The Defense Department is being forced to extend multimillion-dollar contracts for services in Iraq, including one with a firm under criminal indictment, because losing bidders have legally challenged the companies selected as replacements.
Agility, a Kuwaiti firm charged in November 2009 with overbilling food contracts worth $8.5 billion over four years for troops, civilians and contractors in Iraq, Jordan and Kuwait, recently received a $26 million, six-month contract extension. The extension was granted because another Kuwaiti concern challenged the April award of the food contract to Agility's replacement, Anham, a Dubai-based conglomerate.
A second firm, Fulcra Worldwide of Arlington, was awarded an extension worth $5 million on its strategic communications contract in Iraq with U.S. Central Command after Fulcra itself filed a claim against loss of the contract to another bidder, SOS International, a New York firm with offices in Reston.
The Defense Logistics Agency, which supervises the food contract, decided to extend the Agility contract through April 2011 while the protest against Anham by another bidder is being adjudicated by the Government Accountability Office (GAO).
Agility had been scheduled to transition the work, which amounts to more than $300 million a year, to Anham. However, cargo shipper Kuwait & Gulf Link Transport filed a protest against the award on the grounds that Anham's proposal failed to meet criteria set out in the contract offering.
While a decision by the GAO is expected shortly, Anham has been delayed in preparing to take over the contract, which involves not only purchasing and supplying food and other items, but also warehousing it in Kuwait before shipping to Iraq and Jordan to meet the needs of about 145,000 people.
Meanwhile, Agility, which has been barred from bidding directly or through affiliates on new U.S. contracts, will continue to provide provisions under the contract extension. The company also has been fighting the Justice Department indictment in federal court in Georgia claiming it cannot be subpoenaed or tried anywhere outside Kuwait. After the indictment, Agility closed its U.S. offices, even though top officials of the subsidiary handling the contract are not only U.S. citizens but also former Army generals, one of whom served in a senior position with the Defense Logistics Agency.
Central Command announced last week it had to extend the Fulcra contract for six months because to "award to any other source would result in unacceptable delays and negatively impact the ability" of U.S. forces in Iraq to carry on "all aspects of media communications activities," according to the paper justifying the decision.
Under the contract, which it has had for more than three years, Fulcra not only works directly with the Iraq government spokesman and ministers at the Defense and Interior ministries, but also carries out monitoring of media in Iraq, plans strategic messaging, and manages Web materials for English and Arabic sites supporting the Iraq command. Fulcra is the new name for the Lincoln Group, which as a Pentagon contractor in 2005 was found to have paid Iraqi newspapers to print stories written by American soldiers or its employees.
Fulcra lost its bid on the new contract in June and in July filed the first of three complaints with the GAO. It lost the first two and before the last one was settled, the firm filed a protest in October with the United States Court of Federal Claims, where it is pending. Meanwhile, Central Command was faced with a dilemma since Fulcra's complaint prevented SOS International from making preparations to begin work and keeping Fulcra in place was its only option.
Fulcra is claiming that SOS filed an "unreasonably low-priced proposal," according to its complaint before the Court of Federal Claims. Arguing the new contract was "largely similar" to the one Fulcra now holds, the firm said its current monthly price was $531,459 while the SOS bid averaged out to $158,620 a month for what were to be "largely similar" services. In the complaint, Fulcra argues that SOS's bid, which offered a 70 percent reduction in cost, was "unrealistic" and thus should have been"technically unacceptable" by Central Command.
Fulcra described the SOS bid as a "bait and switch" violation, where the offer misrepresents its costs with the hopes of winning the contract and then expects to be paid based on higher actual expenditures.
SOS's response to the allegations was sealed and a lawyer representing the firm said she would not comment on the case.