Iraq Contractor 'Marked up Prices by 12,000%'

A United Arab Emirates-based logistics contractor billed Defense Department authorities in Iraq for parts at prices marked up as high as 5,000 percent and 12,000 percent, according to a quarterly report released Saturday by the Special Inspector General for Iraq Reconstruction.

GovExec reports that a review of a $119 million reconstruction and logistics contract with Anham LLC questioned almost 40 percent of its costs, including:

  • $900 for a control switch valued at $7.05 (a 12,666 percent increase);
  • $80 for a small segment of drainpipe valued at $1.41 (a 5,574 percent increase);
  • $75 for a different piece of plumbing equipment also valued at $1.41 (a 5,219 percent increase);
  • $3,000 for a circuit breaker valued at $94.47 (a 3,076 percent increase);
  • $4,500 for another kind of circuit breaker valued at $183.30 (a 2,355 percent increase).

Because of what it called weak oversight, SIGIR formally questioned the contract's costs and recommended reviews of billing practices in all of Anham's U.S. government contracts in Iraq and Afghanistan, which total about $3.9 billion.

The review of Anham was among six audits SIGIR summarized. The examples of flawed oversight included government contracting officers' representatives who "failed to compare vouchers with receiving documents and allowed Anham employees to sign for receipt of $10 million in goods."

Anham said iIn a statement that "the Company takes enormous exception to the SIGIR implications. Its suggestions -– based on innuendo rather than hard facts -– are not the result of a meaningful 'audit'. ANHAM is continually audited by the Defense Contract Audit Agency (DCAA) and welcomes such true audits. ANHAM is also very proud of the savings that it effectuated for the U.S. Government and U.S. Taxpayers on the Contract."

Another audit faulted the Pentagon's Commander's Emergency Response Program for deferring too much to State Department agendas. "Many of the capacity development projects undertaken were not linked to specific military objectives," the audit found, adding that State officials "played a significant role in planning and executing CERP projects, raising questions about whether the CERP has simply become another U.S. development program."

SIGIR did credit the State Department with improving oversight of contracts for mentoring the Iraqi police program, addressing weaknesses the inspector general had been citing since 2005. In June 2011, Deputy Undersecretary for Management Patrick Kennedy told the Commission on Wartime Contracting that he had accelerated reconciliation of invoices overseen by the department's International Narcotics and Law Enforcement Affairs Bureau.

The State Department effort, which resulted in recovery of funds or reductions in billing totaling some $188 million, is "a clear demonstration of the critical importance of contemporaneous invoice oversight in contract execution," the SIGIR report said.

(Sources: GovExec, Anham)

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