Posted on Thu, Nov. 10, 2005


Lawmakers condemn buying program


Washington Bureau

WASHINGTON — Congressmen on Wednesday blasted an “incompetent” and “predatory” Pentagon buying program that paid $20 for ice cube trays and $23,000 for a tiny refrigerator — overcharges exposed in an investigation by The State newspaper.

One such refrigerator, wheeled in front of the House Armed Services Committee, prompted U.S. Rep. Joe Wilson, R-S.C., to remark: “That looks like it cost $99.99 at Lowe’s.”

The refrigerator is specialized for military aircraft, but it still should not have cost what the Pentagon paid, said Defense Department officials.

They acknowledged problems with the prime vendor program, under which the purchase was made, but said it has saved taxpayer money overall.

But committee members had harsh words for those responsible for the program and demanded that they return in the next few weeks for a second hearing.

Chairman Duncan Hunter, R-Calif., said he also wants explanations from the companies that charged large markups to the Pentagon and the government purchasing agents who approved them, showing what he called “absolute incompetence.”

He also wanted the name of every person in the chain of people who approved the overpriced refrigerator.

“This is a real slap in the face to the guy making $13,000 a year who is engaged in a firefight in Ramadi,” Hunter told Pentagon purchasing chiefs. “A fairly large amount of incompetence is embedded into the system.”

Last month, The State published the results of its investigation of the prime vendor program, under which the Pentagon chooses a few vendors and encourages procurement officers to use those companies when they need to purchase everything from apples to zip drives.

The State’s investigation focused on the Pentagon’s four main food-service prime vendors, which supply kitchen equipment to the military. It examined 122 items and found that on average, the Pentagon paid 20 percent more than it would have paid had it purchased from nonprime vendors.

Columbia businessman Charles Jones, who supplies food-service equipment to the government and other institutions, estimates his company has lost about $10 million in business since the prime vendor food-service program was established in the mid-1990s.

He said taxpayers have lost many times that amount because of reduced competition.

Pentagon procurement officials said their analysis of the program showed it to be a military asset and a good deal for taxpayers.

“Our experience with the prime vendor program has been an overall success,” said Kenneth J. Kreig, undersecretary of defense for acquisition, technology and logistics.

Kreig cited reduced inventories and 24- to 48-hour delivery times. The pharmaceutical prime vendor program alone has saved $177 million in reduced wholesale inventory, he said.

Earlier this year, he said, the Pentagon itself instituted more checks on the prime vendor program, including quarterly and annual audits.

As for pricing, the director of the Defense Logistics Agency, Vice Adm. Keith W. Lippert, who oversees the program, said his staff reviewed the 122 items The State examined and concluded “the vast majority of these items were priced correctly.”

He called the overcharges cited by The State “anomalies.”

“These seem to be more than anomalies,” said U.S. Rep. John Spratt, D-S.C., the second-highest ranking Democrat on the Armed Services Committee.

Hunter pressed Lippert on the pricing issue, arguing that prime vendors didn’t seem to have any incentive, once they won contracts, to push their suppliers for better prices.

“It’s something we should take a look at, sir,” Lippert said. “Your point’s well taken.”

Jones, in Washington to attend the hearing, brought with him one of the $23,000 refrigerators that dominated much of the committee’s two-hour discussion.

His company, Commercial Marketing Corp., had purchased it and three others like it at auction this year for $220.

The Pentagon also spent $32,642.50 apiece for nine small refrigerators of a different type, which the manufacturer said it sold for $17,267 each.

However, Lankford-SYSCO, the Maryland-based prime vendor that sold the refrigerators to the Pentagon, said it paid the manufacturer $29,475 for each.

Lankford-SYSCO also is the company that sold the Pentagon the $20 and $15 ice cube trays. In a statement Wednesday, company officials said the small size of the ice cube tray orders — no more than four in each order — added to their high cost.

The company said it paid $12.50 apiece for the trays from the manufacturer.

It cost the company $8 apiece to ship the trays to the Pentagon’s supply shop in Pennsylvania from another part of the state, according to the Pentagon.

Jones said Lippert doesn’t seem to understand how the prime vendor program drives up prices. After the hearing, he wrote to the vice admiral and volunteered to give him an outsider’s perspective on the program.

“All he’s heard is what his staff tells him.”

Reach Markoe at (202) 383-6023 or lmarkoe@krwashington.com.





© 2005 The State and wire service sources. All Rights Reserved.
http://www.thestate.com