Boeing Denies $16.6m Overcharging in US Army Helicopter Contract

US aerospace firm Boeing has denied a Pentagon report that the company overestimated the use of new parts and overcharged the US army on a multi-billion dollar helicopter contract.

Earlier, a report by Pentagon's inspector general accused the company of overestimating the number of new parts it would use to build the 181 CH-47F Chinook helicopters under the $4.4bn (£2.8bn, €3.2bn) contract spanning five years.

Later, Boeing installed mostly used parts in the helicopters, resulting in overcharges between $7.4m and $16.6m.

The inspector general said the US army failed to oversee the contract and double-check Boeing's estimates of used and new parts in the deal.

"The bottom-line is that using reworked parts rather than new parts increased Boeing's profit," Bridget Serchak, a spokeswoman for the inspector general, told Bloomberg.

The Army paid Boeing for parts "that were proposed but never installed", and "is paying for additional parts that they do not need and may not use."

Responding to the allegations, Boeing spokesman Damien Mills denied any wrong-doing from the company.

"Boeing recognises the important work that the Department of Defence Inspector General performs. However, with regard to the audit of the CH-47F multiyear contract, we disagree with the IG's conclusions," Mills said in an e-mailed statement to IB Times UK.

"We believe we were fully compliant with all government contract policies and guidance applicable to the first CH-47F multiyear contract, and we provided evidence of that to the IG throughout this audit."

Under the contract, the company has to build 109 new helicopters and remanufacture 72, mostly using parts from helicopters returning from war assignments. In June, the army awarded Boeing another contract worth $4bn for 177 more CH-47 helicopters.

A Pentagon audit into the first contract prompted the army to revisit the assumptions of the second contract and helped it save about $36.8m, according to the report.

The Army said in a response to the report that it had negotiated $15m savings with Boeing under the second five-year contract due to reduced use of new parts.

Mills added that the company had requested a copy of the full report through the Freedom of Information Act, but the request remained unfulfilled. Therefore, it was reviewing the document published on Bloomberg.

"Until we complete a thorough review of the full report no decision will be made regarding any actions that may be taken in response to the report," Mills added.

Overcharging by Boeing

The aircraft maker was accused several times of overstating amounts sought under various government contracts.

Boeing sought an overstated $1.9bn from the military for a formula designed to compensate contractors for rising costs, according to a 2008 audit. The amount was cut down to $272m after negotiations.

A separate audit in May 2011 found the company overcharging about $13m on $23m worth of orders from a Texas army depot. It also found that the company priced a plastic motor gear used on Chinook helicopters at $644.75, while its actual price was as low as $12.51.

Furthermore, the inspector general accused Boeing in June of charging the Defense Logistics Agency $13.7m excess for spare parts.

The allegations come as Boeing's commercial aircraft division is struggling with fresh flaws with its Dreamliner 787 model and a multi-billion contract loss in Japan.