Lawmakers want to know how a new Pentagon purchasing system designed to save money could pay $76 for an aircraft screw.
Two audits by the Pentagon inspector general obtained by The Associated Press show how an effort to institute commercial buying practices within the Pentagon's multibillion-dollar purchasing system produced contracts with sharply higher spare-parts prices than the Pentagon paid under the old system.The audits examined spare-parts contracts with Seattle-based Boeing Co., and Sundstrand Corp. of Rockford, Ill. While it found no illegal activity, it concluded that contracts from 1994 through 1996 yielded parts prices many times what they had been, including a $76 screw previously priced at 57 cents and a $714 electrical bell that had sold for $47.
"There's nothing illegal going on here, but there's something wrong going on here," said Sen. Rick Santorum, R-Pa., who chaired a Senate Armed Services acquisition subcommittee hearing on the audits Wednesday.
Inspector General Eleanor Hill attributed the problems not to contractor greed but to poor performance by the Defense Logistics Agency, which handles much of the military's spare-parts purchasing. Hill said Pentagon buyers failed to use their considerable leverage to demand lower prices, approved sole-source contracts when competing suppliers were available and bought large quantities of parts without getting bulk discounts.
"When you're dealing with a sole-source contractor, you're not dealing with the commercial market; you're dealing with a negotiating situation," Hill said.
Hill credited the Pentagon with making "considerable progress" in streamlining its purchasing system, buying items "off the shelf" instead of from specialized suppliers, using buying cards for small purchases and compressing development schedules of some weapons.