Managing Conflict – The End of Contract Bonus Fiasco (Part 2 of 2)
by Mark Leonard
In some contingency contracts, the initial bid reserves funds for paying out an end of contract bonus. The LOGCAP III contract for the final Task Order supporting the U.S. military in Iraq did not reserve funds for end of contract bonuses. Despite the funds not already being allocated to KBR by the Department of Defense, a well-to-do retired full bird colonel working at KBR’s Middle East HQ developed a proposal for additional funding to support end of contract bonuses for KBR employees in Iraq.
The proposal was a reasonable request and, if accepted, would both reward employees for their service and provide an incentive for staying on through the end of the contract. An entire team of employees worked on the proposal and it carried the backing of KBR’s corporate offices in the U.S. The proposed bonus funds were approved by low and mid level military approval agencies in a long and drawn out process that lasted from the Fall of 2010 to the Summer of 2011. In the end, the approval failed to garner support from senior officials in the Department of Defense.
Throughout the approval process, employees were notified via all hands emails and during all hands meetings where project managers briefed employees on the status of the bonus proposal. Each time the proposal passed through certain steps on its way to final approval, employees’ hopes were bolstered. The rhetoric used by KBR was very optimistic, giving employees every reason to believe that the bonus would be approved.
From an HQ perspective, the proposal was an effective exercise because it convinced some employees to stay on until the end of the contract. From an employee perspective, their hopes for an end of contract bonus were dashed in the summer of 2011, when, in the twilight hours of the project, KBR finally revealed that there would be no bonus. Employees felt that the whole end of contract bonus was just a scheme to get employees to stay on the project longer, and lost faith in program management for pulling the wool over their eyes. It was easy for disgruntled employees to create this narrative of manipulation by HQ and it is hard to say how many managers had good intentions with the proposal and how many managers were using it to keep employees around.
Ultimately, the proposal convinced employees to stay on and thus helped KBR meet its mission requirements, so from a corporate perspective it was successful. However, this example highlights the ethical dilemma inherent in this type of conflict management strategy.