boeing overcharged army 177000 %

Boeing Co. raked in millions of dollars from the U.S. Army by marking up spare helicopter parts as much as 177,000 percent, according to a Defense inspector general report first obtained by the Project on Government Oversight.

Boeing, a major defense contractor, overcharged the Army on 18 different parts and collected $23 million dollars instead of the $10 million it should have received in fiscal year 2010. One part, a straight pin that usually valued at $0.04, was sold to the Army for an astronomical $74.01 per unit. A plain stud used on Apache helicopters fetched $3,369.48, even though it usually retails for $190.00 a piece - a 1,673 percent markup.

Though such transactions may appear miniscule compared to the large multi-billion dollar budgets the Pentagon is usually accustomed to, the markups prove to be much more lucrative throughout the life span of a particular defense project where these costs can accumulate, like an Apache helicopter.

"The cost to buy a weapon system out of the factory, such as the AH-64 helicopter, usually is less than the cost to operate and maintain the weapon over its life," explains the Project on Government Oversight report. "Parts on a weapon have to be replaced at varying intervals and, similar to how the human body replaces most cells in the body in less than a decade, a major weapon system with a long-enough life span may eventually be largely rebuilt with new spare parts."

The Pentagon inspector general who filed the report recommended that the Defense Department seek a refund from Boeing for the lost tax-payer dollars, but the Army declined to do so. Instead, it cited previous price-fixed contracts which it entered with Boeing that do not require adjusting part prices based on what they may be selling for after the fact.

Though certainly not the first to take advantage of the government procurement process, Boeing may have struck a chord in a particularly sensitive fiscal environment as debt-ceiling talks heat up on the Hill and lawmakers struggle to rein in spending.

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amadeus said:

This story used to come up all the time about the $400 hammer and such. It's because of the way the Pentagon does its accounting: defense contractors are expected to spread out the costs of their projects. Boeing complies by charging $74 for a screw now and $74 for a missile later. In the end, it balances out. I'm assuming that's what happened here.

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a $7,600 coffee pot, $9,600 Allen wrenches, and -- the most famous pork barrel item of them all -- those $640 toilet seats.”

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Cutlass said:

Pentagon spending has had growing issues since before Ike warned us about them. No one seems to ever get a handle on it, so it keeps getting worse.

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asbestos said:

Is this an example of the invisible hand making the world safer?

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asbestos said:

Is this an example of the invisible hand making the world safer?

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Takhisis said:

It's the nature of the capitalist market regulating itself.

http://en.wikipedia.org/wiki/Invisible_hand

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JollyRoger said:

The overcharges create invisible hand jobs in South Carolina.

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Tristan_C said:

Yes, I know what the invisible hand is. I honestly cannot figure out how it fits into this story.

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Takhisis said:

Oh! I thought you meant you didn't know what the invisible hand was.
I'd guess that the invisible hand makes the world a better place by making guns more expensive? :shrug:

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Tristan_C said:

And how, precisely, do you reckon the invisible hand is making guns more expensive? You're as mysterious as the OP...

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