Dubai-based Anham LLC in firing line for over charged bills

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Dubai-based Anham LLC over bills the Pentagon for spare parts and equipment.

Objective

Analysis of the over billing.

The company overcharged the Pentagon by at least $4.4 million, which include a $900 for an electronic control switch that normally costs $7-8 per switch.

According to the new audit, the questionable costs identified in a $300 million contract found weak oversight in multiple areas that left the government vulnerable to improper overcharges, said Special Inspector General for Iraq Reconstruction Stuart Bowen.

Bowen?s office called for an in-depth review of the entire contract after discovering the errors, which was the result of a? ?significant weaknesses? in government oversight, competition practices, and a possible undisclosed ownership affiliation between Anham and with its subcontractors.

The contract in question was funded with a combination of money reserved for Iraqi Security Forces and Army operations and maintenance funds.

Other examples of ?over billing? by Anham were $4,500 for a circuit breaker valued at $183.30,? $3,000 for a $94.47 circuit breaker, and $80 for a small segment of drain pipe valued at $1.41.

The company, however, has refuted all the charges, stated that it worked closely with U.S. officials when it chose subcontractors and ?not a single screw or nail was purchased without prior, advance approval by the U.S. government.? Anham said in an e-mail statement that it would work closely with the auditors ?to resolve these inaccurate conclusions.?

Audit review

Bowen?s tally of Iraq spending showed that with barely six months remaining for the 46,000 U.S. combat troops to leave Iraq, the Pentagon, State Department and U.S. Agency for International Development, since the Iraq War began, had executed 34,728 contracting actions or grants totaling $35.9 billion.

Bowen has questioned almost 39 percent, or $4.4 million, of the $11.4 million in contract costs it reviewed. The costs, he said, appear to be not fair and reasonable and not properly documented.

Subcontractor ties

Pioneer Iraqi Trading Co., an Anham subcontractor, charged the U.S. $900 for a water level control switch that a competitor had offered for $7.05. Upon scrutinizing the ownership of Pioneer, Anham has a considerable amount of shareholding in the company. This relationship was never disclosed to the Defense Contract Management Agency that oversees military contracts.

?The lack of transparency regarding the relationship between Anham and its subcontractors calls into question whether Anham used due diligence to ensure that the U.S. government received a fair price for the goods and services it purchased,? the inspector general?s report concluded.

The audit report also stated that there were other instances in which Anham used subcontractors to purchase items that could have been bought directly from the manufacturer at lower prices.

?Loudspeaker purchase

Anham was requisitioned to purchase a loudspeaker system to alert warehouse employees of any danger. Anham sought bids from subcontractors and paid a company called Knowlogy $90,908 towards purchase and installation. Report said, the system could have been directly from the manufacturer at the retail price of $44,615.

Contract

The U.S. military awarded the Iraq contract to Anham in September 2007, with a ceiling price of $300 million to operate and maintain two warehouses and distribution facilities in?Abu Ghraib and Umm Qasr, Iraq.

Contract now has an obligation of about $119.1 million, of which $55 million was spent on subcontractors. The contract was structured on a ?cost-plus? basis, which means the government will reimburse Anham for all its costs.

Anham LLC is contracting company founded in 2004 and works out of UAE. It offers wide range of services in aviation manufacturing and related businesses, health management services, ICT training and education services, power generation, transmission, and distribution services.

The company also provides construction, operations, and maintenance services, design, management, project logistics services, facilities management services, security and surveillance services, contract administration, and storage and inventory control services.

Ripples

The UAE and United States are reliable allies that share security and economic interests. UAE has been considered a dependable and substantial economic partner with U.S., and the relationship has been extended to social and cultural sectors as well. Cooperation with U.S. includes a range of defense and intelligence initiatives.

With such isolated incidents, experts do not see any deterioration in the relationship between the UAE and the U.S.

Overview

Special Inspector General for Iraq Reconstruction Stuart Bowen, in his 30th quarterly report found out several weaknesses with the $300 million contract. The egregiously charged bills will spill more worms on U.S. contracting practices. With U.S. on the verge of a major debt default, this issue will be a dent on its image.

Source: Bloomberg Business Week

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