Boeing denies claims it ripped off the Army

A report says the company overcharged the government by as much as $16.6 billion by using more used parts than expected.

By InvestorPlace Oct 15, 2013 1:49PM

© Lucas Jackson/Reuters
A CH-47 Chinook helicopter takes off after dropping off troops at Combat Outpost Herrera in Afghanistan's Paktiya ProvinceBy William White


iplogoBoeing (BA) denies that it overcharged the U.S. Army by $7.4 million to $16.6 million on a $4.4 billion helicopter contract.


The claims that Boeing overcharged the U.S. Army for helicopter parts come from a report made by one of the Pentagon's inspector generals. 


The report states that Boeing overestimated how many new parts it would use in the construction of 181 CH-47F Chinook helicopters under a five-year contract. It also claims that Boeing used more used parts than what it had estimated. 


Boeing disagrees with this report, instead claiming that it complied with the contract and that it adjusted its proposal for a second five-year contract. According to industry experts, the fixed price contracts were carefully negotiated between the company and the government. Both the government and Boeing took a risk with the contract. If Boeing had gone over on the cost to create the helicopters, then it would have had to handle the extra cost on its own, reports Reuters.


The inspector general's report didn't advise the Army to seek a refund for overcharges because it's unlikely that there is a legal basis to do so, but it did suggest that Boeing could voluntarily refund the overcharges.


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127Comments
Oct 15, 2013 5:09PM
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I worked for a plastic company, Texstar Plastics in Dallas when I was in High School during the summer.  They made F-16 Canopies, cut molded, drilled and shaped the edges.  The entire process took about 5 man hours, Texstar billed the US Government for 150 man hours for each canopy.  Companies bitch about the Government and it's spending but when they get a chance they rape the Tax Payers for as much as they can.
Oct 15, 2013 4:46PM
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Are the Military contractors Really any better the our Senators and Congress??, the greed & arrogance of these political bodies is similar to the greed & arrogance of our contractors, ALL FOR ONE, the Senate and Congress are responsible for the laws & enforcement, They allow these things to go on year after year due to existing laws not enforced and new ones not passed, Lobbyists should not be allowed with-in 50 miles of  Washington. VOTE THEM ALL OUT !!!!!!!!!!
Oct 15, 2013 4:19PM
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All the military contractors are, and have been overcharging the government  for defense contracts cause the lobbyists are there kissing their but for  a handout. Two plus BILLION for a single seat fighter jet, no way, but the the government auditors have their hand in the cookie jar also.
Oct 15, 2013 4:10PM
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BOEING has been CHEATING the U.S. Military for years....... When the U.S had the F-4J Phantom , why did BOEING sell a straight slot screwdriver for $5,000.00 . Heck , even back then you could have bought it from Sears for $2.49 ... But BOEING called this screwdriver a " SPECIAL TOOL "..
  I would have thought the upper General's or Admirals would have caught this.. BUT as always, there is under the table $$$$$$$$$$$ and to hell with us..................

Oct 15, 2013 4:22PM
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Capitalist companies wouldn't screw our government would they?  Oh of course not ;) ;) nudge nudge

 

I guess capitalist loyalists don't know about how much Halliburton gouged the government in Iraq.  The wasted spending is mostly from contracts to corporations not internal spending.

 

What I still don't get is the same people that say to cut foreign aid and help out here, say that when we try to help out at home it's wrong....  It doesn't make sense.

Oct 15, 2013 5:31PM
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Okay, so if we put the bad proofreading aside, the article is saying that an audit determined that Boeing overcharged by 0.16% to 0.4% on a price-fixed contract, where the price was negotiated before the 5-year contract was executed...  And then when they renewed for the second 5-year contract, Boeing lowered their price to reflect the actual costs incurred during the earlier contract.  And further, the auditor found nothing illegal about this, but somebody figured that Boeing deserved to be beat-up for being one-quarter percent off in their estimates. (Yes, in their favor.)  I'm not sure where the; "Boeing overestimated the number of parts needed, and then used more parts than they estimated" issue comes in, the information and grammar is so sketchy that I can't figure out who did what wrong in that statement.  Overall this article is a pretty big (and not very clear) yawn for me...
Oct 15, 2013 5:17PM
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Hmmm overcharged 16 billion on a 4.4 billion dollar contract....is this the new math all our educators have been forced to teach????   Or is this dictated by the yahoos who ban all balls on the playgrounds cause they might get hurt( especially the boys, but that's not PC to state it)   Lol  
Oct 15, 2013 5:23PM
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The government overpayes for everything from military contracts, to office trash cans, to sending money overseas to support other countries that take our money and then spit on us.  Some of the big reasons the government is so far in debt and they now want to cut Social Security, Etc. Its all about the politicians lining there own pockets.
Oct 15, 2013 5:27PM
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$7.4 to 16.6 million against $4.4 billion?  That is 0.168 to 0.377%.  Boeing should be congratulated for meeting obligations.  NO DOUBT they would NOT HAVE been paid an extra $7.4 -$16.6 million if it exceeded $4.4 billion.

