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.