed, and at the height of the controversy, DCAA was withholding over $200 million from KBR for DFAC services. Tr. at 195 (Walter); Order entered May 23, 2011, ¶ 10 (“May 23 Order”). 43 This amount included costs withheld from the invoices billed by Tamimi for MA 3 WR 3. Id. ¶ 11 .
According to the Price Negotiation Memorandum dated July 8, 2005 (the “PNM”), JX 94, in mid-2004, the Army formed the Special Cost Analysis Team (the “SCAT”) to definitize TO 59. JX 94, at 7594. This process was to include “an in depth study of DFAC costs and issues.” Id. The leader of the SCAT effort was Ms. DeRoche, an official with the U.S. Army Tactical Command (“TA-COM”), with whom KBR began working in order to come to a resolution of the issues raised by DCAA. May 23 Order, ¶¶ 16-20. By then the mantra was that the Government “could not pay for people we didn’t need.” Tr. at 1987 (DeRoche). Ms. De-Roche explained that the accuracy of the invoicing and cost information between KBR and its subcontractoi’s was not “the substantial question” — the reasonableness was. PX 360, Deposition of Lynn E. DeRoche, Paul Morrell, Inc. v. Kellogg Brown & Root Servs., Inc., No. 1:08ev072, at 91 (E.D.Va. Jan. 15, 2009) (“DeRoche Dep. I”). 44 Thus, although the SCAT “looked at the [actual PPPD] prices and used them in [its] analysis, [they were not] the major focus.” Tr. at 1987 (DeRoche).
The SCAT began its mission by enlisting the services of a consultant — RCI—to provide analytical support to come up with a “should-cost analysis” whereby the team would pull together the available data to attempt to devise an independent model of what the costs should have been at various DFACs. Tr. at 1988 (DeRoche); Tr. at 237-38 (Walter). However, the SCAT abandoned this effort given the complexity and the number of different variables involved. Tr. at 238-39 (Walter). One reason in particular for moving away from the should-cost analysis was that it relied on the SCAT’S having access to particular data for each DFAC facility, and, for some of the relevant sites and periods of performance, no records were kept on the actual number of troops that had eaten at each DFAC site. Tr. at 1988-89 (DeRoche). Without knowing the exact number of troops at each DFAC site, the should-cost analysis was not going to be particularly useful.
The SCAT then begin working on a “parametric estimate” to address the boots-through-the-door issue. Ms. DeRoche explained that the parametric model, a statisti *743 cal technique for estimating, utilized the immense amount of data that the SCAT did have, thereby allowing the SCAT to produce estimates for those areas for which actual data were lacking. See PX 360, DeRoehe Dep. I, at 90, 102-03, 132. According to Ms. DeRoehe, the model “compared the capacity of a given DFAC to the numbers of people that ate there at any given day and developed a ratio. And when you developed that ratio against a large number of data points, then it was statistically valid to interpolate data to fill in the gaps.” Tr. at 1990 (De-Roche). The results of this model would be used to judge the overall reasonableness of KBR’s DFAC costs. The negotiations on the parametric model took place from the end of 2004 through March 2005. Tr. at 239 (Walter). KBR, largely through Ms. Pettibone, and the SCAT, then negotiated on the basis of the information and factors that would be included in the parametric model. See May 23 Order, ¶¶ 18-20. KBR’s main objective was to persuade the SCAT to modify the model so as to best represent conditions on the ground; in particular, KBR took the position that the model should account for the recovery of fixed costs that had been expended in order to provide DFAC services. Id. ¶ 19 . MA 3 WR 3 was one of the contracts that was included in the parametric model. See id. ¶¶ 11, 22 .
However, the parametric model was developed to address the costs of all of the DFACs in Iraq; thus, according to Ms. DeRoehe, it was not statistically valid for any particular DFAC. Tr. at 1990 (DeRoehe). Ms. De-Roche testified that “[o]ne of the limitations of the model was that while [SCAT] felt very comfortable that it would give us a good result in the aggregate, as [one] drills down to individual sites and the more specific [one] got[,] the less ... reliable the data was for any given individual situation.” Tr. at 1990 (DeRoehe).
