An oil company supplying the U.S. military with gas in Iraq was able to overcharge the government because they were the only company authorized by Jordan to transport through their country, according to a Defense Department Inspector General report obtained by TPM via Freedom of Information Request.
The International Oil Trading Company (IOTC) was paid “about $160 to $204 million (or 6 to 7 percent) more for fuel than could be supported by price or cost analysis,” according to the report. Investigators also found that Kellogg, Brown, and Root performed an “inherently
governmental function” by accepting fuel on behalf of the government.
The IG report, titled “Competition Issues and Inherently Governmental Functions Performed by Contractor Employees on Contracts to Supply Fuel to U.S. Troops in Iraq,” was issued only in an abbreviated form on March 15. TPM received a redacted version of the report from the Defense Department though a FOIA request.
According to the report, six companies bid on the contact, which was handled by the Defense Logistics Agency (DLA) Energy (which is charged with managing DOD’s energy sources). But only one of the companies that bid actually had permission to transport fuel through Jordan, making them the only company that qualified for the loan.
The amount that IOTC initially bid on the contract was redacted, but DLA worked them down to $2.10 per gallon. Still, that was $0.36 per gallon over DLA’s constructed price ($2.1000 compared to $1.7390).
IOTC’ s unit price of $2.10 per gallon is “significantly higher than the unit prices that DLA Energy constructed from similar competitively awarded contracts,” according to the report.
DOD’s IG found that it was “not reasonable” to conclude that IOTC thought it would have competition “because it was aware that multiple offers had been submitted for the previous two solicitations for the supply of product from Jordan into Iraq.” Said the IG:
To the contrary, the contracting officer concluded that IOTC may have reasonably anticipated it had no competition because the Jordanian Ministry of Energy informed the company that it would not issue any additional LOAs authorizing the transport of jet fuel for the solicitation. In addition, that contracting officer was unable to conclude that the $2.10 per gallon award price used to support the reasonableness of the price that IOTC offered for this procurement was reasonable.
IOTC even raised the price it offered to supply the fuel in its “Best and Final Offer” while the other offerors lowered their prices, according to the report. “It is difficult to determine whether IOTC engaged in war profiteering,” they concluded.
DLA Energy contracting officers also inappropriately used KBR, “to accept about $859.8 million of fuel at Defense Fuel Support Points at Al Asad, Al Taqaddum, and Victory Base Complex in Iraq.” Said the IG:
KBR was allowed to accept fuel under the LOGCAP contract, an inherently governmental function. Our reconciliation of the records for two of those fuel support points identified only minor variances between the quantity of fuel accepted by KBR and the quantity of fuel that IOTC was paid for; however, fuel is a high-risk commodity, analogous to cash, requiring stringent control procedures.