Pentagon audit reveals eye-watering amount Boeing overcharged the Air Force for spare parts
The Defense Department audit revealed inflated prices including a 8000% markup for soap dispensers.
Boeing overcharged the Air Force nearly $1 million for spare parts on C-17 cargo planes, including an 8,000% markup for simple lavatory soap dispensers, according to the Pentagon’s inspector general.
The Defense Department’s auditor reviewed prices paid for 46 spare parts on the C-17 from 2018 to 2022 and found that 12 were overpriced and nine seemed reasonably priced. It couldn’t determine the fairness of prices on the other 25 items.
The Office of the Inspector General said it reviewed the soap dispenser prices after getting a hotline tip.
Boeing disputed the findings.
“We are reviewing the report, which appears to be based on an inapt comparison of the prices paid for parts that meet aircraft and contract specifications and designs versus basic commercial items that would not be qualified or approved for use on the C-17,” Boeing said in a statement. “We will continue to work with the OIG and the U.S. Air Force to provide a detailed written response to the report in the coming days.”
The C-17 Globemaster is one of the military’s largest cargo aircraft. It can carry multiple military vehicles, large pallets of humanitarian supplies or, in extreme circumstances, hundreds of people. The Air Force flew C-17s nonstop for two weeks during the hectic August 2021 withdrawal from Afghanistan, evacuating more than 120,000 civilians fleeing the Taliban.
Since 2011, the U.S. government has awarded Boeing more than $30 billion in contracts to purchase needed spare parts for the C-17 and be reimbursed by the Air Force.
Boeing is still trying to recover from financial and reputational damage caused by two deadly crashes in 2018 and 2019 of its bestselling airline jet, the 737 Max.
This has been a particularly volatile year for the aerospace giant. It came under renewed scrutiny and federal investigations after a door plug flew off a 737 Max during an Alaska Airlines flight in January. Federal regulators limited Boeing production of the plane.
In July, Boeing agreed to plead guilty to a felony count of conspiracy to defraud the government for misleading regulators who approved pilot training rules for the Max. That plea deal is pending before a federal judge in Texas.
Boeing is on its third chief executive in five years, having hired an outsider who joined the company in August. Last week, Boeing reported a third-quarter loss of more than $6 billion because of charges for several commercial, defense and space programs.
A strike by 33,000 union machinists is now seven weeks old and has crippled production of 737s, 777s and 767 freighters, cutting off much-need cash. New CEO Kelly Ortberg has announced roughly 17,000 layoffs, and the company will issue new stock to raise up to $19 billion to shore up its debt-laden balance sheet.