US Dept of Defense (DoD) Inspector General audit has found the US Air Force paying too much for sustainment of the Pratt & Whitney F1...
The report, first in a series that address the money wastage, focuses on evaluating whether the USAF’s commerciality determination for F117 engine fleet management program (sustainment) services provided by Pratt and Whitney was supported.
A commerciality determination is critical because it affects the type of cost or pricing information needed to support contract negotiations and develop the Government’s negotiation position.
USAF contracting officers did not support their determinations that the sustainment services for the F117 engine obtained through the Globemaster Integrated Sustainment Program (GISP) contract were, in fact, commercial services. The USAF acquired the sustainment services as sole-source, commercial services. However, the AF contracting officers did not assess whether a commercial market existed for those services. This occurred because the contracting officers accepted Boeing’s and Pratt and Whitney’s commerciality claims and USAF engineers’ opinions on commerciality without evaluating the research and rationale used to conclude that the sustainment services met the Federal Acquisition Regulation commercial item definition.
In commercial, sole-source situations, suppliers may exploit the lack of competitive markets and demand unreasonable prices. In this case, P&W increased its negotiation leverage by refusing to provide critical information that the USAF needed to evaluate the prices for the F117 engine sustainment services labeled as commercial.
Without that information, the AF does not know whether the $1.54 billion already spent on the GISP contract through October 2014 for F117 engine sustainment services or if the estimated billions of dollars it intends to spend over the next 7 years is a fair and reasonable price.
The report recommend that the Assistant Secretary of the Air Force (Acquisition) require the contracting officer to obtain the necessary documentation to support the commerciality of the F117 engine sustainment service to be acquired in the FY 2015 through FY 2017 GISP contract option and any future contracts.
Further DoD IG also recommended that the Director, Defense Pricing to establish policy for oversight of future USAF contracts or subcontracts with P&W and establish policy to instruct contracting officials as to what circumstances a contractor’s modified invoices would be acceptable as support for determining commerciality or fair and reasonable prices, and Director should not allow the USAF to contract with P&W for F117 engine sustainment services unless P&W provides the necessary information to support commerciality or fair and reasonable price determinations.
It also recommended the Director, Contracting Directorate, Air Force Life Cycle Management Center, perform a quality review of Air Force Life Cycle Management Center contracting officials’ compliance with the specified regulations for commerciality determinations and consider corrective actions as appropriate.
The C-17 Globemaster III strategic heavy airlifter is powered by four F117 engines, each rated at 40,440 pounds of thrust. The F117-PW-100 first entered service in 1993 and is a derivative of Pratt & Whitney's PW2040 commercial engine.
