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.
Congress critters need to keep the funds flowing into their retirement accounts.
If the military wants COTS pricing, they have to buy in COTS packaging as well.
It’s not their money, they do not care. Same goes for those negotiating contracts with public employee unions.
When they specify that a widget is supposed to be bought from a minority or woman owned business that may tack on quite a premium to the price as well. These are the rules set by Congress and the executive branch...
Indeed you are correct. Thank you for providing insight.
Too many just jump on the issue and never take the time to learn the system and why it is broken and why it results in inflated prices.
And COTS engineering. Government RFPs are filled with requirements that have equivalent COTs products, but with minor differences that equate to enormous engineering and tooling costs. If you have to recoup all those costs on a one-off or small-run product, then it is not going to be cheap.
Businesses that have to make a profit would never build in such costs. If FWA (fraud, waste and abuse) was an alphabet agency, their budget would dwarf most other agencies.
Here is someplace we could responsibly cut defense spending without negatively impacting readness.
I’ve long wondered about the proverbial $700 government toilet seats. Was it $20 for the toilet seat and $680 excess profit, or was it a $20 toilet seat with $680 of paperwork?
This is right on point. Having been a contracting officer in the military I witnessed the extreme influence brought to bear by politicians to secure contracts for their districts and states. Not always, but many times these contracts were let to firms that were in no way the best qualified or the lowest bidders. The pols have their hands in them all the time.
Actually, MOST of the cost is for fulfilling utterly BS requirements placed on procurement by the Government.
Like requiring so much of the contracts to be awarded to “small disadvantaged businesses”. Or many other asinine requirements. . .
Example: One contract I was on, we were buying semiconductor chips as part of a system build. We had to certify, with proof, multiple inspections, and a massive paperwork trail, that we were NOT purchasing materials made from “conflict minerals”. Because there’s a law which forbids the Gov from buying from “tainted” sources. . . so even if the minerals were mined and refined in the US, and used in a US Chip fab. . .we STILL had to prove no “conflict minerals”. . .
$250 dollars or so of chips caused something like $10K in additional overhead, fees, certifications, etc. . .
Well, they DO have to pay for the detention facilities at Area 51 somehow...
so don’t car dealerships
I stopped doing business with the federal govt for the most part. They insist on nickle and dime me as a small business. I’ve had contracts where was charging twice my hourly rate and justified it as their expenses were higher.
The one thing the article does not address is the additional cost of doing business with the government as compared to doing business with anybody else. The documentation is staggering. The packaging can be illogical. Boilerplate procurement requests with extraneous and unrelated requirements attached.
Anyone else wanting a shovel, or a hundred shovels goes out and buys good shovels at a decent price. The government puts out 150 pages of specs and buys a shovel for 10 times the price. And buys a shovel that nobody has ever built before.
I have a small manufacturing company and produce aircraft parts. Aircraft parts are already expensive for commercial and general aviation with their requirement. A part I can literally make in 10 minutes will require 10 hours of paperwork and documentation. Add another 5 for packaging. I got my first military contract 3 years ago. That same 10 minute part can take 20 to 30 hours just to get out the door. I have to cover that cost. So when peopl wonder why a simple gear would cost so much don’t get too angry too quick.
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