Custer Battles

October 15, 2004 – Middletown , Rhode Island Various articles about Custer Battles have been published relying on incorrect information published in other documents and news articles. This release addresses the erroneous information that has been published about Custer Battles.

Allegation: Custer Battles was a nine month old company when it was awarded its first contract in Iraq in June 2003.

FACT: Custer Battles LLC was originally incorporated in October 2001 and has been running a profitable business since inception.

Allegation: Custer Battles won a ‘No-Bid Contract' to provide security for the Baghdad International Airport (BIAP), beginning June 2003.

FACT: Custer Battles competed for the BIAP security contract in June 2003 with at least two other reputable security firms, Dyncorp and Global RSM. In late June 2003, Custer Battles was awarded a 1-year, firm-fixed price contract in the amount of $16.8 million. Under a firm-fixed price contract, the contractor is obligated to perform tasks in accordance with the contracted statement of work. The numbers of personnel required or the costs incurred to perform these contracted tasks are the full responsibility of the contractor. In the event that the contractor under-estimates the costs at the beginning of a firm-fixed price contract, the contractor is obligated to continue performing at a reduced profit margin or loss. Likewise, should the contractor perform the tasks outlined in the contract to standard at a lower than anticipated cost, the contractor is considered to have performed successfully and is entitled to any savings earned.

Custer Battles met all requirements of the contracted scope of work. Due to its performance, Custer Battles was given an “Exceptional” rating and received an endorsement from a senior CPA advisor, “Custer Battles is one of the best firms I have dealt with in my 34 years of government service.” Custer Battles was disappointed that the contract was not renewed, as its price to the Iraqi government was more than 50% less than the price the current contractor charges for performing the same services.

Allegation: Custer Battles overcharged Washington Group International (WGI)

FACT : Custer Battles was awarded a firm-fixed price sub-contract with WGI for guarding the most high-risk power lines in Iraq . WGI approached several other security firms in Iraq requesting immediate security services for their project employees and infrastructure. None of the firms were able to meet the timeline required to fulfill WGI's contract. Custer Battles submitted a firm-fixed price proposal to immediately assume security for over 500 kilometers of power lines through hostile territory (including Fallujah) for 90 days. WGI accepted this proposal with the stipulation that Custer Battles begin guarding the power lines within 24-hours and have more than 650 guards in place within one week. Custer Battles met this stipulation when no other contractor in Iraq was capable of meeting their requirements. At a time when other power lines in the country were being destroyed and workers killed by insurgents, Custer Battles successfully guarded the assigned power lines for 90-days without loss or injury to our client's personnel and without damage to infrastructure. At the completion of this contract, in April, 2004, WGI and Custer Battles entered into a separate and distinct 30-day fixed price contract that was subsequently extended through Jun 26, 2004. This second contract not only included Power Line Security, but also Protective Security Details (PSD) for WGI and Army Corps of Engineer personnel.

Under the firm-fixed price contract, Custer Battles was not being paid to provide guards, but rather to secure infrastructure. The risks associated with ensuring the security of the infrastructure was assumed by Custer Battles, and at various points throughout the contract Custer Battles used 30% more guards than originally budgeted. Additionally, Custer Battles had to self-insure all loss of vehicle, equipment and injuries to local staff. These risks were accepted by Custer Battles, and despite significant cost overruns on the project, Custer Battles was not entitled to any additional payments by WGI. While there are some comments in published reports that attempt to approximate Custer Battles' costs based on the salaries paid to Iraqi guards, this is not germane to the Custer Battles contract. Custer Battles was paid a fixed price to perform a service, and the costs associated with that service are the responsibility of the contractor, while the determination of “reasonableness of price” is the responsibility of the selecting authority.

Custer Battles was audited by the Defense Contract Audit Agency during their audit of WGI. The audit report states “the offeror [Custer Battles] has submitted adequate cost or pricing data. The proposal was prepared in accordance with appropriate provisions of FAR and the DoD FAR Supplement (DFARS). Therefore, we consider this proposal to be acceptable as a reasonable basis for negotiation of a fair and reasonable price.”

Allegation: Custer Battles was awarded Cost-Plus Contracts.

FACT: Custer Battles has never entered into a “cost-plus” contract with any entity since its inception.

Allegation: Four Custer Battles personnel were killed in Iraq .

FACT: To clarify, two expatriate independent contractors and one Iraqi independent contractor have been killed in Iraq since Custer Battles began operations in June 2003. These individuals were killed while serving on Iraqi reconstruction projects, and their loss has had tremendous impact on Custer Battles, its officers and all employees.

The numbers of casualties sustained by Custer Battles in Iraq is significantly lower than other contractors with the same scope and size of Custer Battles. While Custer Battles does take significant measures to protect the welfare of our staff, we attribute our low casualty figures directly to the professionalism and dedication of our world-class security operators. These men and women have proven themselves time and again to simply be the best in the world at what they do.

Finally, there are several websites either run by, or posted to, by former, disgruntled employees. Custer Battles has an Office of Corporate Integrity, headed by a former criminal investigator, which is charged with investigating and reporting every allegation to our general counsel (who has an ethical obligation to report any criminal activity). To date, all of the allegations posted on these various websites have been proven to be baseless, inaccurate, and the result of disgruntled former employees.

Custer Battles is the leading provider of tailored risk management solutions. Their suite of services is designed to allow senior management teams to understand the risk environment and identify profitable courses of action to maneuver with minimal exposure to risk. Client service offerings including business intelligence, global risk consulting, due diligence and litigation support, are designed to cover the full spectrum of risk management and mitigation, which can be applied collectively or individually to fit the client's specific needs.

For more information, please contact (401) 848-7500.