Pentagon's misers now take closer look at spare parts purchases
Washington — Yes, there have been $37 screws and $435 claw hammers. And there may even be some plastic stool-leg caps with $1,118 price tags still lying around in parts bins here and there.
But the Pentagon is doing quite a bit these days to crack down on the exorbitant sums it's been paying for spare parts. And it's beginning to show.
The Air Force has sharply increased the number of firms blacklisted from government contracts because of shady dealings. The Navy is steadily raising the percentage of contracts it lets competitively. Senior defense officials are making a big deal about the subject in speeches around the country, and are awarding cash bonuses to whistleblowers who ferret out abuses. And Defense Secretary Caspar W.'.einberger has issued stern new regulacions on spare parts procedures and given the services 90 days to snap to.
Defense Department watchdogs this week announced that a manufacturer of military aircraft compressors had pleaded guilty to 25 felony counts of fraud against the federal government in illegally jacking up prices and paid $3 million in fines, damages, and penalties. As with other recent cases, officials like to note that it was internal Pentagon work that broke the case.
''It should be noted that most of the examples identified by the media have been uncovered by defense personnel and reported within the system,'' Deputy Undersecretary of Defense Mary Ann Gilleece told a Senate subcommittee probing the issue.
But officials also admit that while other criminal probes are under way, this only begins to scratch the surface in a $13 billion-a-year business involving millions of parts. And more than outright wrongdoing, they say, the problem is a wasteful system that has grown without much control. Making the necessary institutional changes to correct the problem will be much more difficult than conducting the splashy crackdowns.
The Navy, for example, has been obtaining only about 8 percent of its aviation spare parts competitively.
''We agree that our current competitive accomplishment . . . is not adequate, '' Thomas H. Barton, executive director of the Navy Aviation Supply Office, told the House Armed Services investigation subcommittee recently. ''We are setting our sights on at least doubling our competitive procurements in fiscal year 1984 to $400 million.''
Traditionally, when the military services needed spares for its equipment, they simply went to the major contractor who, in turn, usually ordered the part from another manufacturer and boosted the price for overhead, handling, shipping , and as much profit as allowed. When added to poor planning for needed spare parts and the costs of tooling up for making just a few items, this resulted in the horror stories revealed recently.
The Navy now obtains spare parts for its F/A-18 jet from 23 vendors as well as the prime contractor.
''This effort, in itself, results in substantial savings to the Navy, since it avoids the prime contractor's mark-up and profit,'' Mr. Barton said. This policy of ''breakout'' - going directly to the manufacturer rather than a middleman - is being pushed throughout the defense establishment.
''This will replace, in part, guidance issued over a decade ago which failed due to lack of attention and looseness in procedures,'' Deputy Undersecretary Gilleece told the Senate defense appropriations subcommittee in August.
Since then, Mr. Weinberger has issued a 10-point program for cleaning up the embarrassing spare-parts situation and set a 90-day deadline for changes to be made. More contracting personnel are to be assigned to spare parts, with orders to challenge unusually high costs and, if necessary, demand refunds. There will be incentives for increased competition, rewards for those who find cost savings , and discipline for those who are lax.
Congressional critics are glad to hear this. But they wonder what took an administration pledged to fight ''waste, fraud, and abuse'' so long, and they intend to continue keeping an eye on spare-parts prices. The Senate Armed Services Committee begins hearings on the subject next week.