Case Studies: Government Contracts

CSC Settles Claims of Over $2 Billion with the U.S. Army on the Logistics Modernization Program

Summary:

Computer Sciences Corporation (“CSC”) won a contract in 1999 to perform the U.S. Army’s Logistics Modernization Program (“LMP”).  The LMP program was intended to use commercial off-the-shelf (“COTS”) software to modernize the Army’s decades-old logistics system.  After significant delays and cost overruns due to the complexity of the program, CSC filed 14 claims and two REAs against the Army, while the Army filed a counterclaim against CSC.  In total, the value of the claims exceeded $2 billion.

Kenrich was retained to evaluate and opine on CSC’s claims and REAs at the dispute before the Armed Services Board of Contract Appeals (“ASBCA”).  Kenrich issued two expert reports and presented expert findings at the alternative dispute resolution (“ADR”) between the parties.  The ADR was the largest in ASBCA history.  Ultimately, after the three-week ADR, the parties agreed to settle the case, with CSC agreeing to be paid $277 million and signing a $1 billion LMP contract extension.

Background:

The Army awarded CSC a $680 million, firm-fixed-price contract in 1999 to modernize the world’s largest fully integrated supply chain by providing a fully integrated suite of software and business processes.  In accordance with the Army’s intent to conform to commercial best practices, CSC and the Army intended to use COTS products with minimal specialization to streamline and modernize the Army’s logistics systems.  However, due to the size and extreme complexity of the Army’s logistics systems, the LMP system became highly specialized.  The unanticipated customizations led to significant delays and cost overruns on the contract, which resulted in CSC filing 14 claim appeals before the ASBCA.

Solution and Result:

Due to Kenrich’s extensive government contracts claims experience, Kenrich personnel were retained by CSC’s counsel to provide expert analysis and opinions regarding CSC’s claims.  Kenrich reviewed all of CSC’s claims and REAs, as well as the DCAA audits of the claims and REAs.  Kenrich authored two expert reports for the ADR: one affirmative report regarding the claim methodologies and the damages incurred by CSC, and a second expert report rebutting the DCAA audit reports of CSC’s claims.  During the ADR, Kenrich personnel presented the expert quantum analysis to both parties and the mediators.  Kenrich also assisted with analyses requested by the mediators to explain the complex quantum issues in the case and participated in break-out sessions focused on quantum.  The matter settled after the conclusion of the ADR, with CSC agreeing to a one-time payment of $277 million and a five-year LMP contract extension worth approximately $1 billion.