One day after praising the Defense Department for its innovative approach to using outcome sourcing for jet fighter uptime, I take it all back. An expose in the Wall Street Journal this week reports that U.S. military procurement officials are under investigation for an alleged price fixing and kick-back schemes involving some of the nation’s largest food companies.

According to the article, the inquiry is focused on whether the food companies set “excessively high prices” when they sold their goods to the Army’s primary food contractor in the Iraqi war zone. The Kuwaiti contractor is also being scrutinized for pocketing refunds it received from food suppliers, including Perdue Farms, Sara Lee Corp., ConAgra Foods, and others.

For example, the Journal uncovered records that show that Sara Lee paid 5% of the purchase price back to the contractor for meet and bakery orders to feed U.S. troops in Iraq and Kuwait. Under this refund structure vendors were encouraged vendors to inflate prices to boost kickback amounts. Justice Department officials investigating the issue estimate that this price-inflation scheme added “hundreds of millions of dollars” to the Army’s food tab.

But a bigger issue in my mind, is the aspects of the probe that suggest that the Army was specifying the use of certain U.S. food suppliers (and large political donors), while icing out others. Another disturbing aspect questions the rotating door of U.S. military procurement officials that were employed by or consultants to some of the food vendors in question. For example, the Journal reports that the Sara Lee executive that penned the above deal formerly served as chief warrant officer for the Army.

However, the central figure of the probe is David Staples, a top Army procurement official and former Sara Lee employee. According to the Journal, documentation indicates that Staples violated DoD procurement rules when he instructed Army food contractors to purchase foods from specific suppliers — including Sara Lee — rather than using open and competitive bids. The Journal said the issue bubbled up following a compliant to the Pentagon from Tyson Foods complaining that the military was using inappropriate sole-sourcing agreements and keeping other vendors from even completing for the Army’s business.

The scenario reinforces the need for greater visibility and standards for purchasing in both public and private sectors. Leveraging common protocols not only helps ensure ethical purchasing, it also reinforces consistent best-value results and supplier relations. Unfortunately, these recent events deter from some of the great advances the Federal Government and Defense Department have made in adopting commercial methods and technologies to streamline and standardize purchasing methods. They also reaffirm that the cornerstone of supply management excellence are talented and ethical employees.

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