May 24, 2012 / 5:01 PM / 8 years ago

US lawmakers probe food contract for troops in Afghanistan

* Pentagon asked for refund of over $750 million last year

* Lawmakers question Pentagon oversight of contract

By Susan Cornwell

WASHINGTON, May 24 (Reuters) - U.S. lawmakers are investigating a billing dispute of at least $750 million between the main supplier of food to U.S. troops in Afghanistan and the Pentagon.

The Pentagon says Supreme Foodservice GmbH overcharged it, but the Netherlands-headquartered company said the rates were properly based on the complexities and dangers of supplying food in war-ravaged Afghanistan.

The Republican and Democratic leaders of a House of Representatives panel have written to the company as well as the Pentagon’s Defense Logistics Agency, demanding information and documents within ten days about the dispute on a contract dating to 2005 that so far has cost U.S. taxpayers $5.5 billion.

The lawmakers’ probe comes amid continuing concerns about waste and abuse of tax dollars in Afghanistan, with scrutiny intensifying as the Pentagon budget faces big cuts.

With such a large sum in dispute, lawmakers questioned the Pentagon’s oversight of the food contract, and also appear worried that Supreme could get the business again when an even larger follow-on contract is awarded this December.

The Pentagon has solicited bids for a follow-on contract estimated at $10 billion to $30 billion over five years, although U.S. combat troops are expected to leave Afghanistan by the end of 2014.

“The American taxpayers refuse to accept a government contractor that bills more than $750 million in unsubstantiated charges, and they refuse to accept the Pentagon’s failure to manage this contract properly,” Representative John Tierney said in a statement.

“It is outrageous that DLA could ever be in the position of possibly overpaying any vendor by three quarters of a billion dollars - especially at a time when troop levels are being scaled back, because funding is tight,” Representative Jason Chaffetz said.

Chaffetz, a Republican, is the chairman and Tierney the top Democrat on a House Oversight and Government Reform subcommittee that deals with foreign operations.

“The subcommittee will work with the Department of Defense to investigate the facts and circumstances surrounding this apparent lack of oversight,” Chaffetz said.

Supreme Group said in a statement that it will respond to the lawmakers’ letter promptly. A spokesman for the Defense Logistics Agency, Douglas Ide, said the agency was reviewing the request for information.

REFUND DEMANDED LAST DECEMBER

The Defense Logistics Agency wrote to Supreme last December to say it had overpaid the company, and demanded a refund of $756.9 million. But Supreme has argued that food deliveries should be based on market rates for transportation in the remote war zone, according to Chaffetz and Tierney.

“Calculated this way, Supreme would be owed ... $1.08 billion more than DLA has already paid,” Chaffetz and Tierney said in letters sent Wednesday seeking information from the Pentagon and Supreme’s operations in Switzerland and Dubai.

“Despite a billing dispute as wide as $1.64 billion, DLA is now preparing to grant a five-year follow-on contract that will be worth $10 to $30 billion,” the lawmakers added. “Supreme remains one of the four contractors under consideration.”

The original contract with Supreme was signed in 2005 to supply food to just four sites in Afghanistan. This was quickly expanded to 68 sites and today there are 265 sites.

But Tierney and Chaffetz say there was never an agreement on pricing terms for transportation to the additional sites, many of which were in remote parts of Afghanistan. The contract was renewed in December 2010, and expires this December.

The lawmakers’ staffs wonder why the follow-on contract is expected to be even larger. “It raises a lot of questions given our potential (troop) footprint,” one congressional aide told Reuters. “We asked the DLA, and didn’t get an answer.”

In its statement, Supreme Group said the Defense Logistics Agency had unilaterally reduced its payments by $21.7 million a month beginning in March to try to recoup disputed funds.

“We are confident that in due course a satisfactory resolution will be reached,” Supreme Group said, adding that in the meantime, “We remain focused on provision of support to the war fighters in some very challenging environments.”

Pentagon Inspector General Gordon Heddell told lawmakers last year that the Supreme contract was “an example of just how bad it can get,” saying it had not been well designed.

The overpayments included $98 million in transportation costs, Heddell said in testimony. He said the United States also paid $455 million in services to airlift fruit and vegetables into Afghanistan, without including that in the contract.

The Commission on Wartime Contracting in Iraq and Afghanistan, a bipartisan group set up in 2008 to study contracting, said last August that at least $31 billion had been wasted on contracts and grants in Iraq and Afghanistan.

Editing by Vicki Allen

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