Pratt & Whitney Subpoenaed by Pentagon Inspector Over PricingTony Capaccio
The Pentagon inspector general has subpoenaed United Technologies Corp.’s Pratt & Whitney engine unit, saying the company has repeatedly refused to document more than $1.54 billion in maintenance work on C-17 aircraft engines, according to an unreleased audit.
The subpoena, dated Oct. 27 and not previously disclosed, was issued after Pratt & Whitney resisted requests starting in July on the cost of C-17 engine work compared with services on its comparable commercial engine, according to the Defense Department’s watchdog unit. It said the company provided data that wasn’t sufficient and also repeatedly refused to turn over information sought by the Air Force and other Pentagon officials.
The audit, which found the Air Force “is at high risk of paying too much” for the engine work, is the fourth report by the inspector general’s office since 2010 to raise questions about reasonable pricing, a lack of cooperation or whether prime contractors adequately review subcontractor bids.
It may provide grist for additional congressional review, as the new heads of the House and Senate Armed Services Committees in the Republican-led Congress have pledged closer scrutiny of defense procurement policies.
The report ``raises a number of questions about a multi-billion dollar defense contract that requires additional oversight,'' John McCain of Arizona, chairman of the Senate committee, said Monday through a spokesman.
The Pratt & Whitney unit of Hartford, Connecticut-based United Technologies provides the F117-PW-100 engines that power the C-17 military transport plane built by Chicago-based Boeing Co. Each of the four engines on a C-17, which can carry a 160,000-pound payload or 102 passengers, is rated to produce 40,440 pounds of thrust.
‘Did Not Comply’
The subpoena was issued to Pratt & Whitney to “obtain additional information on its commercial customers and F117 engine sustainment costs,” the inspector general said in the audit dated Dec. 22. Pratt & Whitney “did not comply with the subpoena as of the issuance of this report,” Jacqueline Wicecarver, assistant inspector general for acquisition, wrote in the report marked “For Official Use Only.”
In addition, Air Force contracting officials “repeatedly requested” data to support Pratt & Whitney’s price, and the company “repeatedly refused to provide it.” Senior Pentagon and service officials “were also unsuccessful,” the audit found.
Matthew Bates, a spokesman for Pratt & Whitney, said the company was “devoting substantial effort to gather the information requested.”
“We started providing requested information” in July, and “have been providing additional information in response to the subpoena” even “while we have been in discussions with the IG to clarify the subpoena requests and while we await its response to our questions,” Bates said in an e-mail.
“The F117 is a complex program and is not designed to track data in the way the DoD IG has sought it,” he said. “The data sought is voluminous and not immediately accessible” and “some data requires us to seek third-party agreement prior to release.”
Jerry Drelling, a spokesman for Boeing, which manages the 10-year, $11.75 billion sustainment and logistics support contract for the C-17, said he had no comment. The sustainment program was given an award in 2012 by the Defense Department and the Aerospace Industries Association as an outstanding government-industry partnership.
Of the $4.24 billion spent to date on the C-17 support contract, Pratt & Whitney has received $1.54 billion, according to the report. Boeing and the Air Force are negotiating the next option for 2015-2017.
The service commissioned a review of the contract’s prices as part of negotiations over the contract option, the Air Force said in written comments for the inspector general’s report. Ed Gulick, an Air Force spokesman, said in an e-mail that the review wasn’t yet complete. He also said the service has requested that Boeing submit an updated proposal.
“The Air Force has spent billions of dollars on sustainment services for the F117 engine without obtaining sufficient market, sales or cost data for these services,” Wicecarver, the assistant inspector general, said in a letter submitting the report to the service.
Without the data, the service doesn’t know whether the funds that it already has paid Pratt & Whitney under its subcontract through Boeing or “the estimated $3.76 billion it intends to spend over the next seven years, is a fair and reasonable price,” Wicecarver said.
‘At High Risk’
The Air Force “remains at high risk of paying too much for those services” over the C-17’s remaining 25 years of service, during which it expects to spend billions of dollars, the audit found.
“Pratt & Whitney’s unwillingness to provide requested sales and cost data exploited” its status as the engine’s sole-source provider and may have resulted in the Air Force “paying unreasonable prices,” the audit said.
“It might not be in DoD’s best interest to continue to obtain F117 engine sustainment support from Pratt and Whitney under these circumstances,” according to the report.
The Air Force’s Gulick said the service doesn’t intend to open the contract to competition.
Bridget Serchak, a spokeswoman for the inspector general’s office, said in an e-mail that the agency wouldn’t comment beyond beyond what was disclosed in the report’s summary.