What Ted Stevens, Bolivian cocaine and Halliburton have in common

Like much in government contracting, the full story of how Olgoonik arrived in Bolivia remains shrouded in secrecy. The first public notice of the contract came in April, when the State Department announced that it was awarding the five-year, $14.6 million deal to Olgoonik for serving food to coca eradicators in Bolivia. In the award, the government announced that "cost or pricing data" for the contract was "not obtained," and the cost had been set through a "negotiated proposal."

State Department spokeswoman Susan Pittman said there is nothing improper about the price for Olgoonik's Bolivia work, which she said was awarded on the recommendation of the U.S. Embassy in La Paz. She insisted that comparing the cost of the no-bid Olgoonik contract to its much cheaper predecessor was akin to "comparing apples to oranges." "You are comparing two different contracts," she explained. "The quality may be changing. The quantity of the portions may be changing." The State Department is proud to support minority contractors under federal preference programs, she added. "When we determine that there are firms eligible to do the work and the costs are reasonable, we are obliged to do that."

Richard Reierson, Olgoonik Management's chief executive officer, declined to describe improvements in food quality or volume, though he did confirm the contract cost. In a May e-mail to Salon, he expressed pride in the company's work and denied that KBR was involved in the Bolivian effort. "KBR has no involvement or responsibility with this contract in Bolivia," he wrote. Similarly, Heather Browne, a spokeswoman for the former Halliburton subsidiary, explained in a mid-May e-mail that KBR "is not part of any Department of State contracts in Bolivia."

These initial explanations did not tell the whole story. In January, Pete Diegel, a KBR official, traveled to Bolivia with two Olgoonik officials, Reierson and Steve Cofer, according to a first-person account of the visit. They met with embassy officials and the Bolivian company that was then feeding the coca eradication troops -- La Casa Mayor Military Contracting. "Pete Diegel said, 'We have the expertise,'" remembers Jorge del Carpio, the Bolivian company's operations manager. "He even told us that KBR was feeding 100,000 troops all over the world." As the main logistics supplier for the U.S. Army, KBR maintains a multibillion-dollar business at military bases all over the world.

After initially denying being any "part" of the contract, KBR's Browne admitted that the company "provided assistance to Olgoonik" under a mentor program organized through the Small Business Administration. "KBR provides this assistance at no cost," she wrote in a follow-up e-mail. "KBR does not stand to profit and did not participate in [the] preparation of the proposal, award or execution of the Olgoonik contract in Bolivia."

Nonetheless, when Olgoonik took over the contract in April, the Alaskan company hired three former Halliburton employees, including men from the Balkans who had recently been working in Europe. The new hires did not last long in Bolivia. About a month after their arrival, they were greeted by Bolivian police at their office and escorted away. Though the State Department confirmed this incident, neither Olgoonik nor the State Department has given a reason for their abrupt departures from the work site.

Once the contract was awarded, according to del Carpio, Olgoonik purchased some of the old equipment from the LCMMC and hired much of its old workforce. The Alaskan company also began renting a central processing facility from the Bolivian company. Nonetheless, the transition was rocky. On April 11, a local Bolivian newspaper called Extra ran a story headlined "No Dan De Comer A Los Erradicadores" (Food Not Given to Eradicators). The story reported that for the first days of April, freshly prepared meals had not been delivered to the 12 camps where the coca eradicators live. The workers subsisted instead on military Meals Ready to Eat rations, resulting, according to the news story, in the medical evacuation of some eradicators from their camps. The State Department's Pittman confirmed the use of military rations, though she denied that any eradicators were evacuated. She said the State Department does not blame Olgoonik for the problems, since proper paperwork had not arrived to let the company begin work.

Del Carpio says his company first won the coca eradicator food contract in 2000, after an international competition that included dozens of firms. LCMMC won the contract again in 2003, after another open competition. When the coca eradication force was reduced from 3,000 to about 1,500 in 2004, the company renegotiated prices a third time. "You would not believe how hard we had to negotiate these prices," del Carpio said. "We had to show our expenses. It was a very hard process."

He said he remains baffled about how the State Department negotiated the $5.16 price. If LCMMC had been allowed to bid, del Carpio said it could have upgraded equipment and still earned a profit by charging about $4 per soldier per day. Over the five-year course of the contract, that could have saved U.S. taxpayers about $3.2 million. The savings might have been even greater if the contract had been opened for other companies to bid. But without an open competition, the best price for U.S. taxpayers remains unknown.

But that isn't the way things are done these days. In May, the House passed a bill that would limit the size of the awards that Alaska native contracts can get without competition, but there is no indication that the Senate will act on similar legislation anytime soon. Alaska's congressional delegation, including Sen. Stevens, is likely to fight any such effort. At a hearing last year, Alaska Rep. Don Young, a Republican, strongly argued against any attempt to end the Alaska Native preference, even suggesting that those who raise questions about the program have dishonorable motives. "I am here to tell you," he told the committee, "that the efforts to find fault and criticize Alaska Native Corporations participating in the Small Business Administration's SBA Section 8(a) programs, frankly, I think, is a thinly disguised attack on Native Alaskan people and the corporations precisely because a few of them enjoy great success."

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