Boeing allegedly ripped off the government by overcharging almost 8,000% for soap dispensers
Boeing (BA) is not in trouble for money laundering, but the U.S. military is accusing the planemaker of some fiscal funny business involving cleaning supplies. An audit released by the Department of Defense on Tuesday found that the company was overcharging the government for spare soap dispensers on C-17 cargo planes.
“The Air Force did not always pay reasonable prices for C‑17 spare parts, in accordance with the Federal Acquisition Regulation, such as the lavatory soap dispenser, which was a 7,943‑percent markup or more than 80 times the commercially available cost,” the report says.
Auditors were looking into the soap dispensers as part of a C-17 maintenance contract that was valued at $35.6 billion between its original and add-on terms beginning in 2011 and extended through 2031. Under the contract, the Department of Defense would reimburse Boeing for spare parts.
The audit specifically looked at reimbursement rates for 46 different spare parts. It found that:
The government paid a “fair and reasonable” $20 million for 9 of them
The government couldn’t figure out whether it paid a “fair and reasonable” $22 million for 25 of them
The government paid a not-fair-and-reasonable $4.3 million for 9 of them
“Fair and reasonable,” in this case was a 25% markup. Regarding the soap dispenser specifically, the government didn’t say how many of them it bought but did say that it overpaid $150,000 for them compared to market prices.
Boeing says it is still reviewing the report.
“We are reviewing the report, which appears to be based on an inapt comparison of the prices paid for parts that meet aircraft and contract specifications and designs versus basic commercial items that would not be qualified or approved for use on the C-17,” the company said in a statement provided to Quartz. “We will continue to work with the OIG and the U.S. Air Force to provide a detailed written response to the report in the coming days.”
This is not the first time this year that soap has come up in a Boeing audit. When the Federal Aviation Administration took a look at the company’s production processes following a door plug blowout on a 737 Max 9 commercial airliner, it found that contractors were using dish detergent to help lubricate parts during fittings.