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Audit Says Robins Contractors Overpaid by Millions

Robins Air Force Base. (U. S. Air Force file photo by Sue Sapp)
Robins Air Force Base. (U. S. Air Force file photo by Sue Sapp)

WARNER ROBINS -- A Department of Defense audit found that three companies contracted to do work at Robins Air Force Base were overpaid by millions of dollars.

The report by the Department of Defense Inspector General, published earlier this month on its website, determined the Air Force paid up to $24.9 million more than it should have on the three contracts.

The contracts were sole-source, meaning there was no bidding. That is permitted when only one company is considered qualified to do the work, such as the builder of an aircraft being maintained.

The audit report concluded that Robins contract negotiators did not adequately evaluate the nature of the work. A better analysis, the report said, could have resulted in a different type of contract that would have cost less.

The contracts went to Boeing, Honeywell and Northrop Grumman, the report said.

The contracts in the audit report are public-private partnerships, which means the companies perform the work at the base using base facilities and employees. In essence, the Warner Robins Air Logistics Complex, which handles the aircraft maintenance at Robins, is acting as a subcontractor for the companies. The contractor provides oversight, expertise and engineering services for the work.

The Air Force pays the companies to do certain work, then the companies pay the complex for the work of the complex's employees. The complex charges an hourly labor rate, including a fee for overhead, or "non-repair" costs, that include facilities depreciation, military labor and office supplies.

The report said contractors were reaping a profit from the labor and overhead fees, which the inspector general report said should have been reduced or eliminated.

The base has 33 public-private partnership contracts, but since just three were evaluated in the audit, the total amount that may have been overpaid is uncertain.

Base spokesman Roland Leach said The Telegraph's request for comment on the report have been sent to the Air Force Sustainment Center, which oversees the Warner Robins Air Logistics Complex. He said a response likely wouldn't come until Monday.

At the heart of the findings is the amount of responsibility that the contractors assume in the work being done. If the base is responsible for the work getting done right and on time, then that work is considered low-risk for the contractor.

In those cases, the contractors should not get certain profits and fees that they would when assuming responsibility for the work, according to the report.

The report concludes that the three contracts put the risk higher than it should have been. As a result, the report said, the contractors were overpaid by $9.6 million combined, with $7.6 million of that attributed to the Boeing contract.

But even more significantly, the Air Force paid $24.9 million for fees related to non-repair costs on the three contracts. Those fees could have been eliminated, the report said. The fees amounted to approximately 70 percent to 80 percent of the contractors' profits.

The $9.6 million and $24.9 million figures are the potential savings from two different choices that could have been made, the report said. That means the two figures can't be added together for an overall potential savings.

"We believe that the contractor should earn a reasonable profit or fee on the depot's work if they are responsible for a depot's performance," the report said. "However, contracting officials missed an opportunity to reduce or eliminate profit and fees for work performed by the WR-ALC depot."

The total amount of the three contracts is $590 million through 2019. The Boeing contract, at $552.5 million, is the largest by far and is related to work done on the C-17 at Robins.

The inspector general's report included a response from the office of the acting assistant secretary of the Air Force that disagreed with the findings. It stated that the report "infers that depot work is always low risk, while the level of risk is assessed case-by-case and addressed in the price negotiation memorandum when normal values are not used."

The inspector general responded that it agreed that not all depot work is low risk, but that the three contracts it reviewed should have been rated low risk.

The report recommends:

Contract negotiators at Robins should document contractor profit or fee considerations when depot employees perform the work, including any rational for not evaluating the work as low risk.

Base negotiators should determine whether the contractor should be paid profit and fees on the overhead costs included in the depot hourly rate.

A cost-benefit analysis should be done to evaluate the benefits of the partnership type, including the impact on profit and fees.

The Department of Defense should issue guidance on the profit and fees earned on nonrepair costs when the depot functions as a subcontractor.

The report said Air Force officials agreed to put the recommendations in place.

The Project on Government Oversight, a nonpartisan government watchdog group, published a report on the findings on its website last week.

Neil Gordon, an investigator for the group, said such findings of waste in federal contracts are not unusual.

"It's pretty much par for the course," he said. "Unfortunately, it's all too common. I can't say this is the worst case we've seen but certainly the amount of money involved is pretty significant."

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