Boeing rebuts critical Pentagon report on helicopter parts

Mon Oct 14, 2013 6:07pm EDT
 
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WASHINGTON (Reuters) - Boeing Co (BA.N: Quote) on Monday rebutted a Pentagon's inspector general report that said the company overcharged the U.S. Army by up to $16.6 million on a $4.4 billion helicopter contract and said it was still waiting to receive the final report under a Freedom of Information Act request.

The report said Boeing overestimated how many new parts it would need to build the 181 CH-47F Chinook helicopters under the five-year contract, and then installed largely used parts, resulting in overcharges of $7.4 million to $16.6 million.

The inspector general's report faulted the Army for not overseeing the contract properly, and noted it lacked a process to doublecheck Boeing's estimates and track the number of used or new parts that were actually installed.

"Boeing recognizes the important work that the Department of Defense inspector general performs. However, with regard to the audit of the CH-47F multiyear contract, we disagree with the IG's conclusions," said Boeing spokesman Damien Mills.

Mills said Boeing believed it had complied with government contracting policies under the first firm, fixed-price, five-year contract for the CH-47F helicopters, which called for Boeing to build 109 new helicopters and 72 remanufactured ones, using parts from helicopters returning from use in overseas wars, where possible.

Boeing adjusted its proposal for a second five-year purchase of up to 215 additional CH-47F helicopters to reflect the greater than expected use of salvaged parts on the first contract, he said. The Army awarded Boeing a $4 billion contract for 177 more CH-47 helicopters on June 10.

The report said its audit of the first acquisition agreement prompted Army officials to revisit the assumptions of the second multiyear agreement, and reduce the amount of new parts to be ordered for the helicopters by $36.8 million. It said it had identified potential overcharges of $10.6 million to $19.1 million, the report said.

In its response to the report, the Army said it had negotiated a $15 million savings from Boeing's proposal for the second five-year agreement to reflect lower use of new parts.

Bloomberg first reported the Pentagon's inspector general report on Monday and posted a copy on its website.   Continued...

 
The Boeing logo is seen at their headquarters in Chicago, April 24, 2013. REUTERS/Jim Young