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U.S. Army Paid Too Much Upgrading Russian Copters: Audit

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Mi-17 Helicopter in Afghanistan
The Russian helicopters are considered simpler to operate and maintain than their more sophisticated American competitors, and some Afghan and Iraqi pilots are already trained and experienced in flying them. Photographer: Michel du Cille/The Washington Post via Getty Images

Aug. 12 (Bloomberg) -- U.S. Army contracting officers overpaid an American company upgrading Russian-made Mi-17 helicopters as contract costs increased almost 70 percent, according to an audit by the Pentagon inspector general.

The Army Contracting Command has responded that it will seek to recoup $128,990 of $151,543 in what the audit called “excess fees” paid since 2010 to Columbia, Maryland-based Science and Engineering Services Inc. The remaining $22,553 in fees was justified, according to the audit by the inspector general dated July 28.

While the amounts wouldn’t put a dent in the Pentagon’s $496 billion annual base budget, the inspector general’s report is the latest of three to question the contracting practices of an Army-run office set up in 2010 to manage the purchase and maintenance of foreign-made helicopters such as the medium-lift Mi-17 transport helicopters sold to U.S. allies Afghanistan, Pakistan and Iraq.

The two earlier audits also found lax oversight, including a failure to “document price reasonableness” of Mi-17 upgrades.

The Russian helicopters are considered simpler to operate and maintain than their more sophisticated American competitors, and some Afghan and Iraqi pilots are already trained and experienced in flying them.

The audits didn’t touch on a politically charged debate about whether the U.S. should continue to buy new Mi-17s from Rosoboronexport, Russia’s state-run arms trader, to be provided directly to Afghanistan. That program has drawn congressional criticism since 2012, first over the company’s role in selling armed helicopters to Syrian president Bashar al-Assad and then because of deteriorating relations with Russia over Ukraine.

‘Limited Assurance’

Instead, the audits examined contracts to overhaul and upgrade small numbers of Mi-17s bought from other sources to train U.S. and Afghan maintenance personnel.

The newest audit on upgrading Mi-17s said the Army “had limited assurance that it received fair and reasonable prices” for cockpit modifications under the 2010 contract, now valued at $15.2 million, up from $9 million. The company had received $14.1 million as of February, according to the audit labeled “For Official Use Only” that was obtained by Bloomberg News.

Not including contract overhead, the cost for the five cockpits modified rose to about $2.8 million per aircraft from $1.5 million, according to the audit. The modifications upgrade Russian helicopters with U.S.-style radios, gauges, clocks, relocated instruments and added lighting.

Company’s Response

The chief executive officer of closely held Science and Engineering Services, Edward J. Sinclair, a retired Army brigadier general who commanded the service’s Aviation Warfighting Center until 2006, didn’t return a call for comment.

Stephen J. O’Connor, the company’s Washington-based attorney, said in an e-mailed statement that the “subject matter of your article is currently under investigation by federal authorities and SES will make no comment regarding the subject matter pending such investigation.” O’Connor, a founding partner of Tobin, O’Connor and Ewing, didn’t divulge the nature of the investigation.

“The Army is currently conducting a thorough review of the findings and recommendations,” Pentagon spokeswoman Maureen Schumann said in an e-mailed statement.

“Upon completion of this review, the Army will take appropriate action to address the need for any corrective measures, to include the potential recoupment of funds,” she said. “No further Mi-17 cockpit modifications are planned under this specific contract.”

To contact the reporter on this story: Tony Capaccio in Washington at acapaccio@bloomberg.net

To contact the editors responsible for this story: John Walcott at jwalcott9@bloomberg.net Larry Liebert

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