Military Subcontracters Are Providing Shoddy Services to Troops In Iraq and Afghanistan
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Najlaa International Catering Services won a $3 million five-year contract in February 2010 to prepare food for the U.S. Agency for International Development compound in Iraq. The deal was approved despite the fact that Bill Baisey, CEO of the Kuwaiti company, faces numerous complaints and court actions for non-payment of bills and alleged fraud in Kuwait and Iraq.
U.S. wars in Afghanistan and Iraq have been plagued by private military contractors that have performed poorly or failed miserably in fulfilling their contracts. Some overstated their capabilities or were badly managed and underskilled, while others committed outright fraud.
Past investigations concentrated on major contractors such as Halliburton and Kellogg, Brown and Root (KBR), but recently the smaller companies – such as Najlaa -- to which these giants subcontract have drawn fire.
“The government has limited visibility into subcontractor affairs and limited ability to influence their actions,” said former U.S. Congressman Christopher Shays at a July 2010 hearing of the Commission on Wartime Contracting. “This fact presents a challenge to transparency and accountability for the use of taxpayers' dollars. Poorly conceived, poorly structured, poorly conducted, and poorly monitored subcontracting can lead to poor choices in security measures and damage to U.S. foreign policy objectives, among other problems.”
The United States, however, has become so dependent on contractors who do the laundry, feed the troops, and build and run facilities that it would be difficult if not impossible for the military to continue without them.
Najlaa is part of the extensive web of subcontractors supplying the goods and services that sustain U.S. war efforts, and the Kuwait-based company’s failures and problems fit a common pattern. One of several firms that make up Baisey-owned Eastern Solutions Group, Najlaa has several subcontracts with KBR, which has provided more than $35 billion in base maintenance services to the U.S. military in war zones including Iraq and Afghanistan under the Logistics Civil Augmentation Program (LOGCAP).
Both Najlaa and KBR are mired in scandal and legal troubles: Texas-based KBR – which was owned by Halliburton of Houston until 2007– has been in the news regularly for almost a decade because of multiple allegations of over-charging and shoddy service.
Najlaa hit the news recently when the Project on Government Oversight revealed that the company appears to have suffered no repercussions for its role in luring hundreds of South Asian workers to Iraq with promises of lucrative jobs, only to turn around and warehouse at least 1,000 of them in dismal living conditions without work—or pay—for several months.
A KBR special inspection dated November 11, 2008, provides details of problems at the warehouse where the workers were housed, including: poor food and bathroom sanitation; too few showers; cramped living space; lack of a food service operation resulting too little food, poor sanitation, and no dedicated dining hall.
But dig down into the details of the scandal and a much more complex set of problems emerges. A CorpWatch study of a trove of company documents reprises a familiar scenario in which the prime contractor blames the subcontractor, which predictably claims that fault for most of the problems lies with the prime.
Subcontractors at War
The subcontract with KBR that put Najlaa in the spotlight was its deal to build and operate 32 dining facilities (also known as DFACs) at various military camps in Iraq. The sheer volume of contracts so overwhelmed Najlaa that it turned to sub-subcontractors, according to documents seen by CorpWatch. To meet its obligations, Najlaa hired Aram Media, a registered Iraqi company, to build a housing camp for Najlaa workers.
Under its agreement with Najlaa, Aram would manage construction and pay a host of small suppliers including Aim Group for labor, RaAli for blast walls, Pagasus for electrical items, and Meland for toilets. In return Najlaa would pay Aram for all costs plus a guaranteed management fee. Aram Group executive director, Samir Sabbagh, says that he negotiated a 30 percent management fee in September 2008 to build the campsite for the workers.
Over the next several weeks, Aram Group claims that it built the camp according to specifications, and was in constant communication with Najlaa, updating it on progress and responding to all requirements and changes. However, Najlaa, failed to pay Aram Group for the work done, according to Sabbagh.
By March 2009 Najlaa owed Aram Group more than $1 million. Initially Najlaa sent placating messages to Aram: “Najlaa Catering does in fact appreciate your patience and assure you of our intention of resolving the issues at hand regarding the outstanding balance owed to you.”
A month later, Najlaa CEO Bill Baisey flew to Baghdad for joint-venture negotiations with a different company. He made no attempt to meet with Aram. The next day he wrote: “[W]e have no intentions to deny you or your company any money owed to you provided we agree on the final amount. I have just finished building a new camp similar to what you have done, and the cost is not even 1/10 of what you are asking.”
On April 24, 2009, Sabbagh pleaded with Baisey to settle his debts. Baisey sent another soothing message to one of Samir’s colleagues: “I will never accept any thing wrong to happen to you, Samir or your business. I will be back in Kuwait on Monday or Tuesday and shall coordinate with you and Samir on the meeting. All I want is for us to agree on the final numbers and that is it.”