DOD overcharged $11.8 million for spare parts examined in study; Failed to perform adequate cost or price analyses
Sep 08 2011
WASHINGTON – Today, Sen. Tom Carper (D-Del.), Chairman of the Subcommittee on Federal Financial Management, expressed disappointment with the results of a recent report that cites millions of dollars spent on overpriced spare parts by the Department of Defense (DOD). The DOD Office of Inspector General (OIG) report (Pricing and Escalation Issues Weaken the Effectiveness of the Army Contract With Sikorsky to Support the Corpus Christie Army Depot D-2011-1-4) found that Sikorsky Aircraft Corporation overcharged the DOD $11.8 million for spare parts examined in the study, which is 51 percent more than was "fair and reasonable."
The OIG stated that since 2006, neither Sikorsky Aircraft Corporation nor the DOD's Army Aviation and Missile Command performed "adequate cost or price analyses" to support the prices. For the report, the OIG examined a list of 28 spare parts under an Army contract with Sikorsky, primarily for UH-60 Blackhawk helicopter. Examples of spare parts purchased for prices higher than what is "fair and reasonable," include:
- A charge of $284.46 per item for a flush door ring that should have cost $8.37, that resulted in $195,276 in overcharges.
- A charge of $7,814.48 per item for a rotor that should have cost $1,536.65, that resulted in $686,293 in overcharges.
Moreover, OIG found examples of items that the DOD procured through Sikorsky Aircraft Corporation that were already in the military warehouses, including 34 of the rotors that the Defense Logistics Agency had already purchased at the lower price. Earlier this year, the OIG reported on similar spare parts overcharges that involved Boeing Corporation supplied parts.
"Unfortunately, this latest report from the Department of Defense's Inspector General is yet another example illustrating the Department's broken and ineffective inventory and accounting systems," said Sen. Carper. "While the report's findings are deeply troubling – particularly as we are struggling with a massive federal debt and deficit – they are not surprising.
"We have known for years that the Department of Defense is unable to audit its books and is woefully behind in meeting Congress' requirement that it be audit-ready by 2017," continued Sen. Carper. "Further compounding this significant problem is the fact that the Department of Defense's inventory system is just as dysfunctional as its accounting system, resulting in a minimum of a billion dollars worth of inventory that the Department doesn't need being on order at any given time.
"We simply cannot afford this type of waste and ineffectiveness," continued Sen. Carper. "The Department of Defense's inability to properly manage its inventory and its financial records leaves it vulnerable to waste and fraud, as we've seen with this most recent example and far too many others. This type of sloppy record-keeping is unacceptable. I know the Department of Defense can do better than this, and I am eager to hear from the Department about the progress it has made in improving its accounting and inventory systems at a hearing my subcommittee will be holding later this month."
Sen. Carper's Subcommittee on Federal Financial Management will explore this issue and further examine the accounting and financial procedures of the DOD at its hearing on Thursday, Sept. 15 at 2:30 p.m.
A copy of the publically available report can be found on the OIG's website: http://www.dodig.mil/Audit/reports/fy11/11-104rib.pdf