Boeing Does It Again: Overcharges Army $16 Million for Old Helicopter Parts

Friday, October 18, 2013
Aluminum sleeve bearing worth $10 cost $2,286 (photo: Fastenal)

The nation’s second largest defense contractor has been caught four times in the last five years overcharging the government for military equipment or parts.


In the latest discovery, Boeing wrongly charged the Department of Defense $16 million by billing for new helicopters parts, but only delivering used ones.


“Boeing significantly overstated estimates” of new components needed for CH-47F Chinook helicopters and “primarily installed used parts instead” under a $4.4 billion contract awarded in 2008, according to a report by the Pentagon’s Office of Inspector General (IG) obtained by Bloomberg News.


“The bottom line is that using reworked parts rather than new parts increased Boeing’s profit,” IG spokeswoman Bridget Serchak told Bloomberg in an e-mailed statement. The Pentagon paid Boeing for parts “that were proposed but never installed,” and “is paying for additional parts that they do not need and may not use.”


Damien Mills, a Boeing spokesman, disagreed with the report’s conclusions, telling Bloomberg that “we were fully compliant with all government contract policies and guidance applicable” under the contract.


The IG report also faults defense agencies for poor contract management and negotiations.


The accusations follow several earlier findings that showed Boeing—which was awarded $30 billion in government contracts last year—overcharged the Defense Department millions, and in some cases billions of dollars.


In 2008, a government audit said Boeing tried to get $1.9 billion in unjustified payments on military contracts.


Three years later, another audit found about $13 million in overcharges by Boeing, including $644.75 for a plastic motor gear used on Chinook helicopters that only cost $12.51.


In June of this year, the IG said the Defense Logistics Agency overpaid Boeing $13.7 million for spare parts, including $2,286 for an aluminum “bearing sleeve” that should have cost $10.


The IG’s Serchak said there is no legal basis to force Boeing to repay the overcharged amounts because of the Army’s lax contract management. “However,” she noted, “Boeing could voluntarily refund these amounts.”

-Noel Brinkerhoff, Danny Biederman


To Learn More:

Boeing’s Pentagon Charges Questioned in Audits Four Times (by Tony Capaccio, Bloomberg)

Boeing Overcharges Pentagon Again, by $13.7 Million…Including $2,286 for a $10 Spare Part (by Noel Brinkerhoff, AllGov)

Boeing Charged Army $1,679 for Helicopter Part Worth $7.71 (by Noel Brinkerhoff and David Wallechinsky, AllGov)



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