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Delco plant cited in report saying Boeing overbilled

Four times in the last five years, the Pentagon's inspector general has found that Boeing Co., collected excessive or unjustified payments on U.S. defense contracts, including work on Chinook helicopters made in Delaware County.

Tony Britt of Oxford, Pa. exits the cockpit of a Chinook helicopter in the Pre-Flight Test Area at the Boeing Plant, Ridley Park, October 23, 2012. The U.S. Army Inspector General's Office says Boeing overcharged taxpayers by as much as $16 million by using used parts instead of new parts on the CH-47 Chinook helicopters it makes in Ridley, Delaware County. ( DAVID M WARREN / Staff Photographer )
Tony Britt of Oxford, Pa. exits the cockpit of a Chinook helicopter in the Pre-Flight Test Area at the Boeing Plant, Ridley Park, October 23, 2012. The U.S. Army Inspector General's Office says Boeing overcharged taxpayers by as much as $16 million by using used parts instead of new parts on the CH-47 Chinook helicopters it makes in Ridley, Delaware County. ( DAVID M WARREN / Staff Photographer )Read more
    by By Tony Capaccio, Bloomberg News, Inquirer
    Published 

Four times in the last five years, the Pentagon's inspector general has found that Boeing Co., collected excessive or unjustified payments on U.S. defense contracts, including work on Chinook helicopters made in Delaware County.

In the latest of four audits since 2008, the watchdog office said the Chicago-based company charged the Army for new helicopter parts while installing used ones.

"Boeing significantly overstated estimates" of new components needed for CH-47F Chinook helicopters and "primarily installed used parts instead" under a $4.4 billion contract awarded in 2008, according to the report, labeled "For Official Use Only" and obtained by Bloomberg News.

Boeing makes CH-47 helicopters at its plant in Ridley Township. The company received a $4 billion contract from the Army in June.

A Boeing spokesman in Ridley Township, Damien Mills, said the company disagreed with the inspector general's conclusion. "We believe we were fully compliant with all government contract policies and guidance applicable to the first CH-47F multiyear contract, and we provided evidence of that to the I.G. throughout this audit," he said.

The Chinook helicopters were being returned from Afghanistan and upgraded.

While used parts were allowed in some circumstances, the July 16 report found that the company overcharged the Army by as much as $16.6 million by exaggerating how many new ones were required while installing refurbished equipment salvaged from aircraft. The report also faults defense agencies and military services for lax negotiations and contract management.

"The bottom line is that using reworked parts rather than new parts increased Boeing's profit," Bridget Serchak, a spokeswoman for the inspector general, said of the latest findings. The Army paid Boeing for parts "that were proposed but never installed," and "is paying for additional parts that they do not need and may not use," Serchak said in an e-mailed statement.

Boeing is the No. 2 federal contractor after Lockheed Martin Corp., with more than $30 billion of prime government contracts awarded in fiscal 2012, according to a Bloomberg Government ranking.

While Boeing "recognizes the important work that the Department of Defense inspector general performs" it "disagrees with the IG's conclusions," Damien Mills, a company spokesman, said in an e-mailed statement.

"We believe we were fully compliant with all government contract policies and guidance applicable to the first CH-47F multiyear contract, and we provided evidence of that to the I.G. throughout this audit," Mills said.

Henry Kleinknecht, the inspector general's former director for pricing and logistics, who managed the audits of Boeing parts until he retired last year, said the Army lacks the expertise to oversee such programs.