On March 31, 2005, KBR and the United States entered into the Global DFAC Settlement (the “Settlement”) to resolve the boots-through-the-door controversy. See JX 94, at Atts. 19, 23; Tr. at 1995-97 (DeRoehe). 45 Based on the results of the model, the Government offered KBR an overall decrement of $55 million on costs invoiced under TO 59 from September 2003 through February 2004, which KBR accepted. May 23 Order, ¶¶ 22, 42. According to the model, the site-specific reasonable amount for Camp Anaconda was calculated to be $106,565,119.00, which happened to be greater than the $105,623,149.00 that KBR had invoiced in subcontract costs at the site. Id. ¶ 22 . Thus, none of the $55 million decrement was allocated to the subcontract agreement for DFAC services at Anaconda.
In order to effectuate the DFAC Settlement, KBR and the Government agreed to a firm-fixed-price contract modification to TO 59, which avoided potential future audits of the same work. The SCAT team initially had only been tasked to definitize TO 59, but the amount of work put into the parametric model convinced the Government that it was advantageous to use the model to settle as much of the DFAC issue as it could. See Tr. at 1991 (DeRoehe). It became the SCAT’S goal to cover the period of most concern to DCAA — that period before KBR switched to the SK-type subcontract, which could be left to proceed under the normal machinations of LOGCAP III and its TOs. Tr. at 1993-94 (DeRoehe). KBR and the Government agreed to engage in a reconciliation process to identify specific DFAC subcontractor invoices to be included under the Settlement. May 23 Order, ¶45. The original “billing universe” of DFAC subcontract costs incurred by KBR was set in the initial version of the DFAC Settlement as $1,179 billion. However, the SCAT was aware at the time that KBR actively was trying to negotiate price reductions with Tamimi — through CO 6 and CO 9 — and it was agreed that any credits that KBR received from Tamimi would be included in the final settlement. See id. ¶¶ 25-26 . To that end, the SCAT was kept apprised of the progress with negotiations. 46
*744 On April 5, 2005, DCAA forwarded the CO 9 documentation and Ms. Hayes’s Negotiation Memorandum to Alan Maynard, another member of the Army SCAT. JX 204 (Apr. 4-5, 2005 e-mail chain). Then on April 28, 2005, Ms. Pettibone forwarded the credit notes from Anaconda that KBR had received from Tamimi to Ms. DeRoche and other members of the SCAT. See JX 276. Because these credit memos related to the Tamimi invoices that had been submitted through June 2004, the overall Global DFAC Settlement, at least regarding MA 3 WR 3, would run through June 2004. May 23 Order, ¶ 50. Based on this information, on April 29, 2005, the parties adopted Addendum # 1 to the Settlement, which redefined the billing universe down to $1,166 billion, but the overall decrement and allocation were not affected. Id. ¶ 51 .
Ms. DeRoche authored the Government’s PNM dated July 8, 2005, which was signed by Major General Jerome Johnson, Head of Contracting Activity for the Army. Tr. at 1996-97 (DeRoche); JX 94, at 7593-7620. The PNM summarized the negotiations between KBR and the Army and the Government’s position on the DFAC Settlement. The main focus of this lengthy exhibit at trial was paragraph 26, which begins: “The settlement price is considered fair and reasonable and in the best interests of the government. The parametric model parameters and resulting calculations, as well as the invoiced costs accepted for the credit memo period, are reasonable.” JX 94, at 7612. Ms. De-Roche reiterated at trial that “[t]he major issue for us was the overall reasonableness of the settlement; and while ... [SCAT] considered] individual elements within that, it was the overall price that [SCAT] w[as] justifying.” Tr. at 1999 (DeRoche).
Then, under part “f,” the PNM recites:
The reduced costs reflected for the credit memo period are the result of KBR’s protracted negotiation with Tamimi, and are considered reasonable. When the associated credits are applied to the original invoices, the resulting costs are equivalent to KBR’s new subcontract rate structure. The new Tamimi subcontract costs were viewed as reasonable by the SCAT, and are not subject to the application of decrements or suspension by DCAA as were the initial subcontracts that are the basis for this settlement.
JX 94, at 7613. According to Ms. DeRoche, this language referred to the judgment made by the SCAT to include the negotiations with Tamimi under the Global DFAC Settlement, and she opined that it was reasonable to do so. See Tr. at 2005 (DeRoche). However, she also stated that nothing in the PNM referred to the reasonableness of the PPPD rates negotiated by KBR with Tamimi. See Tr. at 2007 (DeRoche).
