Spare Parts are a Windfall for Weapons Makers
Defense contractors need not build billion-dollar jet fighters or submarines to make a nice living off the Department of Defense. A company can do quite well for itself just providing spare parts—at ridiculous mark-up prices—to generate significant amounts of revenue.
A 2014 report (pdf) by the Pentagon’s inspector general revealed the agency’s “hardware store”—the Defense Logistics Agency (DLA)—paid one manufacturer, Bell Helicopter, $9 million more than it should have for commercial parts. “That the parts were designated commercial and bought on a sole-source contract essentially means there was no competition and the government won’t receive any pricing data from the company,” Mandy Smithberger wrote at the Project on Government Oversight.
“The contracting officer did not sufficiently determine whether prices were fair and reasonable for sole-source commercial parts negotiated” on the contract, the report said.
In some cases, the Pentagon has paid $8,124 for a bevel gear that should have cost $445 each, or $492.17 for a straight-headed pin that only cost $36.08. The overpayments to Bell Helicopter reviewed by the IG last year averaged out to 392%.
Smithberger noted that the IG released its report with the pricing data on the parts redacted—because Bell Helicopter refused to release the information until it was subpoenaed by the auditors. “[Defense] contracts often state that contractors have a partnership with the government, but what partner requires a subpoena before turning over information to other partners?” Smithberger asked.
The report concluded that the Department of Defense should seek a “voluntary refund” of overcharges from Bell. It also found that American taxpayers aren’t finished overpaying for parts. “DLA may overpay as much as $2.6 million over the next 12 months on future orders under this contract,” the report said.
To Learn More:
The Unredacted Truth About Spare Parts Overcharges (by Mandy Smithberger, Project on Government Oversight)
Defense Logistics Agency Aviation Potentially Overpaid Bell Helicopter for Sole-Source Commercial Spare Parts (Department of Defense Inspector General) (pdf)
U.S.-Led Military Unit in Afghanistan Lost $230 Million in Spare Parts, Then Spent $138 Million for More (by Noel Brinkerhoff, AllGov)
Boeing Does It Again: Overcharges Army $16 Million for Old Helicopter Parts (by Noel Brinkerhoff and Danny Biederman, AllGov)
Boeing Overcharges Pentagon Again, by $13.7 Million…Including $2,286 for a $10 Spare Part (by Noel Brinkerhoff, AllGov)
Pentagon Spent $900 Million for Obsolete Fighter Vehicle Spare Parts (by Noel Brinkerhoff, AllGov)
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