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 November 17, 2000 $1,887 Bolt - $2,185 Nut - $14,529 Hub - $11,701 Radio Defense Contractor Spare Parts Ripoffs Make Comeback |
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 For Immediate ReleaseContact: Eric Miller or Danielle Brian (202) 347-1122 pogo@pogo.org A new General Accounting Office (GAO) study finds that the cost of 2,993 spare parts purchased in 1998 by the military increased by 1,000 percent or more in just one year. In most cases, defense contractors underestimated the cost of the spare parts then jacked up prices later. "Under a Congress and an Administration that is all too accommodating to the defense industry, the pocket protector crowd of auditors and investigators has become an endangered species. They are not just red tape, they are the watchful eyes and ears of the American taxpayers," said Danielle Brian, Executive Director, of the Project On Government Oversight (POGO). Defense officials told the GAO that discrepancies between estimated and actual prices were often the result of a lack of manpower needed to perform a "thorough price scrub," meaning a review of the spare parts provided by the contractor when a weapon system is initially delivered. A related problem is that the military is failing to update price estimates: 1/3 of the prices the GAO examined were three or more years old and 1/5 were ten or more years old. The GAO study also said that one out of seven spare parts (14%) ordered by the military experienced significant annual price increases of 50 or more percent in 1998. By comparison, in 1995, only one out of 12 spare parts (8%) had such increases. To determine why "extreme" price increases occurred, the GAO examined a sample of 100 spare parts (selected list attached). In 64 out of 100 cases studied, a contractor provided the original price estimate. Some huge price jumps:
POGO's 1999 report, Defense Waste & Fraud Camouflaged As Reinventing Government, showed that agencies successful at reining in industry fraud were targeted for budget cutbacks. POGO's report documented a 19% cut in staff at the Defense Contract Audit Agency (DCAA) which "saves almost $10 for each dollar invested"; a 21% cut in the Department of Defense (DOD) Inspector General's office that recovered $466 million in FY 1996-97 from fraud investigations; and a 1/3 staff cut at the GAO, which played a central role in saving $1.7 billion from the troubled F-22 program. "We look forward to a full public airing of spare parts pricing problems by the Subcommittee on Readiness and Management Support," added POGO's Eric Miller. For more information: Defense Contractor Spare Parts Ripoffs Make Comeback
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| Part Number |
Name of Part
|
1997 Unit Price
(in dollars) |
1998 Unit Price
(in dollars, number of x higher analysis by POGO |
| 013066164 |
Hub, body
|
$35.20 | $14,528.71 (413x higher) |
| 010500591 |
Transformer, radio
|
$683.28 | $11,700.92 (17x higher) |
| 013023802 |
Tube, vent, fuselage
|
$81.25 | $10,080.61 (124x higher) |
| 010313629 |
Tube assembly, metal
|
$348.30 | $6,989.18 (20x higher) |
| 014107601 |
Cable assembly
|
$11.50 | $5,978.18 (520x higher) |
| 014060751 |
Microcircuit, linear
|
$0.11 | $5,788.76 (52,625x higher) |
| 012939355 |
Indicator, sight, liquid
|
$28.75 | $4,214.70 (147x higher) |
| 014261187 |
Stiffener, aircraft
|
$125.00 | $3,416.08 (27x higher) |
| 013818680 |
Insulation, thermal
|
$1.00 | $3,390.00 (3,390x higher) |
| 014061680 |
Bracket, mounting
|
$5.00 | $3,139.16 (628x higher) |
For a complete list of the 100 spare parts price increases, see Appendix V of the GAO study, "Price Trends for Defense Logistics Agency's Weapon System Parts"(# GAO-01-22), which can be viewed at http://www.gao.gov/new.items/d0122.pdf.
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