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IG Finds Overpayments to Boeing

Oct. 1, 2013 - 02:37PM   |  
By AARON MEHTA   |   Comments
Boeing Posts 56 Million Quarterly Loss, And Its Cu
A newly-released report from the Pentagon Inspector General's office found that the Defense Logistics Agency overpaid Boeing for parts, and called on the agency to recover the funds. (Getty Images)
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WASHINGTON — The Pentagon should seek to recover $13.7 million in improper overpayments to Boeing, according to a recently released audit by the Department of Defense Inspector General’s office.

Auditors found Defense Logistics Agency (DLA) contracting officers did not negotiate fair prices for 1,469 deliveries of parts which, when combined with inadequate contract oversight, led to taxpayers paying “in excess of fair and reasonable prices.”

The money in question stems from a pair of contract agreements with Boeing — one from 2002 and one from 2009 — to supply parts and components for the B1-B, B-52, E-3, KC-135, cruise missile and Minutemen missile programs.

The IG report found that overpayments came from a lack of oversight at DLA, rather than anything untoward on behalf of either the agency or Boeing.

“We recommend the Director, DLA implement available options to recover from Boeing the overpayment of approximately $13.7 million,” auditors concluded.

The watchdog arm also encouraged revising DLA purchasing procedures to require contracting officers to obtain and review purchase order histories when doing sole-source acquisitions, to complete reviews of contractor’s cost estimates, and to conduct periodic evaluations of long-term contracts.

The report, published in June but only made public this week, is redacted throughout, covering what appears to be detailed sales figures for parts.

In a response included in the report, DLA concurred with the IG’s findings, but noted that there is no contracting vehicles available for the government to recover the funds from Boeing.

There is “no basis for unilaterally changing the contract prices as the basis for a refund from the contractor,” the DLA response reads. However, the agency agreed to “request a voluntary refund for the items where a fair and reasonable determination was never made and for the items where the Boeing purchase order prices were lower than the contract price.”

A spokesman for the Boeing Co. confirmed the it received a letter requesting a voluntary refund.

The company is “engaged in discussions, which continue, on details of the refund as well as putting in place process improvements that address issues identified in the IG report,” Paul Guse, Boeing spokesman, wrote in an email. “We are discussing process improvements going forward in areas such as streamlined processes, enhanced performance and improved affordability.”

DLA, headquartered at Fort Belvoir, Va., provides the US armed forces with the vast majority of its spare parts. Its aviation arm handles “over 444,000” aviation spare parts, according to IG auditors.

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