Most of KBR's contracts to support bases and troops overseas have come under the multi-billion dollar Logistics Civilian Augmentation Program (LOGCAP). In 2001, KBR won a one-year LOGCAP contract to provide an undefined quantity and an undefined value of "selected services in wartime." The company subsequently enjoyed nearly eight years of work without facing a competitor's bid, thanks to a series of one-year contract extensions. By July 2011, KBR had received more than $37 billion in LOGCAP funds. Its experience reflected the near tripling of Pentagon contracts issued without competitive bidding between 2001 and 2010. "It's like a gigantic monopoly," a representative from Taxpayers for Common Sense said of LOGCAP.
The work KBR performed under LOGCAP also reflected the Pentagon's frequent use of "cost-plus" contracts. These reimburse a company for its expenses and then add a fee that's usually fixed contractually or determined by a performance evaluation board. The Congressional Research Service explained that because "increased costs mean increased fees to the contractor," there is "no incentive for the contractor to limit the government's costs." As one Halliburton official told a congressional committee bluntly, the company's unofficial mantra in Iraq became "Don't worry about price. It's "cost-plus.'"
Not surprisingly, in 2009, the Pentagon's top auditor testified that KBR accounted for "the vast majority" of wartime fraud. The company has also faced accusations of overcharging for everything from delivering food and fuel and supplying housing for troops to providing base security services.
After years of bad publicity, in 2007, Halliburton spun KBR off as an independent company and moved its headquarters from Houston to Dubai. Despite KBR's track record and a 2009 guilty plea for bribing Nigerian government officials to win gas contracts (for which its former CEO received prison time), the company has continued to receive massive government contracts. Its latest LOGCAP contract, awarded in 2008, could be worth up to $50 billion through 2018.
2. Supreme Group: Next on the list is the company that's been described as the KBR for the Afghan War. Supreme Group has won more than $9 billion in contracts for transporting and serving meals to troops in Afghanistan and at other bases worldwide. Its growth perfectly symbolizes the soldiers-to-contractors shift in who peels the potatoes.
Supreme was founded in 1957 by an Army veteran who saw an opportunity to provide food for the hundreds of U.S. bases in Germany. After expanding over several decades into the Middle East, Africa, and the Balkans, the company won multi-billion-dollar "sole source contracts" that gave it a virtual monopoly over wartime food services in Afghanistan.
Today, in a prime example of the revolving door between the Pentagon and its contractors, Supreme's chief commercial officer is former Lieutenant General Robert Dail. From August 2006 to November 2008, Dail headed the Pentagon's Defense Logistics Agency (DLA), which awards food contracts. In 2007, Dail presented Supreme with DLA's "New Contractor of the Year Award." Four months after leaving the Pentagon, he became the president of Supreme Group USA.
Recently, Supreme has faced growing scrutiny over the way it's won competition-free contracts, with service fees as high as 75% of costs and reportedly for more than three-quarters of a billion dollars in overbilling. Last month, Supreme had the chutzpah to sue the Pentagon for awarding a new $10 billion Afghanistan food contract to a competitor that underbid Supreme's offer by $1.4 billion.
3. Agility Logistics: Next on the list is Agility Logistics, a Kuwaiti company. It won multi-billion-dollar contracts to transport food to troops in Iraq. When the Pentagon decided against awarding similar contracts in Afghanistan to a single firm, Agility partnered with Supreme in exchange for a 3.5% fee on revenues. In 2009 and 2010, grand juries indicted Agility for massive contracting fraud, and the Pentagon suspended the company and 125 related companies from receiving new contracts. In 2012, a judge issued a default judgment against Agility in a whistleblower suit seeking more than $1 billion for overcharging the government.
The Rest of the Top 10: A Pattern of Misconduct
Things don't get much better farther down the list. Next come DynCorp International and Fluor Intercontinental, which along with KBR won the latest LOGCAP contracts. Awarding that contract to three companies rather than one was intended to increase competition. In practice, according to the Commission on Wartime Contracting, each corporation has enjoyed a "mini-monopoly" over logistics services in Afghanistan and other locations. DynCorp, which has also won large wartime private security contracts, has a history littered with charges of overbilling, shoddy construction, smuggling laborers onto bases, sexual harassment, and sex trafficking.
Although a Fluor employee pled guilty in 2012 to conspiring to steal and sell military equipment in Iraq, it's the only defense firm in the world to receive an "A" on Transparency International's anti-corruption index that rates companies' efforts to fight corruption. On the other hand, number seven on the list, ITT (now Exelis), received a "C" (along with KBR and DynCorp).
The last three in the top ten are BP (which tops the Project on Government Oversight's federal contractor misconduct list) and the petroleum companies of Bahrain and the United Arab Emirates. After all, the U.S. military runs on oil. It consumed five billion gallons in fiscal year 2011 alone, or more than all of Sweden. In total, 10 of the top 25 firms are oil companies, with contracts for delivering oil overseas totaling around $40 billion.
Spreading the Love
Contractors are hardly alone in raking in the dollars from the Pentagon's baseworld. Pentagon officials, military personnel, members of Congress, and lobbyists, among others, have all benefited -- financially, politically, and professionally -- from the giant overseas presence. In particular, contractors have spread the love by making millions in campaign contributions to members of Congress. According to the Center for Responsive Politics, military contractors and their employees gave more than $27 million in election donations in 2012 alone, and have donated almost $200 million since 1990.
Most of these have gone to members of the armed services and appropriations committees in the Senate and House of Representatives. These, of course, have primary authority over awarding military dollars. For the 2012 elections, for example, DynCorp International's political action committee donated $10,000 to both the chair and ranking member of the House Armed Services Committee, and made additional donations to 33 other members of the House and Senate armed services committees and 16 members of the two appropriations committees.
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