Security

Boeing Overcharges Taxpayers By Up To 177,000 Percent For Army Helicopter Parts

Mega-defense contractor Boeing has been vastly overcharging the Army for basic spare parts, forcing taxpayers to pay more than twice the “fair and reasonable” price, according to an audit conducted by the Department of Defense’s Office of Inspector General and leaked to the Project on Government Oversight. The IG looked at spare parts sales to the Corpus Christi, Texas Army Depot for two helicopters systems and found some egregious price gouging, such as charging $71 for a metal pin that should cost just 4 cents:

$644.75 for a small gear smaller than a dime that sells for $12.51: more than a 5,100 percent increase in price. $1,678.61 for another tiny part, also smaller than a dime, that could have been bought within DoD for $7.71: a 21,000 percent increase. $71.01 for a straight, thin metal pin that DoD had on hand, unused by the tens of thousands, for 4 cents: an increase of over 177,000 percent.

While this case is cause for concern in its own right, it speaks to a bigger question of the Pentagon’s reliance on private contractors. Even without Boeing’s price gouging, the IG’s office expected Boehing to charge a “34 percent surcharge fee for overhead, general and administrative costs, and profit, according to the audit report.” And many of the parts studied in the report were available from the Pentagon’s internal procurement agencies at lower costs:

What is even more shocking is the difference in prices the Army would have paid if it procured many of these parts directly from the Defense Logistics Agency (DLA) and from the Army’s own procurement offices, the audit shows. The largest percentage differences cited in the DoD OIG report—such as the 177,475 percent example (which is not among the 18 parts the report focuses on)—compare DLA unit prices to Boeing unit prices.

Boeing is currently the center of a national debate over labor laws after the company moved a production line from Washington to South Carolina to thwart labor unions, potentially violating rules established by the National Labor Relations Board (NLRB). In response to the NLRB’s attempt to enforce the law, a number of national Republican leaders, including much of the presidential field, have come to Boeing’s defense and attacked the labor board, even calling for it to be defunded or disbanded.