Overcharging Spareparts (here for the MDD/Boeing C-17A Globemaster)

[aonestudio]

$149,072 for soap dispenser! How Boeing fleeced the US Air Force, charging nearly $1 million for twelve spare parts

Boeing allegedly overcharged the U.S. Air Force for spare parts, including a 7,943% markup on soap dispensers, says a Pentagon report. The Air Force overpaid nearly $1 million for these parts. Boeing argues that the report is based on unfair price comparisons, and it plans to respond in detail...

economictimes.indiatimes.com

A Pentagon watchdog reported that Boeing overcharged the U.S. Air Force for spare parts for C-17 transport planes. This included a soap dispenser marked up by 7,943%, according to the Department of Defense Office of Inspector General.

 

[Scott Kenny]

$149,072 for soap dispenser! How Boeing fleeced the US Air Force, charging nearly $1 million for twelve spare parts

Boeing allegedly overcharged the U.S. Air Force for spare parts, including a 7,943% markup on soap dispensers, says a Pentagon report. The Air Force overpaid nearly $1 million for these parts. Boeing argues that the report is based on unfair price comparisons, and it plans to respond in detail...

economictimes.indiatimes.com

OIG doesn't include fun costs like needing to make a multi-million-dollar injection molding tool for a handful of parts.

 

[taildragger]

OIG doesn't include fun costs like needing to make a multi-million-dollar injection molding tool for a handful of parts.

This is probably a cost accounting error, it's pretty certain that the figure is unrelated to the real costs. Someone got lazy and threw a bunch of hours and costs into the soap dispenser charge line. The unofficial motto of cost accountants every where is "how much do you want it to cost?" and this is an example. The Pentagon report apparently noted that they were pointed to the soap dispenser by a whistleblower and that it represented a tiny percentage of the costs surveyed. It's a fun story to report but doesn't amount to much.

 

[publiusr]

I have heard it said that diet cokes give stewardesses fits at altitude—-the soap dispenser a special design? Still, a hundred large is too much—let alone half-again that much.

 

[Scott Kenny]

I have heard it said that diet cokes give stewardesses fits at altitude—-the soap dispenser a special design? Still, a hundred large is too much—let alone half-again that much.

Not if you have to make a custom injection-molding tool for it.

Remember the $25k toilet seats from the 1980s?

Those were for the B-52s, and it was the entire toilet top that was being made. 3ft by 2ft by 3ft in an L shape.They made maybe 200 of them, so the ~$5mil injection molding tool cost got split across ~200 units made.

 

[1635yankee]

Not if you have to make a custom injection-molding tool for it.

Remember the $25k toilet seats from the 1980s?

Those were for the B-52s, and it was the entire toilet top that was being made. 3ft by 2ft by 3ft in an L shape.They made maybe 200 of them, so the ~$5mil injection molding tool cost got split across ~200 units made.

I had heard they were for the P-3, which would likely not need to be a bespoke design, as would likely be the case for the B-52.

I suspect, though, that one could by a perfectly serviceable, aviation quality soap dispenser (or coffee maker or galley fittings) for the C-17 off the shelf.

 

[1635yankee]

This is probably a cost accounting error, it's pretty certain that the figure is unrelated to the real costs. Someone got lazy and threw a bunch of hours and costs into the soap dispenser charge line. The unofficial motto of cost accountants every where is "how much do you want it to cost?" and this is an example. The Pentagon report apparently noted that they were pointed to the soap dispenser by a whistleblower and that it represented a tiny percentage of the costs surveyed. It's a fun story to report but doesn't amount to much.

When I was working in the defense biz, there was a broadcast interview with a vendor whose company sold some electronics to a non-DoD government agency. The part was a standard, commodity part (something like a 2 amp fuse). The gov't employee was not allowed to go to the local electronics shop and buy one; it had to come from the vendor. After looking at the paperwork required (this was towards the end of the first Reagan term), the vendor just stuck the fuse into and envelope and sent it. The paperwork the gov't required would take about six hours to fill out. The fuse cost about 75 cents.

The famous $600 hammer was largely due to paperwork. In the other hand, when I was a test engineer, I bought 3 3/8 in bolts for $700, so I may not be one to talk....

 

[DWG]

This is probably a cost accounting error, it's pretty certain that the figure is unrelated to the real costs. Someone got lazy and threw a bunch of hours and costs into the soap dispenser charge line.

That was my assumption the moment I heard the story.

I think I read that it added up to about $5m over a decade, keep that up for a few more years and you might have to refill the office petty cash drawer.

 

[Kiltonge]

Not if you have to make a custom injection-molding tool for it.

That costs five figures at most, and a soap dish isn't a complex moulding. You don't build a new injection machine from scratch, just the mould.

Certification of material and supply chain will of course add to the unit cost.

 

[MrTopaz]

Regarding mundane-sounding gear that ends up being incredibly expensive, wasn’t there something about a wrench or hammer that cost some absurd amount, but it ended up having to be made from a beryllium alloy that you wouldn’t be able to get from any normal vendor?

 

[Hydroman]

$149,072 for soap dispenser! How Boeing fleeced the US Air Force, charging nearly $1 million for twelve spare parts

Boeing allegedly overcharged the U.S. Air Force for spare parts, including a 7,943% markup on soap dispensers, says a Pentagon report. The Air Force overpaid nearly $1 million for these parts. Boeing argues that the report is based on unfair price comparisons, and it plans to respond in detail...

economictimes.indiatimes.com

That would get me in a lather as well. And getting fleeced like that, who pulled the wool over their eyes, that really gets my goat as I say that with a sheepish looking grin....But being serious, there was probably a USAF soap dish specification, probably special materials to be compatible with USG sanctioned soap, complete Mil-810 testing and you had to go to Boeing approved suppliers.

