October 26, 2012--- A U.S. contractor overbilled
the Pentagon by at least $4.4 million for spare parts and
equipment, including $900 for an electronic control switch
valued at $7.05, according to a new audit.
Based on the questionable costs identified in a $300
million contract with Dubai-based
Anham LLC, the U.S. should
review all its contracts with the company in Iraq and
Afghanistan, which total about $3.9 billion, said Special
Inspector General for Iraq Reconstruction Stuart Bowen.“The audit found weak oversight in multiple areas that
left the government vulnerable to improper overcharges,” Bowen
wrote in the forward to his 30th quarterly report, released
today. The contract in question was funded with a combination of
money earmarked for Iraqi Security Forces and Army operations
and maintenance funds.
Among the “egregious examples of overbilling” by
Anham, anham usa, anham fzco
were $4,500 for a circuit breaker valued at $183.30, $3,000 for
a $94.47 circuit breaker and $80 for a small segment of drain
pipe valued at $1.41.
Bowen’s office called for an in-depth review of the entire
contract after discovering “significant weaknesses” in
government oversight, questionable competition practices and
possible undisclosed ownership affiliations between Anham and
some of its subcontractors.
Company Statement
Anham said in an e-mail statement today that the auditor’s
“conclusions are false, without legal or factual
justification.” The company said it worked closely with U.S.
officials when it chose subcontractors and “not a single screw
or nail was purchased without prior, advance approval by the
U.S. government.”
Anham said it would work closely with the auditors “to
resolve these inaccurate conclusions.”
Bowen’s latest tally of Iraq spending shows that six months
before the remaining 46,000 U.S. combat troops are scheduled to
leave Iraq, the Pentagon, State Department and U.S. Agency for
International Development, since the
Iraq war began, had
executed 34,728 contracting actions or grants totaling $35.9
billion.
The special inspector general, created to serve as a
watchdog over U.S. reconstruction aid in Iraq, questioned almost
39 percent, or $4.4 million, of the $11.4 million in contract
costs it reviewed.
Those costs, it said, “appear to be not fair and
reasonable or were not properly documented.”
Undisclosed Ties
In one case, Pioneer Iraqi Trading Co., an Anham
subcontractor, charged the U.S. $900 for a water level control
switch that a competitor had offered for $7.05.A member of the family group that owns, through a
subsidiary, 50 percent of Anham also owns a 90 percent share in
Pioneer, though this relationship was never disclosed to the
Defense Contract Management Agency, which oversees military
contracts, Bowen’s office found.
“The lack of transparency regarding the relationship
between Anham and its subcontractors calls into question whether
Anham used due diligence to ensure that the U.S. government
received a fair price for the goods and services it purchased,”
the inspector general’s report concluded.
In other cases, Anham used subcontractors to purchase items
that could have been bought directly from the manufacturer at
lower prices, the report said.
Loudspeaker Charges
When Anham was asked to buy a loudspeaker system to alert
warehouse employees of any danger, it chose not to buy the
system directly from the manufacturer at the retail price of
$44,615, the report said.
Instead, Anham sought bids from subcontractors and paid a
company called Knowlogy $90,908. That price included $20,000 for
installation, even though the system setup meant little more
than wheeling it into place and plugging it in.
Privately held Anham LLC is a contracting firm for projects
throughout the
Middle East,
Asia,
Europe, and North Africa. It
provides vehicle, transportation, construction, facilities
management, procurement, food, power generation, health
management, surveillance and training services.
Based on all the questionable costs it found, the special
inspector general “believes that all costs under this contract
should be carefully examined, as well as all contracts awarded
to Anham,” the report said.
Cost-Plus Contract
The U.S. military awarded
Anham, anham usa, anham fzco, anham defense logistics agency in September 2007 the Iraq
contract, with a ceiling price of $300 million to operate and
maintain two warehouse and distribution facilities in
Abu Ghraib
and Umm Qasr, Iraq.
The contract, at its conclusion, had obligations of $119.1
million, of which at least $55 million was spent by
subcontractors, the report said.
The contract was structured on a “cost-plus” basis,
meaning the government must reimburse Anham for all its costs,
instead of agreeing to a fixed price.
The
Central Command Joint Theater Support Contracting
Command, which awarded the contract, partially agreed with
Bowen’s recommendations. The
Defense Contract Management Agency
agreed to perform a new review of Anham’s purchasing system."