On July 26, 2005, KBR and the Army executed Modification 38 to TO 59. Modification 38 implemented the Global DFAC Settlement and converted KBR’s DFAC subcontract effort — less the $55 million decrement — into a firm-fixed-price contract, thereby establishing the adjusted billing as a reasonable amount immune from future audits.
VI. The DCAA audit process
Even after the DFAC Settlement, the accounting travails at Camp Anaconda continued to plague KBR. While the DCMA had expressed support for KBR and the job that it was performing in Iraq, see JX 71 (Oct. 28, 2005 letter to Todd W. Bishop, then-KBR Director of Government Compliance, from DCMA granting continued approval of KBR’s purchasing system); JX 72 (Oct. 3, 2006 letter to Mr. Bishop of KBR from DCMA expressing same), DCAA still was not satisfied that the prices that KBR had obtained from Tamimi at Anaconda were fair and reasonable. On July 19, 2006, DCAA issued a preliminary findings report regarding DFAC services at Anaconda that questioned $44.8 million in KBR costs. See JX 8 (DCAA Preliminary Findings Report). DCAA compared the average PPPD CO 9 prices for the months July 2004 through December 2004 at Anaconda with the average PPPD prices of twelve “competed subcontracts,” the price information for which was available prior to July 2004. JX 8, at 6326. DCAA found that its sample of twelve subcontracts represented an average PPPD rate of $7.07, whereas the PPPD rate at Anacon *745 da ranged from $13.07 (in December 2004 after the DFAC facilities allegedly had been fully amortized) to as high as $24.85 in November 2004. See JX 8, at 6327. Assuming that the average PPPD calculated price represented what was fair and reasonable, DCAA determined that the difference between the fair and reasonable cost and KBR’s submitted cost was approximately $44.8 million. Id.
On August 24, 2006, KBR’s Director of Government Compliance, Mr. Bishop, sent KBR’s response to the DCAA. JX 7 (KBR’s Response to DCAA Preliminary Finding Report); JX 88 (Mr. Bishop’s contemporaneous price analysis). Based on Mr. Bishop’s analysis, the comparison that DCAA was attempting to draw between its selected sample of twelve DFACs and Anaconda contained several flaws. First, Mr. Bishop pointed out that DCAA had used the projected headcount figures for its sample set to determine the PPPD rate, but the actual headcount figures when calculating the PPPD rate at Anaconda. JX 7, at 3653. Second, one of the DFACs used in DCAA’s sample was not even operational until February 2005, so it had not incurred any actual costs during the time frame that DCAA was examining. Id. Third, seven of the sample DFACs originally were constructed under a contract beginning in 2003, thereby allowing for the recovery of any construction costs in the period of performance prior to the relevant period of performance that DCAA was using to calculate its average PPPD rate, whereas Anaconda’s rate was amortized over only nine months, five months of which were encompassed by the questioned time frame. Id. KBR submitted its own comparison, having obtained the actual headcounts for the remaining four facilities within DCAA’s original twelve and normalized the construction costs at those four facilities over a nine-month period to coincide with the amortization time frame at Anaconda. Id. at 3654 . Mr. Bishop’s analysis yielded a difference between the remaining sample and the amount KBR invoiced at Anaconda of approximately $876,000.00. Id.
In addition, Mr. Bishop challenged the notion that any other DFACs were comparable to Anaconda, asserting that “[t]o accurately compare the contracts all factors need to be taken into consideration.” Id. at 3656 . Mr. Bishop listed a number of considerations that rendered Anaconda unique, yet that DCAA had not considered. Mr. Bishop pointed to the type of DFAC structure used at Anaconda, as well as its huge square footage. Id. at 3655 . He also noted that, due to its location in Iraq, resupplying Anaconda was more difficult than other bases, particularly in light of the ever-present hostilities both at Anaconda and on the resupply route to and from the base. Id. at 3655-56 . Anaconda came under regular enemy fire, and KBR convoys resupplying the base were attacked and the truck drivers at times had been captured and even killed. Id. at 3655 . He urged that all of these factors served to increase the PPPD rate at Anaconda, whereas they might not have been present at the other DFAC facilities — circumstances peculiar to Anaconda that DCAA should recognize in determining a fair and reasonable price. Id. at 3656 .
