It sounds like the plot of a Tom Clancy thriller: A tiny company run out of an unmarked Miami Beach office by a barely legal troublemaker siphons hundreds of millions of dollars from the Pentagon by selling it rusting weapons from aged Communist stockpiles.

A company called AEY Inc., run by 22-year-old Efriam E. Diveroli, managed to do exactly that for four years—yet another example of unchecked corruption and incompetence in the  explosion in ”war on terror” defense contracting.

AEY began contracting with the defense and state departments in 2004 for weapons, ammunition, clothing and “research and development,” according to an internal Army memo. The value of AEY’s contracts grew from $1 million in 2004 to nearly $200 million in 2007, due to a 2006 Army contract for providing ammunition to Afghanistan’s police and army. The Army issued five task orders under the contract, bringing AEY’s total take to nearly $300 million.

Diveroli filed documents with the Army certifying that his ammunition came from Hungary, though an Army investigation revealed in January that most of it actually came from China, in contravention of Pentagon procurement law. By then, complaints about the ammunition had already surfaced: An Afghan lieutenant colonel told the New York Times that the Chinese ammunition he received from AEY last fall dated to 1966 and arrived in decomposing packaging. And AEY reportedly continued to make shipments even after American officers in Kabul told the Army about the company’s failings earlier this year.

The issues raised by these events are numerous and disturbing. First is the ease with which a rogue company run by a then-18 year old was able to obtain contracts worth hundreds of millions of dollars when thousands of small businesses regularly complain to Congress about their difficulty getting work with Uncle Sam. Then there are the missed opportunities for oversight: According to the memo, when a bidder on the contract asked the Army whether ammunition from China was acceptable, the Army responded that it was the contractor’s job to figure out whether any restrictions would be breached.

We commend the Army for finally suspending AEY’s contract last week, but it is too little, too late. And the Army’s response to the scandal has been disingenuous at best: The Army Sustainment Command, which took over responsibility for Iraq and Afghanistan contracting, said in a press release that their job is only to make sure ammunition works safely and that they have not received any complaints about the ammunition’s failure to function—only “packaging and corrosion.” Would you send a corroded tank to a soldier in a combat zone?

We also commend House Oversight Committee Chairman Henry Waxman (D-CA) for immediately calling a hearing on the matter. It is an important, albeit obvious, first step to figuring out how something so outrageous could happen – and to ensure that it never happens again. If nothing else, the exploits of Efriam Diveroli show that serious contract reform is necessary not only for saving taxpayer dollars, but for saving American lives.