Prime vendor program fleeces Pentagon

The $600 hammer might have been an urban legend, but the $1,000 toaster and the $20 ice cube tray are quite real.

An investigation by Knight-Ridder Newspapers, based on a tip by a whistleblower who has since retired from military service, found that the Pentagon is dramatically overpaying for items purchased through the prime vendor program.

Lt. Col. Paul Fellencer (USAR, Ret.) compiled a spreadsheet with 135 items the military was grossly overpaying for under the program and turned it in to the Pentagon’s fraud hotline. And of course, nothing happened.

A Knight Ridder investigation of the program found that, for 102 of 122 pieces of food equipment, the Pentagon had paid higher prices to prime vendors than the government did to contractors outside the system. For example, the Pentagon paid $20 apiece for ice cube trays that retail for less than a dollar.

Last year, the Pentagon’s waste-and-fraud hotline received four tips complaining about the prime vendor program. One was from Fellencer, who documented Defense Department purchases in a spreadsheet complete with stock numbers and purchase orders. It showed that the Pentagon had spent 39 percent more using prime vendors, compared with buying the items through the civilian General Services Administration. The data were provided to officials at the hotline.

Pentagon investigators never called Fellencer. They spent a total of eight hours investigating his tip, talked to the officials responsible for the program and dismissed the tip as “unsubstantiated,” the documents obtained by Knight Ridder show. — Knight Ridder Newspapers

This is just completely ridiculous.

The root of the problem is as old as the Republic: Federal accounting has always been primarily concerned with making sure money was spent as Congress directed – not with making sure it was spent wisely. Historically, explained the Pentagon’s deputy chief financial officer, Nelson Toye, DoD’s bookkeeping systems were designed to “be able to satisfy the Congress that we were good stewards of the funds entrusted to us: We didn’t overspend, we did spend it on what you asked us to, we didn’t spend money to buy things you told us we couldn’t buy.” — National Journal

That’s how it works. Got something to sell? Jack up the price to 10 or 20 times retail and get in on the prime vendor program, and you too can fleece the Pentagon — er, excuse me, your fellow Americans, We the People who are duped every April 15 into paying for all this.

One thought on “Prime vendor program fleeces Pentagon

  • June 26, 2007 at 7:10 am
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    I am familiar with how things work on these programs. There are many of these programs, what was reported on was one of probably 20. Since then the gov’t has cancelled that specific contract and every other contract holder (which had no involvement in the this specific complaint) has had to submit to an over the top audit process that will continue for the life of the contract.

    The government will now spend millions annually to audit every purchase and the contractors will spend millions annually collecting data to show competition on every ice cube tray for example. You are talking about hundreds of thousands of line items.

    This is what this results in, micro management of every gov’t purchase because one contractor was not doing what they were supposed to. That doesn’t make things cheaper and that’s the tragedy.

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