Boeing gets $1700 for a $7 part

The Machinists union this morning called attention to a Defense Department audit that finds Boeing is overcharging the government by millions of dollars.

"Boeing's reckless disregard for the public trust, if not the law, was again on full display when it was revealed that the company has been overcharging the government by tens of millions of dollars," the union said in a statement today.

"In May, the Defense Department's Inspector General issued a scathing audit that uncovered $13 million in over-the-top, unwarranted costs, beyond fair and reasonable prices, by Boeing for spare helicopter parts delivered to the U.S. Army," the union statement said.

Frank Larkin, spokesperson for the IAM's Boeing Watch, noted that, "as only one example, there is a dime-sized plastic roller assembly that usually costs $7.71. Boeing , in fact, charged the Army $1,678.61 per part."

The Defense Department audit focused on two separate contracts between Boeing and the government and found overcharges on what Larkin described as "small, mundane parts" ranging from 33 percent to more than 177,000 percent.

The union's statement today follows a report last month in the Seattle Times that said Boeing charged the Army $644.75 for a tiny plastic motor gear that cost another Pentagon agency $12.51.

Earlier this year, Boeing, according to the Times, refunded $1.6 million it had overcharged the government.

Critics of government purchasing policy say overpayments are likely whenever the Pentagon purchases either management services or parts from private contractors instead of through the Pentagon's own Defense Logistics Agency.

Auditors said that $277.8 million of existing spare parts, stored in Defense Logistics Agency warehouses, could be used by the Army instead of purchasing through Boeing at higher prices.

The release of information about Boeing's inflated pricing policy comes while the company is taking flak for what the National Labor Relations Board says is its illegal, retaliatory opening of a production line in South Carolina.

"One wonders how much Boeing's illegal actions cost taxpayers when the company retaliated against union workers in the sate of Washington by opening a Dreamliner production lines in non-union South Carolina," said Larkin.

In the first major decision since Boeing has been in court on charges of violating labor law, a federal judge recently rejected a motion by company lawyers (among them the son of Supreme Court Justice Antonin Scalia) to dismiss the case. Administrative law Judge Clifford Anderson ruled that Boeing must face charges that it broke the law.

Also significant was the judge's ruling that moving future jobs to South Carolina is as significant as moving existing jobs and that such moves could be considered equally retaliatory under the law. Boeing execs have told the media that the move to South Carolina was a response to strikes by union workers in the state of Washington. Anderson also ruled that all remedies, including an order requiring Boeing to move production back to Washington, were in order.

The union has said that none of this should mean job losses in South Carolina because Boeing could move back to that state some of the jobs it has shipped overseas.

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  • Good, boeing needs to realize that it is not above the law!!

    Posted by joe blow, 07/08/2011 8:56am (3 years ago)

  • What a pile of self serving sewage. The union is mad because Boeing built a new plant somewhere other than Seattle, so they dig up trash like this.

    The prices being bandied about by this union and the auditors don't take into consideration the fact that start-up costs have to be amortized over the entire production run. If the government asks for one unit, all of the start-up costs go on that unit, making it seem very expensive.

    Based on what the article says, the auditors should be looking at why the government didn't buy the items from their own warehouse, instead of having Boeing build some more.

    BTW, it would have cost something similar from any other government contractor.

    Posted by Bruce Wilson, 07/08/2011 8:31am (3 years ago)

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