The Pentagon is launching a new solicitation for deliveries of jet fuel via pipeline to Bagram air base, the chief US air hub in Afghanistan.
Red Star, a fuel supply company that is a subject of a US Congressional investigation into contracting practices in both Kyrgyzstan and Afghanistan, has held the fuel-by-pipeline contract at Bagram since 2007. According to the US government’s Federal Procurement Data System, the contract is worth $1.2 billion. [For background see EurasiaNet’s archive].
Sources in Washington, DC, say that while contracting practices in Kyrgyzstan will remain an important aspect of the congressional investigation, they say Red Star’s contracts in Afghanistan will be subject to immense scrutiny.
In 2006, Red Star signed a memorandum of understanding (MoU) with the Pentagon that allowed the company to build pipeline and storage facilities at no cost to the US government next to Entry Check Point 3 (ECP3) at Bagram air base. Ever since, Red Star has been the sole source for pipeline deliveries of jet fuel to the air base.
The latest pre-solicitation, posted on Federal Business Opportunities website on June 25, requests over 1.86 million gallons of TS-1 jet fuel for Bagram. The fuel should be delivered by pipeline and the period of performance stretches from September 2011 to August 2013. “Fuel for these requirements must be sourced from northern routes/sources; Pakistani supply routes/sources will not be accepted for these requirements,” the pre-solicitation adds. A formal solicitation is expected to be advertised on or about August 31, 2010. Competitors maintain that Red Star, thanks to the pipeline MoU, enjoys an unfair advantage.
In addition, critics contend that the Department of Defense entered into the MoU in an allegedly non-transparent way – the need for a pipeline and fuel storage facilities at Bagram was never advertised, and no other company was given the opportunity to bid for the project. This alleged lack of transparency amounts to a violation of US procurement laws, Ronald Uscher, a lawyer representing IOTC, a competitor to Red Star and Mina Corp, claimed. The Defense Logistic Agency (DLA) was not a signatory to the MoU and said the matter was negotiated directly between Red Star and the Joint Logistics Command at Bagram air base, a spokesman for DLA said.
But the spokesman disputed the notion that Red Star’s ownership of the only pipeline to connect with US government-owned facilities at Bagram constituted a monopoly on current and future fuel-supply contracts. “The fuel farm is owned and operated by Red Star. That does not preclude other [bidders] from offering on DLA requirements. DLA currently has contracts for fuel storage at two additional locations in the vicinity of Bagram air base,” the spokesman added.
These facilities are located near Kabul. But responses to an as yet un-awarded solicitation for stored fuel at Bagram indicate that, in some instances, Kabul poses “security concerns.”
A solicitation issued on November 3, 2009, calls for “Contractor-Owned, Contractor-Operated (COCO) Fuel Storage Facilities and Services with the capability to receive, blend, test, store, protect, filter, and ship US Government-owned petroleum product through dedicated COCO pipelines to Bagram [air base], Afghanistan.”
But a requirement that 50 percent of storage be in place at the time the contract is awarded are seen as “blatantly unfair” by some potential suppliers.
One unnamed potential bidder, seeking clarification on whether or not temporary storage could be used, was prompted to write; “On 3 November [2009, the Defense Energy Support Center] published SP0600-10-R-0510 as a ‘full and open competition’ for a COCO fuel storage facility at Bagram ECP3. As you are aware, as part of that solicitation any successful bidder must have available 50 percent of the total storage at contract signing. Today […] we were told that temporary storage in bladders was not acceptable as a temporary solution during construction.”
“Since no permanent storage at or near Bagram ECP3 exists other than one other potential offeror, and bladders cannot be used, how can this be a ‘full and open competition?’ […] You are in essence giving this one potential offeror a sole source contract with the associated blank check. The decision to not allow fuel storage bladders in the interim makes this blatantly unfair to prospective competition,” the potential bidder added.
A spokesman for Red Star told EurasiaNet on July 8; “We do not discount the possibility” of allowing a competitor to use Red Star facilities. The company, however, has no track record of doing so. Ronald Uscher said an approach by IOTC to Red Star in 2008 to negotiate access was rebuffed. “Our client traveled to Bagram to review the logistics and to persuade Red Star and/or the Army to agree to a ‘shared use’ arrangement for Red Star's pipeline, including negotiated throughput fees, per gallon payments to use the pipeline. We were unsuccessful and Red Star was awarded a sole source contract,” he said.
The contract in question was initially announced on February 8, 2008 as an intention to award Red Star the contract on a sole source basis. On February 15, it was modified to invite “expressions of interest from other potential offerors. Any firms desiring consideration must fully identify, in writing, their capabilities to deliver TS-1 [jet fuel] by pipeline into Bagram.”
Uscher added that it appears the latest solicitation still contains “special conditions” that could result in “another sole source award to Red Star.”
Deirdre Tynan is a Bishkek-based reporter specializing in Central Asian affairs.