Boeing Charged Army $1,679 for Helicopter Part Worth $7.71

http://www.allgov.com/Where_is_the_Money_Going/ViewNews/Boeing_Charged_Army_1679_Dollars_for_Helicopter_Part_Worth_7_Dollars_71_Cemts_220505

Boeing has returned $1.6 million so far to the federal government for overcharging the U.S. Army for helicopter parts.

The refund was initiated by an audit from the inspector general of the Department of Defense, which uncovered extraordinary markups on Boeing’s parts.

Among the most outrageous examples: the defense contractor charged the Army $644.75 for a small, plastic spur gear that cost another Pentagon agency $12.51. It also billed the service $1,678.61 for a dime-sized, plastic “ramp gate roller assembly” that costs $7.71. Both parts are installed on the CH-47 Chinook helicopter.

The audit found that the Army Aviation and Missile Life Cycle Management Command (AMCOM) paid Boeing $23 million for 18 “high-dollar parts” that should have cost only $10 million.

Oh, silly me ...

Bake

Of course no one will. Is it any wonder how we spend so much money on our military, but still don't have sharks with lasers?

Just not the people you wish. :-(

:patriot:

a bargain ... I wonder what it would be in today's dollars (after adjustment for inflation) ...

less than $.50 in volume, but, if the Army ordered 1 pc, they're getting the entire cost of tool set-up in the price. The blame could be as much on the part of the Army procurement people as it is with the contractor. Not enough info to know.

In The Old Days, pre-Reagan, the military would buy whole batches of parts. In the case of these plastic spur gears, it probably costs $640 to set up to make them and $4 for the materials to produce one gear--a "reasonable profit margin" included in both instances. Reagan's people decided to "save money" by only ordering the parts they needed. In some cases that was justifiable--how many jet engines do you need to make to recoup the cost of setup? In other cases it's not--the materials to make 100 plastic spur gears wouldn't cost much more than the materials in one. And it's not like there's a huge civilian demand for Chinook helicopters; offshore oil drillers use them but I can't think of too many others.

Of course, if they would have made this gear out of BRASS, they'd never have to replace it.

Buying larger batches meant inventory - which is considered a liability on the books. Since the inventory manager got measured on inventory, he'd get his planners to order smaller lot quantities more frequently. Unit price would skyrocket and distort the true product costs when annual cost rolls were done....and therefore make the products less competitive. Did he care? No, because he wasn't measured on that metric. Sounds like he's now working for the USG.

when corporations are lining their pockets.

Boeing was milking the cow, not recovering setup costs. Have to disagree with the apologists here.

Here's what I read at the link: "Among the most outrageous examples: the defense contractor charged the Army $644.75 for a small, plastic spur gear that cost another Pentagon agency $12.51."

As someone who has spent 30+ years in purchasing/materials for a variety of commercial product manufacturers, I'm simply pointing out a manufacturing fact of life. If the government purchased 1 gear from Boeing, I'm not shocked in the least that the bill would be $644.75. We also don't know any of the facts related to the other Pentagon agency that bought them @ $12.51. Did they buy a few hundred at the time? The government procurement person ought to be questioned on this one... did he try to get this other Pentagon agency to cough up 1 of those gears? Don't know, the article doesn't tell us that. Maybe he did and they didn't have any or couldn't spare any. If he had to order them, he should have negotiated a better price and probably bought more than "a gear". If he did buy quantity, then the story is poorly written because I interpret that as a single gear. If that was what was ordered, I'm simply pointing out that he's paying the mold set-up costs, product quality check and certification, fixed overhead costs, and profit that a huge company, like Boeing, charges to make and sell 1 gear. As a buyer who understands what I'm buying...I'd like to tell Boeing to stick it - but then I've got another problem. Product qualification. Even if I have the drawings to define and reproduce this gear, I can't just go down the street to Joe's Gear Shop and have them make me a cheaper one. Because Joe's is probably not an improved source for the gear. That would take a lot of time and money for him to become an approved supplier. Certainly more than the $644.75 that was paid. The problem here is that the buying mentality and orders are 'buy what you need'. Lets say he buys 100 gears to get a better price - say at $10.00 ea. Now there's a $990.00 worth of excess inventory on the books. Multiply that by millions of parts that the Pentagon purchases - see what the next 'expose' will be about? "Pentagon buys billions of dollars of unused parts!"

What's the solution? Well, I suspect that the buyer of this gear was someone with no ability or interest to take on Boeing. The problem would need to be addressed by the generals who control/run the Pentagon purchasing function. They have the clout to change the game rules. Problem? They are the same ones who'll be going to work for Boeing the day after they retire from the military. So, that's not a solution.

My solution is to cut the budget by 30% and tell the Pentagon brass and the MIC - "you figure it out".

Of course, now republicans will defund the Inspector Generals office.

Really? Have you?

Where is the line item for that $60 million helicopter that crashed in the bin Laden raid?

Oops, can't find it?

What about all the other "black ops" stuff? Can you find the line items for those?

Where do you think the money comes from?

People don't see the left hand when they are laughing at the right hand.

Those helicopiters are billed off budget. And that's the travesty of it. Even with the humungous military cut of on-the-record spending, there's that whole unreported slice.

No, this is bilking. Straight up bilking.