Pentagon overpaid oil tycoon US$200 million in US procurement controversy

A Pentagon audit has revealed that the US federal government overpaid a billionaire oilman up to $200million on several military contracts worth nearly US$2.7 billion.

The audit found that Harry Sargeant III was overpaid  on three contracts which he was awarded under conditions that effectively eliminated the other bidders.

The audit, by the Defense Department’s inspector general, was posted on the Pentagon’s web site this week.

It estimated that the department paid the oilman 'US$160 [million] to $204 million more for fuel than could be supported by price or cost analysis'.

Sargeant, a once prominent Republican donor, first faced scrutiny over his defence work in October 2008, when he was accused in a congressional probe of using his close relationship with Jordan’s royal family to secure exclusive rights over supply routes to U.S. bases in western Iraq.

According to the Washington Post, Republican Henry A. Waxman who led the probe, asserted in a letter to Defense Secretary Robert Gates that Sargeant had won the three jet fuel contracts, despite having the highest bids, because he had an effective monopoly over the routes.

He accused Sargeant and his company of price gouging and 'engaging in the worst form of war profiteering'.

Mr Waxman called on Sargeant to repay the Pentagon, saying in a statement that the report 'confirmed what we found in 2008 - the International Oil Trading Company overcharged by hundreds of millions of dollars while the Bush administration looked the other way'.

Although the audit is classified, the department’s inspector general’s office released a summary of its findings on Tuesday with results supporting some of Mr Waxman’s findings.

Mr Waxman had calculated that the department would have saved at least $180 million by choosing the lowest bidders on fuel contracts awarded to Sargeant.

The audit found that the prices paid to Sargeant were not reasonable because 'no one else could transport the fuel through Jordan'.

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