Privately operated logistics hub fuels debate over excesses in Afghanistan

Trucks stage outside a 290,000-square-foot warehouse in Helmand province owned by Supreme Group. The base and warehouse were built in 2009 as U.S. forces poured into Afghanistan as part of the surge.


By JOSH SMITH | STARS AND STRIPES Published: August 19, 2013

HELMAND PROVINCE, Afghanistan — It looks like any of the other Hesco-and-concertina wire bases that dot Afghanistan’s landscape. But instead of sending out armored patrols or launching helicopter gunships, this base just outside camps Bastion and Leatherneck in southern Afghanistan is all about food and fuel, and a lot of it.

It’s called the Helmand Regional Distribution Center. It is a privately owned and managed forward operating base, and if its owners have their way, it could outlast most NATO bases in the country.

The site holds a warehouse that is one of the largest buildings in Afghanistan. It was built by Supreme Group, a Swiss company that has operated a massive logistics network as part of a contract to support NATO troops since 2005.

There are no soldiers on this base, only contractors. Its towers are manned by private security guards who also protect convoys of employees to and from Camp Bastion, which is about one mile away, across a trash-covered wasteland populated only by local truck drivers waiting to clear security and enter the bases.

The Helmand distribution center offers a rarely seen glimpse into the massive behind-the-scenes logistics operation. Construction on the HRDC began in 2009, right as President Barack Obama dispatched 33,000 additional American troops as part of the “surge” in Afghanistan.

Now with the company embroiled in a congressional probe and a multibillion-dollar billing dispute with the Defense Department, the base is at the heart of a debate over whether Supreme’s logistics surge was efficient business or, as some congressional lawmakers say, a prime example of government contracts spun out of control.

Corporate showroom

A wide range of companies run dining facilities, have logistics contracts and manage private facilities such as the one on the outskirts of Kabul where five security guards and two civilians were killed in an attack in July.

According to the Special Inspector General for Afghanistan Reconstruction, defense contractors working for the Defense Department outnumber American troops by nearly two to one. There were 107,796 contractors in March, compared to about 66,000 U.S. soldiers, according to SIGAR’s latest quarterly report released in July.

But Supreme is in a league of its own.

Since 2005 the company has delivered every piece of food to the more than 76,000 American and British forces that make up the majority of the NATO presense here. It also delivers a wide range of other supplies, including all the fuel for many of the largest air bases.

Supreme’s Helmand facility houses a 27,000-square-meter warehouse, which includes 7,000 square meters of freezer space kept at a chilly -13 degrees Fahrenheit, rivaling any stateside big-box distribution center. Regular flights from Dubai help provide a steady stream of fresh food to supplement the dry goods brought by truck in a transportation system that can stretch as far away as Latvia.

Up to 11 million gallons of liquid fuel can be stored in tanks directly connected to Camp Bastion by an underground pipeline.

Other areas of the HRDC are dedicated to handling the long lines of supply trucks that must be cleared before entering the secure compound.

And that’s not including the facilities designed to support up to 2,000 company personnel. In many ways, the facilities are like those on any military forward operating base — if the military had shelled out for the deluxe package.

The base has a 400-seat dining facility with metal cutlery and ceramic plates rather than the paper and plastic usually found on bases. It also has its own gym, recreation center, auditorium and a PX store. The housing is similar to the prefabricated, container-style billets found on many of the nicer military bases, except with private bathrooms in each room.

For Supreme, the center is also the equivalent of a showroom. Many of the facilities in the HRDC play dual roles: supporting Supreme staff and giving examples of what services the company can provide.

Four generator farms produce 20,000 kW of power for the camp. A self-contained sewage treatment plant means the base’s occupants don’t have to go to sleep to the smell of open “poo ponds,” infamous among American servicemembers.

Solid waste, meanwhile, is destroyed in a series of incinerators. U.S. military bases, including Camp Leatherneck right next to the HRDC, have been criticized by the Special Inspector General for Afghanistan Reconstruction for not fully utilizing such incinerators, potentially causing health risks by burning trash in open pits. Based on those concerns, Camp Leatherneck terminated its burn pits in July.

“The construction and operation of Helmand Regional Distribution Center not only demonstrates Supreme’s total expertise in food and fuel supply, but also reflects our site service capabilities,” Victoria Frost, Supreme's director of Corporate Development, Marketing & Communications, said in a written response to questions by Stars and Stripes. “We can transform a barren piece of land in a hostile environment into a fully operational, completely secure, self-sustaining outpost, quickly, efficiently and independently.”

Dispute and investigation

Supreme says it has more than 800,000 square meters of warehousing space in facilities around Afghanistan.

