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Commitments and Contingencies | 12 Months Ended
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Dec. 31, 2016
Commitments and Contingencies Disclosure [Abstract] |
Commitments and Contingencies | Commitments and Contingencies (a) Leases and Other Commitments We have various non-cancelable operating leases for facilities, equipment, and software with terms between two and 15 years. The terms of the facilities leases typically provide for certain minimum payments as well as increases in lease payments based upon the operating cost of the facility and the consumer price index. Rent expense is recognized on a straight-line basis for rent agreements having escalating rent terms. Lease expense for the years ended December 31, 2016, 2015 and 2014 was as follows (in thousands):
| Operating Lease Expense |  | Sublease Income |  | Net Expense
2016 | $ | 5,100 |  |  | $ | 888 |  |  | $ | 4,212 |
2015 | $ | 5,824 |  |  | $ | 506 |  |  | $ | 5,318 |
2014 | $ | 6,576 |  |  | $ | 119 |  |  | $ | 6,457 |
Future minimum annual non-cancelable commitments as of December 31, 2016 are as follows (in thousands):
| Operating Leases
| Lease Commitments |  | Sublease Income |  | Net Commitments
2017 | $ | 3,504 |  |  | $ | — |  |  | $ | 3,504 |
2018 | 2,038 |  |  | — |  |  | 2,038 |
2019 | 837 |  |  | — |  |  | 837 |
2020 | 312 |  |  | — |  |  | 312 |
2021 | 114 |  |  | — |  |  | 114 |
Thereafter | 5 |  |  | — |  |  | 5 |
Total | $ | 6,810 |  |  | $ | — |  |  | $ | 6,810 |
We signed a lease in 2009 for a building to serve as our headquarters with a rent commencement date of May 1, 2012. Certain terms in the lease agreement resulted in the capitalization of construction costs due to specific accounting rules. We recorded a construction asset and corresponding long-term liability of approximately $27.3 million on May 1, 2012, which represents the construction costs incurred by the landlord as of that date. According to accounting rules, we have forms of continuing involvement that require us to account for this transaction as a financing lease upon commencement of the lease period. The building and building improvements are included on our consolidated balance sheet and are being depreciated over a 15-year period. Payments made under the lease agreement are applied to service the financing obligation and interest expense based on an imputed interest rate amortizing the obligation over the life of the lease agreement. Future minimum annual non-cancelable commitments under our headquarters lease as of December 31, 2016, which are not included in the table above, are as follows (in thousands):
| Lease Commitments |  | Sublease Income |  | Net Commitments
2017 | $ | 4,220 |  |  | $ | 843 |  |  | $ | 3,377 |
2018 | 4,337 |  |  | 396 |  |  | 3,941 |
2019 | 4,456 |  |  | 376 |  |  | 4,080 |
2020 | 4,579 |  |  | — |  |  | 4,579 |
2021 | 4,705 |  |  | — |  |  | 4,705 |
Thereafter | 27,163 |  |  | — |  |  | 27,163 |
Total | $ | 49,460 |  |  | $ | 1,615 |  |  | $ | 47,845 |
(b) Contingencies Anchorage Litigation and Related Proceedings In March 2013, a lawsuit, Anchorage vs. Integrated Concepts and Research Corporation, et al., was filed in the Superior Court for the State of Alaska at Anchorage by the Municipality of Anchorage, Alaska (“MOA”) against our subsidiary Integrated Concepts and Research Corporation (“ICRC”) and two former subcontractors of ICRC (the “Anchorage Lawsuit”). The Anchorage Lawsuit asserted breach of contract, professional negligence and negligence in respect of services ICRC performed under its Port of Anchorage Intermodal Expansion Contract with the United States Maritime Administration. ICRC’s contract with the Maritime Administration expired in May 2012. In April 2013, the Anchorage Lawsuit was removed to the United States District Court for the District of Alaska. In August 2015, a lawsuit, The Charter Oak Fire Insurance Company, The Travelers Indemnity Company of Connecticut and Travelers Property Casualty Company of America vs. Integrated Concepts and Research Corporation, VSE Corporation and Municipality of Anchorage, was filed against VSE and ICRC in the United States District Court for the District of Alaska (the “Coverage Lawsuit”). The plaintiff insurance companies were seeking (a) a declaration by the court that there was no defense or indemnity coverage available to ICRC and VSE for the Anchorage Lawsuit under the insurance policies issued by the plaintiffs and (b) reimbursement of legal fees and costs incurred by the plaintiffs in the defense of uncovered claims in respect of the Anchorage Lawsuit. On or about January 25, 2017 ICRC, our insurers and MOA fully settled the Anchorage Lawsuit and Coverage Lawsuit. Pursuant to the settlements, ICRC and VSE were released from pending claims in both lawsuits and ICRC and our insurers paid MOA approximately $3.8 million, of which $3.0 million was provided by our insurers. The United States District Court approved these lawsuit settlements in February 2017 and dismissed both lawsuits. On or about September 9, 2016, ICRC filed a claim with the Civilian Board of Contract Appeals (“Board”) against the Maritime Administration for payment of contract closeout costs that were incurred by ICRC in respect of two Port of Anchorage Intermodal Expansion Contracts (the “Contracts”), and legal costs related to the Anchorage Lawsuit. On January 6, 2017, ICRC and the Maritime Administration agreed to a settlement, which the Board approved. Pursuant to the settlement, the U.S. Government paid ICRC $10.4 million in February 2017 in full satisfaction of contract closeout costs, including interest and any legal costs or damages arising out of ICRC’s work under the Contracts and the Anchorage Lawsuit. The majority of the Maritime Administration payment satisfies VSE's accounts receivable for work performed by ICRC in prior periods. Heritage Disposal Litigation In February 2015, a lawsuit, Heritage Disposal & Storage, L.L.C. vs. VSE Corporation, was filed against VSE in the United States District Court for the District of Nebraska (the "Heritage