Pentagon Seeks $756.9 Million Overpayment Refund From Supreme Foodservice

The Pentagon is pressing one of the largest contractors in Afghanistan, Supreme Foodservice AG, to refund within 30 days overpayments of $756.9 million in unsupported transportation costs, according to a spokeswoman

by Tony Cappacio Bloomberg  December 13, 2011

The Pentagon is pressing one of the largest contractors in Afghanistan, Supreme Foodservice AG, to refund within 30 days overpayments of $756.9 million in unsupported transportation costs, according to a spokeswoman.

The Defense Logistics Agency made the decision last week“after extensive negotiations, in which Supreme and the agency were unable to agree on final rates” for a contract first awarded in December 2005, said agency spokeswoman Mimi Schirmacher in a statement.

Supreme Foodservice of Ziegelbrucke, Switzerland, through Sept. 30 has been paid $5.5 billion since 2005 to supply and transport food, water, three-layered corrugated packing boxes and other non-food items to U.S. troops in Afghanistan. It provides fresh fruits and vegetables to as many as 246 sites in Afghanistan under the agency’s “Subsistence Prime Vendor”program.

Schirmacher said the Defense Logistics Agency can’t break down the $756.9 million by category “since it involves proprietary pricing information.”

Company spokeswoman Victoria Frost said in an e-mail that the contested rates have been in negotiations for several years. The company “strongly disputes” the repayment request and will appeal, she said.

‘Just How Bad’

Pentagon Inspector General Gordon Heddell, whose auditors in a March report first highlighted Defense Logistics Agency oversight deficiencies, said at a Dec. 7 hearing that the original Supreme contract was “an example of just how bad it can get.” The contract “wasn’t well-designed” or “well-thought out.”

Only this year has the defense agency assessed final transportation rates for a contract awarded in 2005, Heddell said.

“We are just now determining what should have been the reasonable and fair prices to pay,” Heddell told a House oversight committee.

Supreme’s head of Washington-based operations is Robert Dail, a former Army Lieutenant General who headed the DLA between August 2006 and November 2008. He presented Supreme in January 2007 with the agency’s “New Contractor of the Year Award.” He joined Supreme in March 2009 as president of Supreme Group USA in Reston, Virginia

Please read more here