DCAA did not respond to KBR for almost a year, but during that period its own internal position on the amount of costs that should be questioned varied significantly. By January 2007 David M. Fisher, a DCAA auditor, whose deposition was admitted into evidence as PX 477 (Deposition of David M. Fisher, Kellogg Brown & Root Servs., Inc. v. United States, Nos. 09-351C, 09-508C, 09-578C (Fed.Cl. Aug. 24, 2010), adjusted the calculation method, which lowered the amount of questioned costs to $39.2 million. JX 10 (Mr. Fisher’s working papers) (text box at E10). However, by January 19, 2007, Mr. Fisher had further adjusted this figure downward to $28.6 million, JX 10 (cell AM25), and by February 2, 2007, Mr. Fisher had arrived at calculations questioning only $5.1 and $1.6 million, JX 10 (cells BA82, AV82). On February 19, 2007, DCAA held a meeting at which one of the topics discussed was the ongoing progress of Mr. Fisher’s questioned costs at Anaconda. Mr. Duggan recorded this meeting in a memorandum reflecting the supervisory guidance that he received. See JX 30 (Mr. Duggan’s Feb. 19, 2007 memorandum discussing interim guidance); PX 478, Duggan Dep., at 72-75). Of all the witnesses who testified by deposition *746 (Ms. DeRoche also testified in person), Mr. Duggan’s resonated with clarity, authority, balance, and common sense. He confirmed the documentary record. According to Mr. Duggan, Branch Manager Sylvia Wofford briefed him on the DFAC audits and the progress that Mr. Fisher had made. See JX 30; PX 478, Duggan Dep., at 73. However, considering the methodology employed by Mr. Fisher, including using Ms. Hayes’s “poorly drafted [Negotiation Memorandum] as the starting point for his findings” and not considering “unique site requirements and variables,” Ms. Wofford stated to Mr. Dug-gan that “management felt that [Mr. Fisher’s] findings could not be sustained based on reasonableness.” JX 30; see also PX 478, Duggan Dep., at 72-77. From there, Mr. Duggan received his instructions on how to proceed. See JX 30.
By April 7, 2007, responding to questions about DFACs generally, Mr. Duggan said “yes” when asked if his questioned costs included instances of “clear overbilling of headcount bands” and, by that point, he estimated a 20% overbilling. JX 17, at 6521 (Mr. Duggan’s Apr. 7-14, 2007 memorandum reflecting supervisory guidance). Mr. Dug-gan also realized that issues were present with the Government’s change in stance on whether the Army wanted to own the DFAC facilities at the sites, noting that some of the “lease to own assets we paid twice for.” Id. Although implicating the “color of money” issue, members of DCAA still deemed this posture was “unreasonable and should be pointed out.” Id. On April 10, 2007, Mr. Duggan’s supervisor queried him specifically about the issues regarding Tamimi. Id. at 6523 . Mr. Duggan suggested that DCAA modify Mr. Fisher’s report prior to issuing anything “to address KBR’s concerns,” but, when discussing what modifications would be necessary, Ed Nelson, a DCAA Regional Director, interjected that “[auditors] can over think these things” and that “the audit has been going on for a year and we need to put something out on the street so that KBR would be forced to reply to [DCAA’s] findings.” Id. By this point Mr. Duggan’s supervisors were instructing him to go with Mr. Fisher’s findings, despite being told to abandon them approximately one month before. Id. The reason? DCAA was having “some success.” PX 478, Duggan Dep., at 103-04.
On May 22, 2007, Mr. Duggan attended a meeting with Regional Audit Manager Dan Altemus and Supervisor Doug Black during which he presented an argument that KBR did meet the requirement that the prices it claimed as costs were reasonable. JX 19 (Mr. Duggan’s May 22, 2007 memorandum reflecting supervisory guidance); see also PX 478, Duggan Dep., at 113-14. Mr. Altemus was not persuaded by this argument. Id. Mr. Duggan also argued that KBR had a persuasive argument that it was difficult to justify the “comparative method,” given that DFACs at different locations would have different reasonable prices. See JX 19. However, the group was of the opinion that, even if DCAA utilized KBR’s method of calculating prices — an option that Mr. Altemus was opposed to pursuing — justification was present to question $23 million of KBR’s costs and that this would be a sensible “fall-back position” in the final report released by DCAA. See id. By May 25, 2007, two draft Audit Reports on the Anaconda DFAC costs were prepared utilizing different methodologies; one report questioned $37.2 million of unreasonable subcontract costs, JX 27, at 6358, whereas the second questioned $23.6 million of unreasonable costs, JX 35, at 6319.