Litigation"). In November 2015, the Heritage Litigation was removed to the United States District Court for the Eastern District of Virginia. The complaint asserted that VSE had not fully paid Heritage for firework storage services rendered by Heritage during the period of October 2010 through August 2015 as a subcontractor under VSE's contract with the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives for the storage of fireworks seized by the Government. In June 2016, the jury in the Heritage Litigation awarded Heritage damages of approximately $4.8 million, exclusive of interest to be determined by the Court. On January 24, 2017, the United States District Court reduced the jury's award against VSE to approximately $3.5 million and denied Heritage’s request for prejudgment interest. On February 10, 2017, VSE and Heritage entered into an agreement in respect of the Heritage Litigation pursuant to which VSE paid approximately $3.3 million to Heritage in full settlement of the lawsuit. During the course of the Heritage Litigation, VSE obtained evidence that invoices provided by Heritage under our predecessor contract with the U.S. Department of Treasury (the "Treasury Department") were possibly based on Heritage's improper inflation of the weight of certain seized fireworks stored by Heritage. We filed a voluntary disclosure of this matter with the Inspector General of the Treasury Department in June 2016. We estimated that the possible overbilling of the Government based on Heritage's improper inflation of the weight of seized fireworks stored by Heritage may be approximately $1.5 million. As a result of the United States District Court’s determination in the Heritage Litigation that the jury rejected that Heritage was engaged in a fraudulent billing scheme and that the Government was involved with the original weight estimates, we have determined that VSE did not overbill the Government. In February 2017 we notified the Government that we believe the voluntary disclosure matter is closed, but that we will continue to cooperate with the Government if it decides to continue investigating this matter. Hawaii Litigation In May 2012, four complaints were filed in the Circuit Court of the First Circuit, State of Hawaii, by the estates of five deceased individuals and certain of their relatives against VSE and certain other entities and individuals for unspecified damages. The complaints allege, among other things, that the explosion of fireworks and diesel fuel that injured and killed the five individuals in April 2011 was caused by negligence, actions and omissions of VSE and the other defendants and their employees, agents and representatives. The five deceased plaintiffs were employees of Donaldson Enterprises, Inc., which was a vendor retained by VSE to store and dispose of fireworks and other explosives seized by the federal government from entities and individuals illegally in possession of the fireworks and other explosives. VSE had a prime contract with the Treasury Department to support the management and disposal of seized assets, including fireworks and other explosives. VSE has denied the allegations and, together with its insurance carriers, will aggressively defend the proceedings, which are expected to proceed to trial in October 2017. While the results of legal proceedings cannot be predicted with certainty, we do not anticipate that this lawsuit will have a material adverse effect on our results of operations, financial condition, or cash flows. Aviation Litigation On or about November 30, 2016, a lawsuit, Arrieta et al vs. Prime Turbines LLC et al, was filed in the District Court of Texas in Dallas County, by Edgar Arrieta, and four other plaintiffs against VSE's subsidiaries, Kansas Aviation of Independence, L.L.C. (“Kansas Aviation”) and Prime Turbines LLC (“Prime”) and three other unrelated defendants. The other named defendants are Pratt & Whitney of Canada Corporation, Cessna Aircraft Company and Woodward Inc. The Plaintiffs allege that on April 1, 2016, a plane crashed in Mexico, resulting in the death of one plaintiff and serious injuries to two other plaintiffs. Plaintiffs allege that Kansas Aviation and Prime were negligent in providing maintenance, service and inspection of the airplane engine and/or component parts prior to the crash. Plaintiffs state they are seeking monetary relief over $1.0 million from the defendants. Trial is scheduled for May 2018. We have denied the allegations and, together with our insurance carrier, will aggressively defend the proceedings. While the results of legal proceedings cannot be predicted with certainty, we do not anticipate that this lawsuit will have a material adverse effect on our results of operation, financial condition, or cash flows. In addition to the above-referenced legal proceedings, we may have certain claims in the normal course of business, including legal proceedings, against us and against other parties. In our opinion, the resolution of these other claims will not have a material adverse effect on our results of operations, financial position, or cash flows. However, the results of any legal proceedings cannot be predicted with certainty, therefore, the amount of loss, if any, cannot be reasonably estimated. Further, from time-to-time, government agencies investigate whether our operations are being conducted in accordance with applicable contractual and regulatory requirements. Government investigations of us, whether relating to government contracts or conducted for other reasons, could result in administrative, civil or criminal liabilities, including repayments, fines or penalties being imposed upon us, or could lead to suspension or debarment from future government contracting. Government investigations often take years to complete and many result in no adverse action against us. We believe, based upon current information, that the outcome of any such government disputes and investigations will not have a material adverse effect on our results of operations, financial position, or cash flows.

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