Army Suspends Ammo Contract for Afghan Security Forces

WASHINGTON, March 27, 2008 - Army officials announced today that the service has suspended its contract with a company that delivered ammunition from China for use by Afghan army and police forces in a way that violated the contract terms.

Officials from the Army Legal Services Agency notified Edraim Diveroli, president of the Miami Beach-based AEY Inc., that his company is suspended from future contracting with any U.S. government agency. That letter, dated March 25, follows an Army investigation launched in November regarding AEY's violation of its contract.

The Army contracted with AEY in January 2007 to supply various types of nonstandard ammunition for use by the Afghan National Army and Afghan National Police, an Army official said on background. The company was required to purchase the ammunition and deliver it to Kabul International Airport in Afghanistan.

As of today, the Army has issued five task orders, collectively worth $155.3 million, the official said. AEY has made about 80 deliveries, with an estimated value of $54.6 million, into Kabul.

Those deliveries violated two specific terms of the contract, the official said. One stated that the ammunition could not be acquired directly or indirectly from the People's Republic of China, and the other specified that it must be packaged to comply with best commercial practices for international shipment.

Although AEY specified that its 7.62 mm ammunition had been produced in Hungary for the civilian market, U.S. inspectors and Army investigators in Afghanistan determined that much of it actually was manufactured in China. In addition, much of the ammunition was older than specified, with some produced as early as 1962, officials said.

Army Criminal Investigation Command is continuing its investigation, an Army official said.

Bryan Whitman, deputy assistant secretary of defense for public affairs, told reporters today the Army suspended its contract with AEY over questions about the origin and packaging of ammunition, not the company's safety or performance.

"Safety and performance has not apparently been a factor, according to our folks in Afghanistan," Whitman told Pentagon reporters. "They have had no safety incidents reported and no reports of any ammunition that has malfunctioned associated with this particular contract."

Whitman denied that the issue resulted from the Army's awarding of a contract to the lowest bidder and said he was not aware of AEY's qualifications for fulfilling the contract terms.

"As the United States government does business, they are obviously always trying to ensure they get the best value," he said. "But that does not mean that, in achieving the best value for the taxpayer, that we will accept something that is below standard for what it is we are purchasing, either."

Suspension of the AEY contract will have no impact on operations in Afghanistan, and many other contractors have expressed interest in entering into a contract, an Army official said. "Besides, there's no shortage of ammunition already in Afghanistan," he said. "This will have no impact."

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Army Suspends Ammo Contract for Afghan Security Forces

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