Agility implicated in probe of DoD food supply chain
Agility, the Kuwaiti based global third-party logistics provider, is under investigation by the departments of Justice and Defense for its roll in an alleged scheme to overcharge the U.S. military for food supplies to troops in Iraq, according to a series of articles in the Wall Street Journal this week.
Investigators are looking into whether Agility, formerly known as PWC Logistics and still referred to as Public Warehousing Co. in Kuwait and existing government contracts, bought food from ConAgra Foods, Perdue Farms, Sara Lee Corp. and other food suppliers at higher-than-normal prices and then received large refunds for prompt payment.
According to court documents viewed by the Journal, former Army procurement officials now working as consultants, and a former Sara Lee executive now in the Army’s procurement division, helped steer PWC’s orders to specific companies, instead of allowing the company to shop for the best prices.
Agility-PWC’s prime supplier in Kuwait, evidence shows, returned 10 percent of the money it received for its goods to Agility. The supply company is owned by the same family that is among PWC’s largest shareholders. Another company, Houston-based American Grocers, inflated bills for food by putting on its invoices costs that were never incurred, such as trucking charges. The Journal reported that PWC paid the inflated bills and passed the costs on to the Defense Department, according to the indictment of the businessman who owns American Grocers.
Agility has rapidly expanded into a major provider of outsourced logistics services through several acquisitions on the strength of high revenues from a series of significant contracts with the Defense Department to supply food, trucking, warehousing, fuel and heavy equipment delivery in theater and other services. One of its contracts to supply food and dry goods is potentially worth $14 billion over five years. Under the contract, PWC is responsible for procuring food in the United States, transferring it to international transportation carriers contracted by the military, warehousing, picking, shipping and delivery to bases in Iraq and Kuwait. The job is so big that Agility-PWC has become the largest exporter of U.S. food products, an official said in a February 2006 feature on the company in American Shipper (pages 30-38).
Last summer the Defense Logistics Agency awarded a contract to Agility’s defense and government services unit to build and provide food services for 11 dining facilities throughout Kuwait. The fixed price contract is worth up to $127 million if the agency exercises two option years beyond the one-year base contract.
Agility said it is cooperating in the investigation and did nothing wrong. It told the paper that its high food prices are the cost of operating in a war zone, and that all discounts are allowed by the contracts and is normal practice in the food industry and the Middle East.
In an extensive defense posted on its Web site Thursday, the company said the fact that it has been “competitively awarded two successive food supply contracts from the U.S. military is direct evidence of its ability to provide high quality services and deliver competitive pricing — pricing that includes not only the cost of the food it supplies but also the costs associated with storing, handling and delivering it at multiple locations in a war zone. The company is constantly working with its suppliers to obtain the best value for the U.S. government.”
Agility, which offers freight forwarding, contract logistics, customs brokerage, transportation management and other services, follows Western management practices. It noted it has a strong government contract compliance and corporate ethics programs, as shown when it reported wrongdoing it discovered by a second-tier supplier who apparently overcharged the government, an apparent reference to the American Grocers case. It also notified the U.S. government of a suspected corruption ring within the military in Kuwait that led a government investigation and assisted with a sting operation during the probe.
PWC “is proud of its work to provide food and other services in support of the brave men and women in the U.S. military who are stationed in the Middle East. More than 30 PWC employees have been killed and 200 injured carrying out the extremely dangerous work of providing food for U.S. troops in a war zone, primarily in attacks on convoys that have destroyed more than 300 trucks and damaged another 700,” the company said.