No Bang for the Buck

Lack of Contracting Oversight Hurts Afghan Mission

Lack of contracting oversight, epitomized by contracts to Efraim Diveroli's AEY, is hurting the mission in Afghanistan, write Lawrence Korb and Colin Cookman.

A hand holds a sample from shipments of the Chinese-made ammunition sent to the Afghan National Army from AEY. (AP/U.S. Army)
A hand holds a sample from shipments of the Chinese-made ammunition sent to the Afghan National Army from AEY. (AP/U.S. Army)

It is a rare 22-year-old who is president of his own company, rarer still when that company is winning government contracts in the hundreds of millions of dollars. Efraim Diveroli, president of AEY, is certainly exceptional in that respect. His tiny company had received contracts valued at almost $300 million to serve as the primary provider of ammunition to the Afghan National Army and police forces.

AEY is reported to have filled its orders with decades-old munitions from former Communist­bloc stockpiles that the United States has, in a separate NATO program, been paying to destroy. Furthermore, the ammunition’s Chinese origins make its purchase a violation of U.S. law.

The murky details of AEY’s business dealings — which are believed to have passed through a series of middlemen suspected of participating in illegal arms trafficking — are still being untangled. While Diveroli’s story is unique in many ways, it highlights two enduring aspects of the Bush administration legacy: a neglect of the Afghanistan campaign, despite its strategic centrality in the fight against al-Qaida, and a failure to effectively manage an ever­increasing reliance on private contractors to carry out U.S. government policy.

For all the rhetorical support offered to the nascent Afghan government, the Bush administration has neglected Afghanistan for years. In raw numbers, less than $150 billion has been spent over the seven years of U.S. operations in Afghanistan, compared with more than $600 billion in the five-year-old war in Iraq.

The administration’s failure to place a priority on procuring high-quality equipment for the Afghan forces it trains is only the latest example of its inattention to the mission there. Ever the reluctant nation-builders, administration officials have failed to strengthen the capacity of the Afghan national government, focusing instead on tactical military successes against the Taliban.

While the United States has pledged $10.4 billion in nonmilitary assistance to Afghanistan since 2002, a new report by a coalition of Afghan aid organizations found that only $5 billion of that had actually been spent.

Where Does Aid Money Go?

Of the $15 billion that international donors have collectively spent, 40 percent is estimated to have returned to the donor countries in the form of consultancy fees and expatriate employee salaries. What money we do spend is not going to programs administered by the Afghan government itself, limiting its ability to contest with the Taliban for control of the political space.

People in and out of government wonder, about Diveroli, “How did this guy get all this business?” The answer is still unclear. There is no question that the munitions order for which AEY tendered its bid would need to be outsourced; Afghan weapons are primarily of Soviet origin and do not use the NATO­standard munitions produced in the United States.

At this point, it seems that AEY was able to get away with providing such shoddy materiel primarily due to a poorly drafted contract (which failed to specify that the munitions meet existing Russian testing standards), and lax oversight of AEY’s performance on the job (despite the company having already earned a reputation among U.S. officials as unreliable on a separate 2005 contract to provide rifles for Iraqi forces).

These failures reflect the U.S. military’s dire shortage of oversight capacity. Limited opportunities for career advancement have produced a Pentagon contracting force where only 3 percent of personnel are active-duty service members.

Oversight Treated as Side Issue

In November, an independent commission led by former defense undersecretary Jacques Gansler reported its findings to the Army: “Notwithstanding a sevenfold workload increase and greater complexity of contracting,” con­tracting oversight, which “should be a core competence … is treated as an operational and institutional side issue.” Only 38 percent of contract officers deployed to the theater in Afghanistan and Iraq were judged to be properly trained for their job.

Nor is this problem limited to the Department of Defense. State Department audits released in October found that there are only 17 contract compliance officers in the entire management bureau, collectively responsible for overseeing $4 billion a year in expenditures, an amount that has risen fourfold in as many years.

The Gansler report recommended that at least 1,400 more contracting officers were needed to oversee the Pentagon’s bur­geoning contracting budgets. Training an effective contracting oversight corps is certainly more costly and time-consuming than just trusting in the cheapest bidder, but it is necessary if the United States is to transform limited resources into meaningful accomplishments that could improve the security of Afghanistan and the United States.

As long as the Bush administration does not give sufficient priority to results in Afghanistan and is unable to effectively manage the money it does spend, aspiring young entrepreneurs like Efraim Diveroli will have plenty more ill­deserved windfalls to look for­ward to. U.S. taxpayers and our Afghan allies deserve better.

The positions of American Progress, and our policy experts, are independent, and the findings and conclusions presented are those of American Progress alone. A full list of supporters is available here. American Progress would like to acknowledge the many generous supporters who make our work possible.


Lawrence J. Korb

Senior Fellow

Colin Cookman

Policy Analyst