RE: Agility Files for USD 225 Million in Claims and Damages against DLA
Agility, formerly known as Public Warehousing Company K.S.C., has filed a claim against the Defense Logistics Agency- Troop Support (“DLA”)at the Armed Services Board of Contract Appeals alleging that United States government officials employed by DLA and the Department of Justice (“DOJ”) conspired and acted in concert to intentionally deprive Agility of its rights under the Second Prime Vendor Contact (“PV2 Contract”), breaching the Contract’s express and implied terms, and violating regulatory duties.
Agility seeks a total of approximately $225 million comprising $158.9 million, plus interest, it is owed in performance based distribution fees (additional profit) under the PV2 Contract. The claim is in addition to damages it has sought in other claims related to transportation delays and unpaid interest on invoices that were paid late. The PV2 Contract obligated Defense Supply Center Philadelphia (“DSCP”), DLA’s predecessor agency, to fairly and objectively evaluate Agility’s performance of the Contract periodically. Agility earned additional distribution fees based on superior performance if two factors were met: 1) it received a “would definitely award” rating in DSCP’s objective evaluation; and 2) it met specified “fill rates” (that is, the percentage of orders Agility filled successfully). Agility always achieved the fill rate required.
DSCP’s original, objective evaluation of Agility stated that the contracting officer “definitely would award to [Agility] today given that I had a choice.” DOJ, which had been investigating Agility based on a false claims complaint filed under seal by a disgruntled former business associate of Agility, Kamal Sultan, asked DSCP to downgrade this recommendation, apparently concerned that a positive, objective evaluation would call into question DOJ’s already lengthy investigation of Agility. A senior DSCP official rejected DOJ’s request to downgrade, stating ‘”no” on changing the recommendation. This is CPARs – let’s not pick and choose the parts we like and dislike. We’re going to lose 2 [Contracting Officers] if this continues.”
In the face of DOJ’s interference, another senior DSCP official stated: “We are very concerned about the pressures being put on the [Contracting Officers] and the impact on their ability to continue to do their day to day job. Remember guys, please, this is one of the largest, if not the largest, and complex contracts within all of DLA. There is no and has never been a blue print for this program: getting commercial food products on a massive scale to combat units in a killing zone. The SPV program never ever did this before and yet over $1.5 BILLION in annual sales and very high customer satisfaction.”
DOJ persisted, increasing the pressure on DSCP to change its positive evaluation. THE DSCP contracting officer, in response to DOJ’s escalating pressure, explained: “While it is certainly not my intent to negatively impact an on-going investigation, the original report was written in good faith…While I am partially willing to add the above statement to the CPAR evaluation, it doesn’t quite feel right. I personally believe that people and corporations are innocent until proven guilty.” Despite the contracting officer’s comments and DSCP’s resistance, continued unyielding pressure and interference from senior government officials on DSCP became too great. DOJ prevailed, and the recommendation ultimately was downgraded.
Had DOJ officials and others not interfered with Agility’s contractual rights, and had the contracting officers fulfilled their independent contractual and regulatory duties, DSCP would have issued evaluations entitling Agility to nearly $158.9 million in additional distribution fee payments. These distribution fees were earned as a result of Agility’s spectacular, near-flawless performance, achieving near-perfect fill rates “getting commercial food products on a massive scale to combat units in a killing zone.”