War Contracting Gone Bad
Wednesday, June 25, 2008 at 7:58 pm
A Congressional report released Tuesday details the sordid story of how the military contrator AEY, and its 22 year-old company president, Efraim Diveroli, won, and then lost, a $298-million Pentagon contract to supply munitions to Afghanistan security forces.
For the Afghanistan contract, AEY bought Chinese-made, 40-year-old rifle cartridges from Albania and other former Soviet bloc nations. Since buying Chinese-made arms is illegal under U.S. law, AEY worked with the Albanian defense ministry to repackage the arms, and disguise their point of origin, before shipping them to Afghanistan.
But it does highlight a litany of Pentagon and State Dept. wartime contracting mishaps that indicates why AEY was able to keep winning Pentagon dollars. For example, there was actually no need to buy Albanian weapons, because the Albanian government was trying to give them away. AEY got this Pentagon contract even though 11 prior government contracts had been terminated for mismanagement. It seems that the Pentagon officers who terminated those deals never told the officers in charge of the Afghanistan contract. And the weapons contract didn’t specify weapons quality — allowing AEY to buy ammunition that was, in some cases, more than 60 years old.
In rewarding the contract, the Pentagon did not establish ammunition quality standards or age limitations, despite the fact that such munitions are perishable. The only requirement was that munitions be “serviceable.”
The lack of requirements played right into the AEY strategy of underbidding competitors and then looking for a weapons source to fill the contract. According to the committee report, in shopping for an ammunition supplier, AEY emphasized the lack of a age limitation. “Please be advised there is no age restriction for this contract!!!” AEY officials wrote to one possible contractor.
Their quest for the cheapest munitions brought them to Albania, a former Soviet bloc member that had bought millions of rifle cartridges from China in the 1960s and ’70s. AEY bought these cartridges from the Military Export Import Co,. run by the Albanian government’s defense ministry.
AEY did this despite the fact that it is against U.S. federal law to buy weapons made in China, either directly or indirectly. There was also a more practical consideration — Albania was trying to unload these weapons and had even offered to donate them to the U.S. military.
The committee report found that Albana, in its quest for NATO membership, was actively cooperating with U.S. and NATO programs to destroy stockpiles of China-purchased weapons and ammunition. Albania– along with Bosnia, Bulgaria, Hungary– even offered to donate the ammunition to the U.S. for the war in Iraq.
This donation plan ended last December, though, when the Albanian president met with Gen. David Petraeus, the commander of the Iraq forces. Petraeus said it was against the law to receive China-made munitions.
Why AEY was dealing with Albania, much less giving the Albanian defense ministry millions, is not known. Part of the answer, though, might lie in the defense ministry’s record of corruption. Ylli Pinari, the head of the Military Export Import Company, is on the State Dept’s arm trafficker “watch list.”
The middleman company in the AEY-Albania deal, Evdin Ltd., a Cyprus-based company, is also on the State Dept. watch list. At the hearing Tuesday, it was revealed that the State Dept. never informed Pentagon contracting officers that either Evdin Ltd. or the Albanian Military Export Import Co. were on the watchlist.
The committee report turned up a litany of other ways that AEY, and its Afghanistan weapons, was not vetted until this year, when the Pentagon terminated the contract in May.
AEY’s Afghanistan contract was finally terminated after the Pentagon inspected the weapons. They found, among other things, ammunition made in Bulgaria as long ago as 1944. Many wooden weapons boxes had disintegrated because of extensive termite damage.
They also traced the origins of some weapons to China. The Pentagon suspended the Afghanistan contract Mar. 25. The Times published its article on Mar. 27. That story prompted the oversight committee’s investigation.
The hearing Tuesday delved little into Harrison’s allegations. Instead, there was a session of bipartisan disgust over the AEY fiasco, as GOP committee members agreed with Waxman and the Democrats. “This case seems to speak volumes about what’s wrong with the military contracting process today,” said Tom Davis (R-Va.), the committee’s ranking Republican.
“This is beyond belief,” said Todd Platts (R-Pa.).
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