Since 2008, Chicago-based Boeing, the military’s second-largest contractor, has overcharged the United States on four separate occasions, to the tune of $16.6 billion.
According to a report obtained by Bloomberg News, “Boeing significantly overstated estimates” of new components necessary for the CH-47F Chinook helicopters and “primarily installed used parts instead” under a $4.4 billion contract awarded in 2008. Instead of delivering the new pieces it told the Army were necessary, Boeing restored parts from older aircraft and installed those in their place.
In addition to being overcharged, the military paid for parts that Boeing never installed at all but was allowed to keep for its own use in the future.
“The bottom line is that using reworked parts rather than new parts increased Boeing’s profit,” Bridget Serchak, a spokeswoman for the inspector general, said to Bloomberg. She added that the U.S. 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.”
For it’s part, Boeing disagrees with the conclusion reached by the inspector general.
“We believe we were fully compliant with all government contract policies and guidance applicable to the first CH-47F multiyear contract, and we provided evidence of that to the IG throughout this audit,” Boeing spokesman, Damien Mills, said in a statement.
It’s important to note that while the Pentagon report accuses Boeing of overcharging the Army, it also pins some of the blame on poor contract management/negotiation by defense agencies.
In fact, the inspector general’s former director for pricing and logistics, Henry Kleinknecht, underlined the need for the military’s personnel to become more capable in negotiating the types of contracts it is granting to companies like Boeing.
“Unfortunately, the Army does not have a cost/price analysis group, much less an experienced one,” Kleinknecht said to Bloomberg. Contracting officials don’t have “the technical expertise in a lot of these complex areas to go in and figure out what the problems are."
Senator Tom Carper (D-Del.), leader of the Senate Homeland Security and Governmental Affairs Committee, intends to hold a hearing later this year to discuss the situation and seek ways to eliminate wasteful spending.
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