Agency extends Afghan food-supply contract for firm that hired former director

Continued photo coverage from the front lines of the U.S., Afghan and NATO military effort in Afghanistan.
Washington Post Staff Writer
Tuesday, January 4, 2011; 8:35 PM

The Defense Logistics Agency has extended without competitive bidding a $4 billion food-supply contract to a company whose top officials include a retired lieutenant general who commanded the agency just over two years ago.

In an announcement, the DLA said it had granted a two-year contract extension to Supreme Foodservice to supply food to U.S. and coalition troops in Afghanistan. It said the extension was "required in order to maintain continuous prime vendor coverage and uninterrupted supply of vitally needed subsistence items."

In March, the agency announced plans to rebid the Afghan food contract for up to five years but never put out a bid proposal. In announcing the extension, the agency redacted an explanation for the delay, although the uncertainty about troop levels may have been a factor.

The DLA said in a statement that a new proposal "is still in development" and that the agency had "determined that the follow on procurement may take two years to be awarded."

Supreme Foodservice is part of Supreme Group, a global logistics services company that was founded in 1957 by a former U.S. soldier and that is now headquartered in Amsterdam. It has held the Afghan food contract since 2005.

In 2007, Army Lt. Gen. Robert T. Dail, the DLA's director at the time, gave the agency's New Contractor of the Year award to Supreme Foodservice, saying that in Afghanistan, the company "has used a combination of ground, helicopter and air transportation to more than 65 military sites to ensure mission success."

Dail retired from the Army in November 2008. Four months later, he was hired as president of Supreme Group's new entity, Supreme Group USA, located in Reston.

Troy Hughes, a lawyer for Supreme Group USA, said Dail has not participated in "coordination or negotiations" with the DLA on the Afghanistan contract.

"It was the intent by Supreme Group leadership to exclude LTG Dail from all subsistence prime vendor contract activities, to include negotiations, upon his arrival and for as long as he serves in the Group and/or as president of Supreme Group, USA," Hughes wrote in an e-mail.

He added that, while at the agency, Dail was not involved in granting the original Afghanistan food supply contract in 2005. The DLA has since said that Dail cannot represent Supreme before the agency on the contract for a two-year period after his retirement.

Dail is not the first former senior DLA officer to join a major agency contractor. In 2006, retired Maj. Gen. Dan Mongeon, former director of operations at the DLA, joined Agility, formerly PWC Logistics, after 34 years in the Army. At the time, PWC/Agility had a multibillion-dollar contract to provide food and other provisions to troops in Iraq, Jordan and Kuwait.

That contract ended in early December, more than a year after the Justice Department brought charges in federal court against PWC/Agility for allegedly overcharging the government. Agility has denied the charges, and the matter is before a federal court in Georgia.

Supreme has had its own problems in Afghanistan. According to Hughes, the company is working with Afghan officials "regarding our tax returns." Afghan tax authorities are apparently reviewing whether Supreme owes taxes, something the company denies. The company says its work is tax-exempt because all its imports support U.S. and coalition forces.

While the "review and assessment of Supreme tax returns is ongoing, Supreme provided the authorities with a monetary deposit to be held in escrow until the completion of the assessment," Hughes said. "Supreme expects this money to be returned at the end of the assessment," he added.

Last month, the Wall Street Journal reported that the company was among several under investigation by the Afghan government and that Afghan Finance Minister Omar Zakhilwal said Supreme had paid $11 million for back customs duties on goods it imported and sold on the local market since 2002. That is the money Hughes said was being held in escrow. Zakhilwal, according to the newspaper, "said the government was working with Supreme to make sure it is in compliance with Afghan tax and customs regulations in the future."

© 2011 The Washington Post Company