WASHINGTON (Reuters) - Boeing (NYSE:BA) overcharged the U.S. Air Force for spare parts for C-17 transport planes, including marking up the price on soap dispensers by 7,943%, according to a report by a Pentagon watchdog.
The Department of Defense Office of Inspector General said on Tuesday the Air Force overpaid nearly $1 million for a dozen spare parts, including $149,072 for an undisclosed number of lavatory soap dispensers from the U.S. planemaker and defense contractor.
“The Air Force needs to establish and implement more effective internal controls to help prevent overpaying for spare parts for the remainder of this contract, which continues through 2031,” said Inspector General Robert Storch. "Significant overpayments for spare parts may reduce the number of spare parts that Boeing can purchase on the contract, potentially reducing C-17 readiness worldwide."
Boeing said on Tuesday it was reviewing the report, adding that it "appears to be based on an inapt comparison of the prices paid for parts that meet military specifications and designs versus basic commercial items that would not be qualified or approved for use on the C-17."
Boeing said it plans to provide a detailed written response to the report in the coming days and said the spare parts were substantially modified to meet military specifications.
The Pentagon's budget is huge, breaking $900 billion last year, making overcharges by defense contractors a regular headache for internal watchdogs, but one that is difficult to detect.
The Inspector General also noted it could not determine if the Air Force paid a fair price on $22 million of spare parts because the service did not keep a database of historical prices, obtain supplier quotes or identify commercially similar parts.