Legal Case

Current Status

Agility believes the case involves a civil contract dispute and should not be a criminal matter. Agility’s prices, suppliers and business practices were disclosed to, approved and routinely reviewed by its U.S. government customer.

Agility stands by its work on the Prime Vendor food contract. From 2003 to 2010, Agility met and passed the requirements of government auditors, inspectors general and oversight authorities. After learning of this prosecution, the company continued to deliver outstanding service for U.S. troops in Iraq and Kuwait and superior value to taxpayers.

Agility remains open to resolving the dispute through dialogue with the Justice Department but is prepared to defend itself vigorously if those discussions are not fruitful.

Agility Statement Following 8-16-11 Arraignment

Background

On Nov. 16, 2009, the U.S. Justice Department made public an indictment alleging that Agility overcharged and committed fraud in connection with its contracts to supply food to U.S. troops and contractors in Iraq and Kuwait. The Justice Department subsequently added two Agility subsidiaries – one based in Kuwait, one based in the U.S. – to the original indictment.

The Justice Department has since moved to dismiss charges against one of those subsidiaries, Agility DGS Holdings Inc. That motion is pending before a federal court in Atlanta.

Our Position

This case involves differences over the interpretation of the Prime Vendor I and Prime Vendor II food contracts. It should be a civil contract dispute, not a criminal matter. We acted responsibly and transparently in developing our pricing, selecting suppliers, and establishing the policies and practices we used to perform the two contracts. Our prices, suppliers and practices were put in place with the knowledge and approval of our customer, the U.S. Defense Logistics Agency (DLA).

Despite the Justice Department’s legal actions against the company, DLA has asked us to continue to supply food to troops in Iraq and Kuwait under the Prime Vendor II contract. DLA conducts ongoing reviews of our practices and continues to characterize our prices as “fair and reasonable.”

Impact

As a result of this case, Agility and its subsidiaries have been placed on the U.S. government’s Excluded Parties List. That means they are temporarily suspended from pursuing and performing new U.S. government contracts and task orders. Importantly, this case does not involve the U.S. Foreign Corrupt Practices Act.

Meantime:

  • Agility and its subsidiaries continue performing work under existing U.S. government contracts and task orders.
  • Agility and its subsidiaries continue working on and winning contracts with other government customers, NGOs and international organizations.
  • Agility’s commercial customers face NO impediments of any kind as a result of the legal dispute.

Prime Vendor Facts and Figures

Agility set the standard for performance-based logistics in a wartime environment with more than 7 years of exceptional execution on the largest-ever U.S. military subsistence procurement contract. The contract was first awarded to Agility in 2003 and was renewed in 2005 and 2008.

Proven Performance in a War Zone

  • 1 million meals/day at peak (4 meals/person for 150,000+ troops and 100,000+ contractors) … In seven years, there was not a single instance in which Agility's performance prevented a dining facility from being able to serve a meal.
  • 200+ trucks a day servicing a peak of 86 dining facilities, including 56 mobile kitchen trailers
  • 99 percent "fill rate" over life of the contract
  • 99.9 percent inventory accuracy
  • Zero performance drop-off despite 20 percent surge in troops (2007)
  • No. 1 purchaser of U.S.-brand prepared/processed foods at peak of contract
  • Two successful DSCP Food Audits-both were the highest-ever overseas Prime Vendor scores including the first ever score of 100 percent
  • Achieved an order-rejection rate of less than 0.1%, despite shipping highly perishable foods on multiple-day delivery runs in extreme temperatures. … U.S. troops got what they ordered.

Benefits to U.S. Troops and Taxpayers

  • Reduced U.S. military cost, footprint, and turn-around time
  • Eliminated the need for 3,000 to 5,000 military personnel to perform this mission in Kuwait and Iraq
  • Increased quality of food consumed by troops
  • Proved in-transit visibility, real-time tracking, and 100 percent line-item detail
  • Offered continuity of service - embedded customer service representatives in Iraq for 5 consecutive years
  • Reduced government transport and warehousing requirements
  • Eliminated $12 million in waste
  • Absorbed the risks for hundreds of millions of dollars in inventory investment costs and potential inventory losses

Agility’s Investment

  • Built the largest temperature-controlled, freezer-capable warehouse in the Middle East
  • Bought warehouses in Turkey and Jordan to support surge and military operations
  • Purchased 1,600 Mercedes top-of-the-line tractor cabs and 1,800 dry, chilled, and refrigerated trailers
  • Invested in unique real-time tracking an in-transit visibility technology
  • Hired, equipped, and trained dedicated multi-national local security teams
  • Embraced risk: funded upfront costs by acquiring and owning all inventory until delivery in war zone

The Cost and the Risks

  • 33 fatalities
  • 262 casualties
  • 247 vehicle losses
  • 327 cargo losses
  • 2 capture-and-release incidents - 2 MIAs
  • 142,294+ deliveries - flatbeds and reefers into Iraq
  • Agility assumed all risk for losses, receiving no compensation from the U.S. government. The Company was the only contractor that accepted the risk of operating a large fixed-price contract in Iraq; other contractors worked on a cost-plus basis.

Recognition

  • Best Logistics Strategy, Subsistence Prime Vendor Program (2007) - Worldwide Business Research (WBR)
  • Outstanding Industry Leader in Military Logistics (2006) - Institute for Defense and Government Advancement (IDGA)
  • Quality Award for Outstanding Service (2005) - Surface Deployment and Distribution Command (SDDC)
  • Outstanding Readiness Support (2005) - Defense Logistics Agency (DLA)
  • New Contractor of the Year (2005) - Defense Logistics Agency (DLA)
  • Outstanding Customer Service (2004 and 2005) - Defense Supply Center Philadelphia (DSCP)
  • Outstanding Food Service Southwest Asia Region (2004) - Defense Supply Center Philadelphia (DSCP)
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