Boeing charges Army for new helicopter parts but uses old ones

[mfcorey1]

Four times in the last five years, the Pentagon's inspector general has found that Boeing Co. collected excessive or unjustified payments on U.S. defense contracts.

In the latest of four audits since 2008, the watchdog office said the Chicago company charged the Army for new helicopter parts while installing used ones.

"Boeing significantly overstated estimates" of new components needed for CH-47F Chinook helicopters and "primarily installed used parts instead" under a $4.4-billion contract awarded in 2008, according to the report, labeled "For Official Use Only" and obtained by Bloomberg News.

Although used parts were allowed in some circumstances, the July 16 report found that the company overcharged the U.S. Army by as much as $16.6 million by exaggerating how many new ones were required while installing refurbished equipment salvaged from old aircraft. The report also faults defense agencies and military services for lax negotiations and contract management.

"The bottom line is that using reworked parts rather than new parts increased Boeing's profit," Bridget Serchak, a spokeswoman for the inspector general, said of the latest findings. The Army paid Boeing for parts "that were proposed but never installed," and "is paying for additional parts that they do not need and may not use," Serchak said in a statement.

http://www.chicagotribune.com/news/la-fi-boeing-overcharge-20131014,0,653044.story

[malaise]

1. So whatever happened to no new contracts for Boeing

At some point there will have to be consequences for criminality.

[Dash87]

5. Unfortunately there won't.

They can do whatever they want and pay the fines, so long as they have the money. Nobody is going to jail, nor will they ever. The contracts will keep flowing because they lobby for them. Doesn't matter how good or not they are.

[AnotherMcIntosh]

2. This is fraud under the False Claims Act,

which had its origins in the Civil War. At that time, at least one munition supplier sold sawdust in barrels to the Union army as gun powder.

Is someone going to prison? Probably not.

[zipplewrath]

3. Probably not

The case you reference doesn't appear to be what's going on here. The article isn't real clear but it appears that they proposed/predicted that more new parts were going to be needed than actually were. But apparently they went ahead and ordered new parts anyway. They kept installing refurbished parts (which is allowed) and stuck the new parts on the shelf. What the government wants them to do, and what the IG is probably asserting is that they shouldn't have ordered new parts until supplies were much lower.

It has been little noted that the Defense Contractors have moved into the "Depot" business, often on their own products. That means that instead of the government running the maintainance depots themselves (and managing the spare parts inventories among other issues) the contractors now do it. It was suppose to save the government money since the connection between the supplier and the depot would be tighter (think "just in time" among other ideas). In fact, one of the advantages was suppose to be that refurbished parts could be used more often since the suppliers had the expertise to do the work. It may be working for all I've read, but there is the problem of a contractor being in the position to also sell excess inventory.

[AnotherMcIntosh]

6. If the headline for the OP is accurate, it is a prima facie violation of 31 USC § 3729.

[zipplewrath]

8. Are they ever?

Are headlines ever "accurate"?

Although used parts were allowed in some circumstances, the July 16 report found that the company overcharged the U.S. Army by as much as $16.6 million by exaggerating how many new ones were required while installing refurbished equipment salvaged from old aircraft.

The issue appears to be that they ordered lots of new parts, when they were still able to use refurbished instead. A little bit of in accuracy would be permissible. At some point you're over ordering just because you can.

[AnotherMcIntosh]

9. Clearly, the operative phrase is "allowed in SOME circumstances" (emphasis added).

[zipplewrath]

10. And it is not clear

And it isn't clear that the circumstances in which they were used were not permissible. It appears that the problem was that they ordered way more new parts than were needed for the amount of replacements required. You don't get to order new parts, in excess of your burn rate, just to clear out your inventory. And if you chronically declare that new parts are going to be required in certain circumstances, and then justify using refurbished parts once those circumstances actually arise, there are going to be serious questions about your honesty at either end of the process.

[Dash87]

4. Deregulation reaping what it sows.

Corporations cannot be trusted to do the right thing - that's like not putting sandbags and demanding that a river not flood.

The fact that they're caught wont matter anyways. The profits they gained far eclipse any fines they'll have to pay. There's all the incentive in the world to do this again.

[Ron Green]

7. Maybe this is where they get the money to advertise

on public television.