WASHINGTON (Reuters) - The United States is indirectly paying tens of millions of dollars in protection money to Afghan warlords, and potentially to the Taliban, to secure convoys carrying supplies to U.S. troops in Afghanistan, congressional investigators said in a report.

A U.S. Marines convoy from Kilo Company, 3rd Battallion, 6th Marines travels in Marjah district, Helmand province March 30, 2010. REUTERS/Asmaa Waguih

The Pentagon’s system of outsourcing to private companies the task of moving supplies in Afghanistan, and leaving it up to them to provide their own security, frees U.S. troops to focus on counterinsurgency.

But its unintended consequences undermine U.S. efforts to curtail corruption and build an effective Afghan government, according to the report to be reviewed at a congressional hearing on Tuesday.

“This arrangement has fueled a vast protection racket run by a shadowy network of warlords, strongmen, commanders, corrupt Afghan officials, and perhaps others,” Representative John Tierney, chairman of a House of Representatives national security subcommittee, said in a statement.

Tierney, a Democrat, said the system “runs afoul” of the Defense Department’s own rules and may be undermining the U.S. strategic effort in Afghanistan.

The report by the subcommittee’s Democratic staff called protection payments “a significant potential source of funding for the Taliban,” citing numerous documents, incidents reports and emails that refer to attempts at Taliban extortion along the road.

Congressional investigators began looking into the Defense Department’s $2.16 billion Host Nation Trucking (HNT) contract in November 2009. The contract covers 70 percent of the food, fuel, ammunition and other supply distributions to U.S. troops in Afghanistan.

“HNT contractors and trucking subcontractors in Afghanistan pay tens of millions of dollars annually to local warlords across Afghanistan in exchange for ‘protection’ for HNT supply convoys to support U.S. troops,” the report said.

“The HNT contractors frequently referred to such payments as ‘extortion,’ ‘bribes,’ ‘special security,’ and/or ‘protection payments,’” the document said.

Many contractors have told U.S. military officials that warlords were demanding protection payments in exchange for safe passage and that these payments were funding the insurgency, the report said. But the contractors concerns were never appropriately addressed, it said.

It faults the Pentagon for a lack of effective oversight of its supply chain and private security contractors.

“The Department of Defense has little to no visibility into what happens to the trucks carrying U.S. supplies between the time they leave the gate to the time they arrive at their destination,” the report said.

The congressional investigators said the Defense Department must take direct responsibility for the contractors to ensure robust oversight.

They also recommended a top-to-bottom evaluation of the secondary effects of the HNT contract, including an analysis of corruption and the impact on Afghan politics.