Arab Times

March 22, 2011 09:49 ET

Arab Times-Auditing Firm Confirms: U.S. Department of Defense May Have Overpaid $100 M For The Food Deliveries Contract to Afghanistan

DLA Neglects The Fact That The Subcontracted 'JAFCO' is 100% Owned by Supreme

KUWAIT CITY, KUWAIT--(Marketwire - March 22, 2011) - (Exclusive to Arab Times) -

The U.S. Department of Defense may have overpaid a European company more than $100 million for prime vendor contract of food deliveries to Afghanistan and failed to conduct proper supervision over another $600 million paid to that vendor, the Pentagon's independent auditing firm stated.

According to a report issued by the Inspector General, U.S. Department of Defense, the amounts overpaid account to approximately one-fourth of the $3 billion paid by the Defense Logistics Agency to the Switzerland-based Supreme Foodservice Co. AG for the supply and transport services to the U.S. Army major bases in Afghanistan.

The report stated: Supreme Foodservice Co. AG performed according to the contract terms, however, the officials in charge of "subsistence contracting" at the DLA did not provide adequate management nor supervision and did not abide by the Federal Acquisition Regulation or internal DOD contracting regulations.

As a result, the Department of Defense overpaid Supreme Foodservice Co. AG more than $98 million for transportation costs and about $26 million for "tri-walls," corrugated boxes used to store and transport frozen and chilled foods, the Inspector General stated.

The contracting officers also paid Supreme Foodservice Co. AG about $455 million for air freighting fresh fruits and vegetables into Afghanistan without ensuring that the Supreme's price (i.e $3.74 per pound) is reasonable compared to others and without incorporating those air freighting costs into the contract, the IG's office said.

The agency also paid about $104 million in tri-wall costs to Supreme without checking if those costs had been accurately calculated nor investigating whether they should have been paid under the contract terms, the IG's office added.

The DLA had initially contracted Supreme Foodservice Co. AG on a five-year contract in 2005 and later extended that contract for two more years in 2010 neglecting the fact that the company subcontracted by Supreme to purchase and supply food services to the US Army is a company called JAFCO and it is a company owned 100% by Supreme Foodservices Co. AG.

Therefore, the Inspector General's office advised the agency to ask Supreme Foodservice to refund overpayments made on tri-walls and air freighting contract costs.

The report also stated that the $3 billion paid by the Department of Defense to Supreme Foodservice between 2005 and 2010 included approx $1.6 billion for food and $1.4 billion for transportation and other related costs.

Based on the given fact, the Congress has requested the Inspector General's office to perform the audit in a provision of the fiscal year 2008 National Defense Authorization Act.

In February 2011 the Commission on Wartime Contracting estimated that up to $12 billion may have been lost to contracting fraud in Iraq and Afghanistan since 2002, with billions more lost to waste, abuse and oversight.

The government has spent about $177 billion on contracted goods and services in Iraq and Afghanistan since 2002, the Commission said. Where the civilian bureaucracy meant to oversee contracting waste in Iraq and Afghanistan has had several failures of its own.

Special Inspector General for Afghanistan Reconstruction, Arnold Fields, resigned in January 2011 following months of congressional criticism. Fields, a retired U.S. Marine major general, was appointed to the newly created post in 2008, but his office was slow to take any action and did not complete a single audit in its first 16 months.

Investigations with Supreme Foodservice Co. AG

The U.S. Department of Justice has started a confidential investigation of Supreme Food Service Co. AG, the prime vendor of the US army in Afghanistan and the companies that have been subcontracted by them in an effort to discover infringements made by Supreme Food Service Co. on the prime vendor contract".

The U.S. Department of Justice dispatched official letters to Supreme suppliers to enquire about information regarding the prices of the services received by the US army. The Department of Justice is using documents, data and letters which have been exchanged between Supreme Food Service Co. and its suppliers to reveal infringements related to the prime vendor contract in Afghanistan.

In the context of reticence and secrecy, the Office of the Inspector General issued a warrant to companies subcontracted by Supreme; to supply food and non food items to the US Army under the prime vendor contract # SPM300-05-D-3130 signed on September 1, 2004.

The warrant issued to subcontractors contained a specific appendix of all the required documents which include invoices, purchase orders, records of the volume of incoming orders issued by Supreme Food Service Co, agreements and contracts between the two parties, any exchanged correspondences, in addition to any documents related to reductions and discounts on the supplied materials.

Supreme Food Services Co. AG, an Australian-based company, conducts its operations for the U.S. Army in Zone 3 in Afghanistan. It performs all operations related to food supplies and distribution to areas belonging to the army.

About "Supreme"

Supreme Food Service AG was established in 1957 by a full ownership of Australian partners. It was set up by a former US Army food service soldier. His main concern was to supply food service to military installations in Western Germany post WW2.

In the 1970s, the company expanded its services to include military customers internationally, and specifically in unsettled regions and those with limited infrastructure.

The company extended its services in Afghanistan in 2002 and later it was awarded the Prime Vendor contract with the US Department of Defense in 2004.

Supreme utilizes its resources in land, rail, sea and air transport to deliver food to more than 45 military locations in Afghanistan over the past couple of years.

Contact Information

  • Arab Times Newspaper
    (+965) 50022322
    (+965) 24846905 (FAX)