 

IG was correct in noting this and Boeing was correct to include change in renewed contract. 

 

Clearly, defense hardware expenditures are large but most largess is to be found in the excess number of senior officers and their staff.  Objective should be to make some Pentagon space (as well as that in posts, forts, bases, etc) available to other Government agencies BECAUSE it becomes surplus to the needs of the military.

 

I doubt very few government contractors AS WELL as other government agencies comply to within 0.377% of their budgets (excepting frantic end of year spending to consume entire amount.) 

Oct 15, 2013 5:16PM
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How much will you owe Boeing for libeling them? A Sixteen billion overcharge instead of sixteen million dollars makes Boeing out to be major crooks, might just want to correct that to 16 MILLION, which, on a 4.4 billion contract, is the third of a per cent, Nothing!!!!
Oct 15, 2013 3:52PM
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Let me see if I understand....."If Boeing had WENT over on the cost" Really.... Did you go to school? English is NOT my first language, but I can write better than this. Secondly, is there an editor available? Was this article reviewed by anyone?...

 

Wow....How many billions of dollars is the United States spending on EDUCATION????? And more is needed????? With 1/4 of what the USA spends on Educations (Or is it Unions?) Any other country just about has a better education system.....

Oct 15, 2013 4:38PM
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Love it...government entities turning on each other...LOL!
Oct 15, 2013 4:44PM
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And just what did the military contracting officer receive from Boeing?  A job?  The promise of future employment after leaving the Army?  My advice.......follow the bucks.
Oct 15, 2013 5:16PM
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in the mechanic world, which i am part of if we go over cost, we "eat it" so to say. well if boeing goes over cost so should they eat it as well. my opinion ad 3.50 will get u a cup of coffee tho.
Oct 15, 2013 3:56PM
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Title at 3:54PM EST, 10/15/13 says "A report says the company overcharged by as much as $16.6 billion by using more used parts than expected." First line of text of the article says "Boeing denies that it overcharged the U.S. Army by on a $4.4 billion helicopter contract."

 

Nice proofreading William White. Want a job with Boeing? Or perhaps you can become an Army finance auditer. Lol.

Oct 15, 2013 6:02PM
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I worked for Boeing Space Systems for 42 years as their top "efficiency" expert. My responsibility was to ensure we continually implemented improvements leading to cost reductions, especially in those cost plus programs with the US government. Everyone today believes that big business is always ripping off whom ever they can to make a buck. Well maybe I wasted 42 years trying to do the right thing, but I don't think so.
Oct 15, 2013 5:34PM
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In Viet-Nam, we called this........"**** Hooks " .     Ask any crew chief as then, were leakers and seepers  as they are today.  Any crew chief know you have to have on board at all times, one case of Engine Oil and Hydro Fluid.  Nothing has ever change since Viet-Nam !
Oct 15, 2013 5:51PM
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I was in the Navy and worked on jets. I replaced a gauge peep window which is a 3" round piece of Lexan on an old A-4 Skyhawk. This is a 3" disc of normal lexan plexiglass. Nothing special other than it was cut round and had 6 holes drilled in it. To replace one from Naval supply was $700. I made one for less than $10 including materials and labor for a one off. It took me around 10 minutes to make and was installed in another 10 minutes. It flew for 3 years and never, ever, ever had an issue. This is the waste that needs to be looked at. I am a purchasing professional by career now. Cheaper isn't always better, but these government jackasses have no clue how to negotiate a deal and reduce costs because it is not their job to do. They are incented to show up at work...., thats it. They get no bonus for saving dollars, therefore it doesn't happen. Surprise surprise....  
Oct 15, 2013 6:24PM
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Remember that the Government is the biggest customer in the U.S. especially in the Aerospace Industry. Yes, I beleive that there is waste in the aerospace industry; however, this is one industry where the U.S. manufacturing jobs are. Unfortunately many of the Aerospace jobs have been slowly transitioning to low cost countries... specifically Mexico. With the push to drive down costs, you will see more jobs move to Mexico.. And now that the Government is changing classification for military components under Obama, you will see additional companies attempting to transition Military Aerospace jobs to Low cost countries. I wonder how much longer the U.S. people will sit around watching our country slowly degrade.
Oct 15, 2013 6:24PM
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Morality: if everyone was doing his job honestly without pushing it to abuses, then America would be rich with no need to tax the people to death and borrowing from China.
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