Cost Bombshells

Exploding spare-part prices

At a time when President Reagan is fighting with Congress over his record military budget, whistle blowers in the Pentagon are continuing to sound alarms about the wasteful way past funds have been spent. Last fall a leaked report, prepared by Air Force auditors at Oklahoma's Tinker Air Force Base, showed astounding increases in the price of aircraft engine parts made by Pratt & Whitney: a turbine air seal for an F-111 fighter-bomber, for example, soared from $16 to $3,033.82 in one year. These findings touched off a broader study by the Pentagon's inspector general's office. Last week a leak of the resulting draft concluded that Air Force and Navy purchasing practices encourage exorbitant price increases on aircraft engine spares.

The inspector general examined price increases from 1980 through 1982 for nearly 15,000 aircraft engine parts and discovered about 65% of the prices had risen by more than 50%; 4,000 items had ballooned by more than 500% and some by more than 1,000%. A gear-and-pinion assembly supplied by Bendix Corp. jumped from $31.59 to $546, a rise of 1,628%. A spare part from Britain's Rolls-Royce was marked up from $3.70 to $54.75, an increase of 1,380%. Inflation over this period was 28.9%.

The report blames the price hikes not only on the suppliers but on Pentagon purchasing agents for failing to insist on greater competition among parts manufacturers, and for not reforming contracting procedures to prevent absurd markups. In practice, Pentagon agents tend to prefer "sole source" contracts with a major manufacturer, who will acquire the parts from subcontractors and take a profit as middleman. When bids on parts are sought, the Pentagon's buyers often deem the competition "adequate" even if the only "bidders" are the prime contractor and one of its subcontractors, whose business often depends upon remaining on good terms with the larger company. Furthermore, the report contends, Pentagon buyers are reluctant to permit new sources of parts from breaking into the circle of approved suppliers.

Such practices have been condoned, the Pentagon report contends, in part because purchasing agents are judged by their superiors mainly on the speed and quantity of the purchases they make. "Cost is not a major consideration," concluded the inspectors.

A similar admission came last week from John Melchner, director of the Pentagon's Defense Audit Service, to a House subcommittee. He testified that Navy purchasing officers "are pushed to get parts as soon as possible," even if it means bypassing the Pentagon's inventory. For instance, the Navy paid the Sperry Corp. $110 for each diode used in an F/A-18 fighter-bomber flight simulator, even though the diodes were available from the Pentagon's own spare-parts stockpile at 4-c- each. The apparent reason for this expensive shortcut: unwillingness to order through the cumbersome military bureaucracy. Declared Democratic Congressman Nicholas Mavroules of Massachusetts: "This is an abominable situation."

Thanks to yet another whistle blower, it is now known that even the cost of the one-inch-square plastic caps that the Air Force fits on the legs of stools used by navigators in B-52 bombers and other aircraft has flown as high as the planes. This became public knowledge when a maintenance crew chief at Tinker Air Force Base got angry because one cap cost more than his monthly base pay. Each cap should cost about 25-c-, according to an estimate by Air Force analysts. The price the Pentagon was paying Boeing: $1,118.26. After switching suppliers, the Air Force now pays $4 for each cap. This file is automatically generated by a robot program, so viewer discretion is required.