Wednesday, June 29, 2011

“Surprise! Boeing Overcharged Pentagon”

“Surprise! Boeing Overcharged Pentagon”
by Marcus Baram

“Despite bipartisan outrage over Pentagon spending in the 1980s - remember the $600 toilet seat? - such contracting abuses continue to take place. Boeing overcharged the U.S. Army up to 177,000 percent on helicopter spare parts - $71.01 for a metal pin worth 4 cents that the Pentagon already had plenty of in storage - according to an audit by the Department of Defense's inspector general and obtained by the Project on Government Oversight. The audit focused on the Army Aviation and Missile Life Cycle Management Command's transactions with Boeing to supply the Corpus Christi Army Depot in Texas.

The IG found that the Army should have only paid $10 million - instead of the nearly $23 million it was charged by Boeing - for various parts, about 131.5 percent above "fair and reasonable" prices. The audit concluded that Boeing should repay the $13 million overcharge. The defense industry giant has refunded about $1.3 million plus a $324,616 credit as of the date of the audit.

$644.75 for a small gear smaller than a dime that sells for $12.51: more than a 5,100 percent increase in price. $1,678.61 for another tiny part, also smaller than a dime, that could have been bought within DoD for $7.71: a 21,000 percent increase. $71.01 for a straight, thin metal pin that DoD had on hand, unused by the tens of thousands, for 4 cents: an increase of over 177,000 percent.

Taxpayers were massively overcharged in dozens of transactions between the Army and Boeing for helicopter spare parts, according to a full, unredacted Department of Defense Office of Inspector General (DoD OIG) audit that POGO is making public for the first time. The overcharges range from 33.3 percent to 177,475 percent for mundane parts, resulting in millions of dollars in overspending.

Though the amount pales in comparison to the total Pentagon budget, POGO notes: ‘The individual transactions of tens of thousands to millions of dollars examined by the DoD OIG may at first appear to be small potatoes against an annual DoD budget of more than $700 billion, including the costs of the wars. But when viewed over the cost of a weapon system's lifespan, the total cost of spare parts—including simple components such as ball bearings, retainers for nuts and bolts, sleeve bushings (basically just a metal cylinder), and straight metal pins—can be significant. The cost to buy a weapon system out of the factory, such as the AH-64 helicopter, usually is less than the cost to operate and maintain the weapon over its life. Parts on a weapon have to be replaced at varying intervals and, similar to how the human body replaces most cells in the body in less than a decade, a major weapon system with a long-enough life span may eventually be largely rebuilt with new spare parts. Hence the expression that aircraft are nothing but "spare parts" flying in close formation.’”
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DoD IG Report on Audit of Boeing Spare Parts Contracts (May 2011)
http://www.pogo.org/pogo-files/alerts/national-security/ns-sp-20110623-2.html

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