A Costly Lesson Learned

For a cost to be allowable the FAR, among other things, requires that the cost be reasonable.  FAR 31.201-3 gives the courts a great deal of latitude in determining if claimed costs are, in fact, reasonable. Kellogg Brown & Root Services Inc. (KBR) recently learned this lesson the hard way.   In KBR vs United States , Fed. CL., Nox. 09-428C & 09-578C, 9/27/2012 KBR lost approximately $30 million in payments because it was unable to support their costs as fair and reasonable. The costs in question were related to a subcontract that was awarded without appropriate costs or price analyses performed to establish the reasonableness of the subcontract costs as required by FAR 15.404-3(b).

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