Posted on 07/09/2014 9:44:10 AM PDT by PoloSec
The Department of Defense has overpaid $9 million dollars for spare parts, and stands to overpay another $2.6 million over the next year because officials didn’t bother doing price research, according to a recent audit.
“The contracting officer did not sufficiently determine whether prices were fair and reasonable for sole-source commercial parts negotiated on contract SPE4AX-12-D-9005,” the report reads. “This occurred because the contracting officer did not perform an adequate analysis when procuring sole-source commercial parts.” (RELATED: Pentagon Spends $150 Per Gallon On Green Jet Fuel)
Bloomberg reports that the DoD paid $8,123.50 each for gears that should have cost $445.06 — an 18-fold markup.
The Office of the Inspector General, who performed the audit, wants the DoD to recoup the money from the contractor, Bell Helicopter, saying that “the contracting officer [should] assess and implement available options to voluntarily recover from Bell about $9 million in excessive payments.” The company is not legally required to pay any money back.
A Bell spokesman told Bloomberg that the company “does not agree with the findings or recommendations” and that “Bell Helicopter has fully complied with all applicable regulations, and continues to adhere to its policy, which ensures that the U.S. government consistently receives the best price on commercial items acquired for its use.” (RELATED: The Pentagon Is Cooking Its Books By The Billions)
The Inspector General’s office had to subpoena Bell to obtain cost data that showed how massively the company was overcharging the government. DOD officials maintain that “Bell has consistently refused to provide [us] cost data for commercial parts.”
The Pentagon has a history of not seeking out competitive prices. A 2011 audit found that they overpaid $200 million on several military contracts, doing things like paying over $1,600 for $7 wheels. In 2013 Boeing was asked to refund over $13 million in payments for overcharging the government, a claim it settled by providing the agency with just $3.2 million in parts. That dust-up echoes a similar scandal in the 1980s, when Boeing had to cough up $5.2 million for prices “in excess of what Boeing management considered to be reasonable” after an internal audit. The repayment was voluntary.
I agree. I have been a contractor on military bases before and the red tape and hours of documentation is nuts. We had an electronic panel get doused with steam when a pipe burst in a jet engine test facility. After drying out the panel contents and testing for functionality, they asked for someone in our company to sign off and be responsible for the $100 million dollar test if the boards didn’t work. Because the electronics had never been tested against long term effects of being sprayed down with steam, the only way we could sign off was if the entire panel was replaced with new boards at a cost of $6000 in parts alone.
It was a toilet seat custom manufactured to fit on a P3 Orion toilet. It was custom built to original specs to fit on an aircraft that has been out of production for years. It bolts directly in place with no airframe modifications or recertifications required. Recall that aircraft parts have an expensive certification and maintenance tracking protocol. Custom builds to spec and short runs make for expensive items.
The problem is not the contractors over-charging the military, it is the military procurement policy that can transform a washer purchased at Home Depot for 10 cents, into a custom built washer packaged with $59.90 of paperwork on the mine the iron came from, the batch of steel it was produced in, the milling machine that made it and testing documentation at each step.
how are they going to buy the “black” purchases that nobody knows about? Lots of stealth equipment and R&D go into a $500 toilet seat.,,,,oh had kickbacks, graft and bonuses for flag officers on the gravy train as “consultants”.
Onerous and fantastic regs add a considerable amount.
But in addition to all this, in defense related programs, you get the full support of the firm for the product delivered for the life of the contract - sometimes beyond.
Then there is the phenomenon of contributing costs to contracts that have expired, but on which the government wants work to continue, until such time a new contract, with new terms and requirements, is signed.
Happens all the time.
Defense work is expensive, laborious, time consuming, and most of all, cutting edge.
For the DOD and contractors, the work is such that it is very fluid, as the threat is always changing. Should a war or conflict ensue, you don't want 5-year old technology employed against the enemies’ state of the art technology, do you?
Defense contracts are huge, but so is the amount of work involved in delivering on them.
The $500 toilet seat, or the $1500 hammer, is a straw man. These items are so priced because DOD, DIA, CIA, and NSA (maybe more) are charging for things they don't want you, or, more importantly, the enemy, to know about.
Is there fraud, graft and corruption involved in these things? Most probably. And it should be rooted out, if it exists.
But no matter how you view it, Defense is still, now, and always gonna cost a lot of money.
A lot!
CA....
It may be that they had to specially design the toilet seat to fit their requirements and then they only wanted 18 of them. They still have to create a plug, then a mold, manufacture and as you point out there is almost always special packaging requirements with government contracts.
If Kohler or American Standard was making 1,800,000 toilet seats that design and engineering costs would be spread over the cost of the entire production run. The per seat cost is much less. This is the way it was explained to me once.
The devil is in the details or more accurately the specifications. In this case it is in accuracy, precision, temperature and vibration ranges, shielding and such. For example with resistors, a bulk price would be a few pennies for a low end item with say 5% precision compared to several dollars for a milspec with 0.005% precision.
That’s what I remember also. Some of the high-priced items, like the famous $500 coffee pot, were specifically ordered to survive a B1 bomber crash landing. Also, since the fleet was only going to number in the dozens, I didn’t have a problem with it.
The devil is in the details or more accurately the specifications. In this case it is in accuracy, precision, temperature and vibration ranges, shielding and such. For example with resistors, a bulk price would be a few pennies for a low end item with say 5% precision compared to several dollars for a milspec with 0.005% precision.
and take COTs level testing and development.
the pentagon brings it upon themselves...
i quoted a job that required a bolt..just a plain old steel bolt...
but this bolt is not manufactured anymore..
so, instead of changing the friggin bolt, we have to have a company tool up and MAKE them..
cost at a bolt store, 12.00 dollars..
cost for a surplus bolt as required..9800.00 dollars..
yes, nine thousand eight hundred dollars... APIECE...
we needed 4 of them..
Blame congress. The military procures in accordance with federal acquisition laws.
Good post.
And also the phenomenon of bidding low on the intial contract to win the bid knowing you will “get healthy” on the service parts down the road.
It was also a bit onerous, and other administrators I knew who worked on it weren't all that keen on administering the program.
I handled a few smaller programs that were not subject to the phenomenon you speak of (those were the kind the Pentagon wanted research and development to keep going on, regardless), but most of what I was concerned with were really huge contracts, the kind where entire floors were taken up for administering these leviathans.
As I said, Defense work entails a lot. While I enjoyed the work, there was considerable stress involved, and writing proposals (when weren't we writing proposals?) often entailed long hours and long weekends. And sometimes long travel.
But it was all good.
CA....
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