Leaked Audit: Manufacturers and FAA Allowing Defective Parts on Planes Insufficient Oversight of Foreign and Domestic Outsourcing

The Project On Government Oversight has obtained a Transportation Department Inspector General (IG) report dated February 26, 2008 and not yet released to the public, which finds that “neither manufacturers nor FAA inspectors have provided effective oversight of suppliers; this has allowed substandard parts to enter the aviation supply chain.” (Page 4) These suppliers include those that provide parts critical for safe flight on both civilian and military aircraft. The audit found that outsourcing to other countries is a significant safety oversight concern, reminiscent of regulatory failures of foreign-made products, such as that of drug safety and quality by the FDA and of consumer products. However, even domestically, the Federal Aviation Administration and major aerospace companies failed on a massive scale to ensure quality control.

“A massive effort must be made to beef up the entire aviation safety oversight apparatus—lives and billions of dollars are at stake,” said Nick Schwellenbach, a POGO investigator. “This is further proof that the FAA continues to be a captured agency, offering just a fig leaf of ineffective regulation at the public's peril. And manufacturers continue to put short-term profit ahead of proven and prudent safety and quality.”

Three of the numerous examples cited in the report are as follows:

• “Manufacturers were not verifying that their suppliers were providing effective oversight of the sub-tier suppliers they used to produce parts. This is a critical safety issue, as demonstrated by four engine failures that occurred in FY 2003 due to faulty speed sensors on fuel pumps obtained from a supplier. Three of the engine failures occurred on the ground and one occurred in flight. The part failures were traced to unapproved design changes made by a sub-tier supplier. In all, 152 parts were manufactured in the suspect population.” (Page 12)
• “Effective oversight of suppliers is essential to ensure that substandard parts do not enter the aviation supply chain. For example, in February 2003, 1 supplier released approximately 5,000 parts that were not manufactured properly for use on landing gear for large commercial passenger aircraft. At least one of these landing gear parts failed while in service. While FAA became aware of this large-scale breakdown at this supplier in 2003, it has not performed a supplier audit at this facility in the last 4 years.” (Page 11)
• “One supplier allowed new, untrained employees to manufacture several components. We witnessed one new employee improperly inspecting a product. A later review of his training record showed that he had not received any formal training in the proper inspection method. This was the same supplier mentioned previously that used a piece of paper as a measuring device for an oil and fuel pressure transmitter.” (Page 13)

The IG audit examined supplier oversight at Boeing, Bombardier/Learjet, General Electric Aircraft Engines, Rolls-Royce, Pratt & Whitney, and Airbus, as well as at the FAA, the government agency responsible for ensuring aviation safety.

In the audit obtained by POGO , the IG found in 20 out of 21 suppliers that there were “widespread deficiencies at supplier facilities used by major aviation manufacturers. We found that some aircraft manufacturers had not designed effective oversight systems for their aircraft part suppliers.” (Page 4) The IG added, “Manufacturers are the first line of defense in ensuring the products used on their aircraft meet FAA and manufacturers' standards. Yet, during the 24 months preceding our review, manufacturers had not audited 6 of the 21 critical part suppliers we visited.” (Page 5)

The “second line of defense”—FAA oversight—was found grossly insufficient for a variety of reasons. For example, regardless of the number of suppliers an aviation manufacturer has, the FAA only has to perform four audits a year of its suppliers. The IG stated that “a manufacturer that has 2,000 suppliers and is assessed as a high risk will require the same number of supplier audits as a high-risk manufacturer that has only 20 suppliers.” (Page 8) To further illustrate, “for 2 consecutive years, FAA scheduled the maximum of four supplier audits for a manufacturer of agricultural aircraft (i.e., crop dusters). Conversely, for one of these years, another FAA inspector did not perform any supplier audits for a major engine manufacturer for commercial aircraft.” (Page 8)

Furthermore, according to the audit, the number of FAA supplier audits has declined even as the issue of supplier oversight has been identified as one of six top issues in aviation manufacturing.

An inverted set of incentives has been created under the FAA's new “risk-based” inspection system, implemented in 2003. One Manufacturing Inspection District Office manager told the IG that “his inspector workload had been cut almost in half under the new risk-based system.” (Page 7) Another manager “changed the results of the statistical sample because he did not have sufficient travel funds to complete audits of the selected foreign suppliers. The manager instructed inspectors to select suppliers in their local area in place of the foreign suppliers.” (Pages 7-8)

In a striking statistic, the IG stated “in each of the last 4 years, FAA has inspected an average of 1 percent of the total suppliers used by the five manufacturers we reviewed. At FAA's current surveillance rate, it would take inspectors at least 98 years to audit every supplier once. This is particularly troubling because, as discussed previously, manufacturers are not evaluating these suppliers frequently or comprehensively.” (Page 9)

In 2000, the IG stated in a report on manufacturers’ quality assurance systems for fasteners—which led to the report of quality control systems in general that POGO obtained—that evidence suggested a “systemic weakness in FAA’s process to evaluate safety issues brought to the agency’s attention.” (Page 4 of http://www.oig.dot.gov/StreamFile?file=/data/pdfdocs/av2001003.pdf)

POGO will continue to investigate these issues and urge Congress to hold hearings.