‘Deja Voodoo Pricing’: Pentagon Buys $76 Screws

The Pentagon’s watchdog said Wednesday that a new purchasing system designed to save money produced millions of dollars in overpriced spare parts, including a $76 screw and a $714 electrical bell.

Inspector General Eleanor Hill, whose job it is to police for waste and fraud at the Defense Department, said two audits found that the problem wasn’t caused by contractor gouging seen in past abuses, but by Pentagon errors.

She said that while employing a new purchasing system similar to that used in the commercial sector, Pentagon buyers failed to drive a hard bargain, neglected to find parts that were available from competitors for lower prices and bought large quantities of parts without getting bulk discounts.

The Pentagon’s acquisition chief, Jacques S. Gansler, told senators the audit found “isolated instances” in a new system that has saved taxpayers money.

Hill said neither contractor involved--Sundstrand Corp. of Rockford, Ill., and Seattle-based Boeing Co.--violated any laws. Nonetheless, Hill cited several examples of overpriced parts:

* $714 each for 108 electrical bells previously priced at $47.

* $75.60 for each of 187 set screws previously priced at 57 cents.

* $403 each for 246 actuator sleeves priced earlier at $24.72.

Boeing said it charged the Pentagon the same prices advertised to commercial airlines. Spokesman Dick Dalton said the lower prices cited by the audits date back 15 to 20 years and were based on a different supply system in which the Pentagon bought large quantities at cheaper prices and then bore the storage costs.

“These are parts that frequently require precision machining, aerospace tolerances and materials that are specifically for the aerospace industry,” Dalton said.

Critics of defense spending practices weren’t buying it.

“This is deja voodoo pricing by defense contractors,” said Sen. Charles E. Grassley (R-Iowa).

In one Sundstrand contract, the Pentagon paid $6.1 million for commercial parts that should have cost just $1.6 million, a 280% markup, the audit said.