Audit: Boeing overcharged U.S. Army $13M for helicopter parts

Audit: Boeing overcharged U.S. Army $13M for helicopter parts
SEATTLE -- The Boeing Co. overcharged the U.S. Army $13 million for parts for the Apache and Chinook helicopters, an audit by the inspector general of the Department of Defense found.

The aviation company also owes the Army a refund of up to $11.4 million for overpaid incentives that resulted from miscalculations of repair turnaround times, according to the report.

The report, which was made public by Project on Government Oversight on Tuesday, found Boeing charged "131.5 percent more than the fair and reasonable price" for 18 different helicopter parts on a contract for the Corpus Christi Army Depot. It blames both parties for the pricing errors.

"Neither the Army nor Boeing officials performed adequate cost or price analyses to establish the reasonable of the proposed subcontract prices," the report said, "and Boeing officials submitted cost pricing data that were not current, complete, and accurate" in negotiations for seven of the parts.

In 2008, the Army purchased 50 ramp gate rollers from Boeing at the price or $1,629.49 each for a total of $81,324, officials said, even though Boeing had purchased the units for $28 a piece just five months prior.

The following year, the contract unit price for the same part was listed as $1,678.61, which "was more than 16,000 percent more than the DLA (Defense Logistics Agency) standard unit price of $10.25," the audit found.

Officials said the majority of the pricing problems involved Chinook parts, which are manufactured at the company's Philadelphia plant.

In the case of the 617 sleeve bushings purchased between 2007 and 2009, the audit stated "the fair and reasonable price was $16,423 versus the $173,626 that Boeing charged the Army, or a 957.2 percent difference."

The Army also overpaid Boeing in incentives for results that were not achieved, according to the audit.

The Army paid the company for a 46.7 percent improvement in performance, the statement said, but the actual improvement rate ranged between 26.1 percent and 36.9 percent. The audit blamed the Army's inconsistent methodologies for the error.

Boeing owes the Army between $6.3 million and $10.9 million in overpaid incentives, as well as an additional $538,688 for failure to meet requirements during a subsequent contract period, the document said.

Boeing has already refunded $1.6 million of the amount owed, and said it has implemented changes to prevent future errors.

The report also outlined internal errors made by the Army, including failure to utilize up to $277.8 million in excess inventory instead of ordering the same parts from Boeing.

"An underlying reason for the excess inventory was that no one had taken responsibility" to keep stock of the inventory, the audit said.

AMCOM is working to develop procedures that will ensure the excess parts are used before orders are placed. It is also addressing pricing errors, the inspector general said.