After presumably more internal deliberations, DCAA finally responded to Mr. Bishop and KBR on August 9, 2007, and notified KBR of its revised findings. See JX 39 (Aug. 9, 2007 DCAA letter). DCAA did acknowledge that KBR had made some worthwhile suggestions in its initial response, which convinced DCAA to modify its initial approach. In relevant part, the letter stated:
We agree, in part, with [KBR]’s objection to using those subcontracts that [KBR] identified in our comparative analysis that had lower fixed costs (because of longer amortization periods) compared to those subcontracts used in the [CO 9] procurement. Therefore, to make this analysis as comparable as possible, we (i) induced the subcontracts in our comparative baseline from twelve (12) to eight (8) by eliminating the four (4) subcontracts [KBR] considered most incomparable, and *747 (ii) adjusted the amortization period to nine (9) months for the remaining 8 subcontracts. This resulted in reducing questioned costs from our original amount of $44 million to the $37 million that we now question....
JX 39, at 6345. However, DCAA was not acquiescing in the other factors unique to Anaconda that Mr. Bishop cited as skewing the prices and, hence, the claimed costs. According to DCAA,
none of these factors were quantified. By stating that DCAA failed to consider these assertions^] you are implying that [KBR] did recognize those factors in [its] pricing of the subcontracts. Notwithstanding, [KBR] provided no basis for any quantification, nor any convincing rationale to demonstrate that the qualitative factors would result in higher, or lower, costs, when comparing the eight DFACs to the Tamimi DFACs.
Id.
DCAA offered KBR the opportunity to submit additional information that DCAA could use to further revise its comparative model. Id. at 6345-47 . However, DCAA reiterated that KBR should provide or demonstrate by “actual cost data” or provide DCAA with the actual costs of the qualitative factors. Id. at 6346-47 . This was an odd posture because even DCAA realized that these were commercial procurements, and, as Mr. Duggan had reminded his supervisors, “the FAR was written by contractors who want every procurement to be commercial to avoid the audit of cost or pricing data.” JX 19; see also PX 478, Duggan Dep., at 119-20. The effect of this anomaly was that KBR was not required to provide — and thus likely did not possess — cost data.
On September 29, 2007, KBR submitted its letter response to DCAA. See JX 126. Mr. Bishop stated that KBR already had submitted “all available procurement and payment data,” but that, in the brief period allotted by DCAA for a response, it would be impossible to generate the additional data that DCAA was requesting — information that KBR did not possess at the time. Id. Mr. Bishop also expressed frustration over the process, stating that KBR had concluded that “DCAA’s position will not change regardless of what this created information will show ... [because] KBR and DCAA have a fundamental disagreement regarding how KBR was entitled to price its subcontracts under the terms of its prime contract and further information will not resolve this disagreement.” Id. In concluding, Mr. Bishop notified DCAA that, while KBR continued to disagree with DCAA “that any appropriate basis exists to support the issuance of a Form 1, KBR believes that the time has come to resolve this issue in another forum.” Id.
On December 7, 2007, DCAA issued its final audit report, JX 1, a report that was not actually received by KBR until April 2008. Summarizing its findings, DCAA related that the rate KBR negotiated with Tamimi “equated to $24.15” PPPD and that “[s]imilar subcontracts were negotiated at much lower prices (the average for eight similar DFACS was $8.83 PPPD).” JX 1, at 6211. DCAA thus found that “unreasonable costs of $39.9 million were charged to the government ... [and were being questioned] as unreasonable as defined by FAR 31.201-3.” Id. On January 29, 2008, DCAA issued

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Source: Frix Law Library, https://www.frixlaw.com/law-library/cases/6663030. Public record. Not legal advice.