The company says that infrastructure is proof of its commitment to Afghanistan, but it has drawn scrutiny from lawmakers on the House Oversight and Government Reform Committee and DOD auditors, who have expressed concerns that Supreme is trying to establish itself for the long term in the country, all on the taxpayers’ dime.

The roots of the congressional probe and the billing dispute that sparked it go back to Supreme’s first contracts in Afghanistan in 2005. That’s when the company was handed a “Subsistence Prime Vendor” contract, worth up to $4.2 billion over five years, to provide food, water and other supplies to troops.

The initial contract called for Supreme to deliver supplies by road to four locations. Before Supreme began the work, the Defense Logistics Agency, which handles defense logistics contracts, asked the company to expand its work and deliver supplies by truck and helicopter to more than 260 locations. At the peak of military operations, the company says it was supplying 135,000 people on a daily basis.

Neither Supreme nor the DLA, however, agreed on a price for the expanded operations. For example, the company billed the Defense Department $33 million for deliveries — three times as much as DOD officials were expecting — according to documents released by the Oversight Committee.

Because the two sides couldn’t come to an agreement, the DLA later determined that Supreme had overcharged the U.S. government for a total of $757 million. Supreme, however, insists that the U.S. still owes $1.8 billion. To recoup the costs it says Supreme was overpaid, DLA has been withholding millions of dollars per month from payment for services. (The DOD has kept them on because the replacement company has not been able to get up to speed quickly enough.)

As of March 31, the agency had recouped $283 million, Matthew Beebe, DLA deputy director for acquisition, told the Oversight Committee in a hearing in April.

Despite the billing dispute, the contract has continued and was even extended to the end of 2013 because no other company was in a position to take over.

The DLA has now granted a new company a $10 billion Subsistence Prime Vendor contract — a decision Supreme is challenging in court. The billions of dollars in dispute are a small percentage of the money the company stands to make if the contract continues.

Specifically singled out by U.S. officials was the Helmand distribution center, which auditors said was part of company efforts to “strategically position” itself for more contracts by using taxpayer money for construction. The company was also criticized for charging top dollar to transport supplies “across the street” to Camp Bastion.

Supreme says it just made sense to position their supplies and employees inside Afghanistan, and the HRDC was the way to do it.

“Building a new warehouse closer to troop locations created a more efficient supply chain and enhanced the service provision to clients,” Frost said. “The risk of service disruption was also mitigated by maintaining large stocks of food and fuel onsite.”

Supreme says the high costs are due to the risks that it had to face when operating in active combat zones. The company says at least 312 of its subcontractors have been killed delivering food to troops since the contract began.

All this caught the eye of lawmakers on the House Oversight Committee, who blasted the company and DLA during that hearing in April.

“This has to be one of the prime poster children for government contracts spun out of control,” Rep. John Mica, R-Fla., said at the time. “If we’re looking for areas to cut waste, fraud and abuse and rip-offs of the taxpayer, this is the kind of contract that has to be stopped in its tracks.”

DLA’s failure to agree on a set price before Supreme began work was an “example of government mismanagement,” said ranking member Rep. John Tierney, D-Mass.

Building a future

As NATO forces have begun to withdraw, the number of bases has dropped from about 800 to 100 or so, according to ISAF. That hasn’t stopped Supreme from fighting for new contracts.

Chief Commercial Officer Robert Dail, a retired lieutenant general, was hired by Supreme in 2009 after retiring as the head of the Defense Logistics Agency. As the Supreme official in charge of drumming up new business in the U.S., Dail has raised eyebrows for those connections to DOD contracting officers. Dail told The Daily Beast that he doesn’t represent Supreme on the current contract with his old employer, and that his two-year no-lobbying period for ex-Pentagon officials has expired.

Supreme officials aren’t shy about their ambitions to use their facilities in Helmand, Kandahar, and elsewhere, not only to help transport NATO materiel out of the country, but to find new business supporting potential industries, like mining.

“We certainly envision an enduring presence here,” said Charlie Szar, Supreme’s commercial director for Afghanistan, logistics and re-utilization. “We are pretty hopeful that we can move into some other kinds of work.”

Szar, who spent 23 years flying helicopters for the U.S. Army and Air Force, said because 80 percent of Supreme’s assets in Afghanistan are based outside of any military-protected areas, the company isn’t anticipating major security problems as troops depart.

Meanwhile, the company has won several contracts to dispose of extra equipment that the military doesn’t want to ship home. And the billing dispute hasn’t dampened the company’s hopes to sell military officials on the idea that its facilities can easily be converted to break things down and move things out.

“We’re hoping to move (out) as much as we can as fast as we can,” Szar said.

Twitter: @joshjonsmith

Amas Chikarapo, a mechanic for Supreme Group, works on a vehicle at a company facility at Kandahar Air Field. The company hopes to use its facilities like this maintenance yard to help ship NATO equipment out of Afghanistan.