 

[DWG]

That costs five figures at most, and a soap dish isn't a complex moulding.

Soap dispenser, not dish, so multiple parts and a touch of mechanical design. I still think it's most likely overheads being tagged on a convenient item, but it's not necessarily as simple as people are assuming - you don't want soap spraying all over the floor every time you hit a bit of turbulence, for instance.

 

[Hood]

It's nothing new, I've seen files at Kew where the MoD 40 years ago were moaning about the prices BAe was charging hundreds for things like spanners that the RAF fitters said were worth a couple of quid.

Even writing and printing a manual seemed to cost tens of thousands (VC.10 C.1 manual argument over commercial VC.10 manual).

 

[1635yankee]

Regarding mundane-sounding gear that ends up being incredibly expensive, wasn’t there something about a wrench or hammer that cost some absurd amount, but it ended up having to be made from a beryllium alloy that you wouldn’t be able to get from any normal vendor?

You can buy beryllium alloy wrenches from normal vendors. For examples, see the McMaster-Carr catalogue. They're not cheap, because beryllium is expensive and it's toxic.

 

[MrTopaz]

You can buy beryllium alloy wrenches from normal vendors. For examples, see the McMaster-Carr catalogue. They're not cheap, because beryllium is expensive and it's toxic.

I stand corrected.

 

[Hydroman]

When I ran the AIMD hydro shop when I was onboard CVN-65 in 1982, the USN was buying non-USA made, cheap tools for outfitting all of the AIMD shops. I had chrome chipping off into control valves as an example during repairs creating a micro-FOD hazard plus the jet shop guys were getting outfitted with new Snap-On tools. So I wrote a micro-FOD hazard report, got a nice budget, and outfitted the shop with new Snap-On tools. So in the end, saved the USN some $$$$$ by using top-notch tools instead of crap and knowing what to purchase. The original Snap-On tool storage units, other tools, fixtures, etc I designed for the shop were still being used up to 2012 when I was on the ship for the last time. The USG does not have good checks and balances for identifying fraud and overcharges unfortunately.

 

[Scott Kenny]

That costs five figures at most, and a soap dish isn't a complex moulding. You don't build a new injection machine from scratch, just the mould.

Certification of material and supply chain will of course add to the unit cost.

A relatively simple mold can take a good machinist a full year's labor to make the first time. (for a roughly 300x200mm sized parts frame) In addition to the cost of making the master model.

Those costs go up a lot when the size of the part goes up. In the case of the "toilet seat", it was a part 900x600x900mm or so in an L shape, which means a tool size of ~1500x750x750mm (or whatever the next size larger injection molding machine uses)

 

[Foo Fighter]

Can they not 3d print these items? Where would the profit be in that though?

 

[TomS]

Can they not 3d print these items? Where would the profit be in that though?

3d printing isn't suitable for everything. And it requires design time too.

 

[Foo Fighter]

Or 3d scanning.

 

[F119Doctor]

The other point to be made is that the Boeing C-17 support contract is a Performance Based Logistics type of contract. The DoD gives Boeing a fixed amount of $$, and Boeing keeps the aircraft flying to a specified metric. If Boeing can reduce costs internally, they make a higher profit. Increasing costs result in lower profit. Inflating the cost of an individual parts doesn’t help Boeing make more money. The only advantage is in the future if the DoD decides to terminate the PBL arrangement, there is an inflated cost history for future piece part purchase negotiations.

 

[riggerrob]

That sort of "creative accounting" is routinely used by the Canadian Armed Forces.
For example, when HMCS Bonaventure was in her last refit, they discovered that the fire ring main was badly corroded, but there was no money in the budget to repair it. Fortunately, accountants found some money in a part of the budget devoted to lockers, so the Canadian Navy paid hundreds of dollars each to replace hundreds of lockers.

 

[DWG]

Can they not 3d print these items? Where would the profit be in that though?

If they're going back a decade or more on this, then 3d printing was still the new kid on the block, with unknown risk factors for aerospace use. I don't think the PW 1000 contaminated powdered metal issue is a 3d printing one*, but imagine what that kind of issue would do to a laser sintered part!

* At least I assume not on the basis people would be screaming about 3d printing if it was.

 

[DWG]

That sort of "creative accounting" is routinely used by the Canadian Armed Forces.
For example, when HMCS Bonaventure was in her last refit, they discovered that the fire ring main was badly corroded, but there was no money in the budget to repair it. Fortunately, accountants found some money in a part of the budget devoted to lockers, so the Canadian Navy paid hundreds of dollars each to replace hundreds of lockers.

And there was the USN 'rebuilding' the New Navy monitors - unscrew original builder's plate, scrap existing hull and fittings, build new hull and fittings to entirely different design and displacement, screw on original builder's plate.

 

[Foo Fighter]

And there was the USN 'rebuilding' the New Navy monitors - unscrew original builder's plate, scrap existing hull and fittings, build new hull and fittings to entirely different design and displacement, screw on original builder's plate.

Sounds a LOT like the 1970's car repairs. Knackered chassis? No problem, weld in a used iron bedframe.........

Oh, and don't tell the punter. Schhhhh..........