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Boeing Overcharges Military, Again

CH-47F Chinook

A CH-47F Chinook Helicopter

Imagine being charged $2,286 for something that should have cost $10, or paying $645 for something someone else got for $12.51. You probably wouldn’t buy from that company again, but the Pentagon hasn’t followed the same logic.

A July audit obtained by Bloomberg News from the Pentagon’s Inspector General (IG) found that Boeing overcharged the military as much as $16.6 million as part of a $4.4 billion CH-47F Chinook Helicopter contract from 2008.

This isn’t the first time Boeing has charged the Pentagon thousands of dollars for a cheap spare part. The most recent report adds to a collection of audits since 2008 that detail Boeing’s repeated practice of overcharging the military.  

The July report claims that Boeing, the Department of Defense’s number two contractor, “significantly overstated estimates” of new parts for CH-47F Chinook helicopters and “primarily installed used parts instead.”

From the Bloomberg article:

“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 of the latest findings. The Army 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,” Serchak said in an e-mailed statement.

The largest single overcharge was $2.6 million for 142 engine transmissions that the Army didn’t need. Since they weren’t needed, Boeing kept the already-paid-for pieces.

The IG report also criticized the Pentagon for lax negotiation and oversight of Boeing’s contracts.

Scott Amey, general counsel for the Project On Government Oversight, is quoted in the Bloomberg story.

[He] said in an email that “the audits show a continued pattern of inventory, pricing and oversight failures” by the Army and “Boeing charging more than fair and reasonable prices.”

“If the partnership is going to work, both parties” must “share current pricing data,” he said. “If something doesn’t give, we’re going to see additional audits and reactive attempts to recover funds.”

POGO has taken on Boeing’s egregious misspending in the past. In June, Investigator Neil Gordon wrote about an earlier audit with surprisingly similar details: Boeing overcharged the Army by about $13 million for helicopter parts. And in 2011, POGO published a previously unreleased DoD IG report showing that Boeing had overcharged the Army up to 177,475 percent for mundane helicopter parts.

Yet, the money keeps on flowing. During the 2013 fiscal year, Boeing raked in about $15.3 billion in federal contracts.

Image from U.S. Army Africa.

By: Avery Kleinman
Beth Daley Impact Fellow, POGO

Avery Kleinman At the time of publication Avery Kleinman was the Beth Daley Impact Fellow for the Project On Government Oversight.

Topics: Contract Oversight

Related Content: Contractor Accountability, DOD Oversight, Federal Contractor Misconduct, Spare Parts, Defense, Waste, Wasteful Defense Spending

Authors: Avery Kleinman

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