Shipping 2 washers= $1000000
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Shipping 2 washers= $1000000
It couldn't happen here, could it?
Taken from a UK trade magazine
C&D Distributors, a small parts distributor based in Lexington, South Carolina, has been found guilty of fraudulent billing following the discovery of the fact that $20.5 million has been paid by the Pentagon in the past six years, for parts worth less than $70,000.
The fraud came to light in September 2006 when a purchasing agent at the Pentagon noticed a bill from the company of $969,000 for shipping two washers worth 19 cents each.
A review of previous billings from C&D showed that payment of $998,798 had been made earlier in the month for the shipping of two washers to Fort Bliss, Texas. Further investigations revealed payments by the Pentagon of $455,009 to send three machine screws – total cost $3.93 – to a Marines base in Habbaniyah, Iraq and of $293,451 for an 89 cent washer to be sent to Patrick Air Force Base in Cape Canaveral, Florida.
It is reported that CD Distributors – owned by twin sisters, one of whom died last year – exploited a flaw in an automated Defense Department purchasing system. Cynthia Stroot, a Pentagon Defense Criminal Investigative Services agent, is reported as explaining the loophole: "Bills for shipping to combat areas or US bases that are deemed to be ‘priority’ usually are paid automatically. The majority, if not all, of these parts were going to high-priority areas. If the item was designated ‘priority’ and was destined for the military in Iraq, Afghanistan, or certain other locations the bill got paid. There was no oversight."
The bulk of the individual orders from the Pentagon cost less than $100. It is estimated that since 2000 purchases from C&D reached a total cost of $68,000 compared with payments of 20.5 million. "As time went on C&D got more aggressive in the amounts they put in", says Cynthia Stroot. "C&D was a rogue contractor. While other questionable billings have been uncovered, nothing has come close to its figures. A review of paid shipping invoices shows that fraudulent billing is not a widespread problem."
The surviving owner of the company, Charlene Corley, and two other C&D employees pleaded guilty to conspiracy to commit fraud and conspiracy to launder money.
They face a maximum prison sentence of 20 years on each count.
The Pentagon is hoping to recoup its losses by auctioning homes, beach properties, jewellery, and automobiles purchased by the sisters.
The fraud came to light in September 2006 when a purchasing agent at the Pentagon noticed a bill from the company of $969,000 for shipping two washers worth 19 cents each.
A review of previous billings from C&D showed that payment of $998,798 had been made earlier in the month for the shipping of two washers to Fort Bliss, Texas. Further investigations revealed payments by the Pentagon of $455,009 to send three machine screws – total cost $3.93 – to a Marines base in Habbaniyah, Iraq and of $293,451 for an 89 cent washer to be sent to Patrick Air Force Base in Cape Canaveral, Florida.
It is reported that CD Distributors – owned by twin sisters, one of whom died last year – exploited a flaw in an automated Defense Department purchasing system. Cynthia Stroot, a Pentagon Defense Criminal Investigative Services agent, is reported as explaining the loophole: "Bills for shipping to combat areas or US bases that are deemed to be ‘priority’ usually are paid automatically. The majority, if not all, of these parts were going to high-priority areas. If the item was designated ‘priority’ and was destined for the military in Iraq, Afghanistan, or certain other locations the bill got paid. There was no oversight."
The bulk of the individual orders from the Pentagon cost less than $100. It is estimated that since 2000 purchases from C&D reached a total cost of $68,000 compared with payments of 20.5 million. "As time went on C&D got more aggressive in the amounts they put in", says Cynthia Stroot. "C&D was a rogue contractor. While other questionable billings have been uncovered, nothing has come close to its figures. A review of paid shipping invoices shows that fraudulent billing is not a widespread problem."
The surviving owner of the company, Charlene Corley, and two other C&D employees pleaded guilty to conspiracy to commit fraud and conspiracy to launder money.
They face a maximum prison sentence of 20 years on each count.
The Pentagon is hoping to recoup its losses by auctioning homes, beach properties, jewellery, and automobiles purchased by the sisters.
I’m not surprised at all. Just after I was posted to Leuchars in the seventies, I went through the price challenge routine with SM 39 (as was) for an F4 item – a simple hexagonal nut; the price on the US DoD supply docs was around $5,000 each and that was before adding on the freight charges for carriage by civil air. I got the “don’t waste our time” routine because the item value was under $100k. 
And didn’t the UK have its own version with GEC and some avionic spares?
And didn’t the UK have its own version with GEC and some avionic spares?
Last edited by 4mastacker; 17th Oct 2007 at 16:39. Reason: siplling
Where do you think the US contractors got the idea from??!!
Following rulings by successive Ministers of State for the Armed Forces on the application of our financial probity rules, the person most likely to be disciplined here is the one who reports the "fraud". The US case "only" involves over-charging - there is no suggestion that the service or goods provided were unfit for purpose. One of the cases ruled on here involved false statements as to aircraft safety. But that's ok, isn't it?
Following rulings by successive Ministers of State for the Armed Forces on the application of our financial probity rules, the person most likely to be disciplined here is the one who reports the "fraud". The US case "only" involves over-charging - there is no suggestion that the service or goods provided were unfit for purpose. One of the cases ruled on here involved false statements as to aircraft safety. But that's ok, isn't it?
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I can't remember what the official teminology was from my days back in the old SM era, but it went something like this.
Your friendly supplier informed you that x NATO stock number had not been demanded for some while so as not to incur further charges for storing an unused and undemanded asset, the offending item had to be disposed of.
The paperwork duly appeared before your eyes and was then signed. Said item then became the property of some quango who no doubt received and re-labeled it and then it sat on their shelf for a change.
Some weeks later, same range manager says 'look boss, we're in a bit of bother, you know the kit that the super-duper-supply-computer had you sell a few weeks ago, well, they need one like yesterday so can you sign here to buy it back please?'
So, at further public expense it's then bought back and put into a storehouse, brought on charge and then issued to the person/unit that wanted it. It's called 'Asset Management' as far as I can remember and I think it cost something like 6% per annum on the cost of your item that you'd already bought to have it sitting on a shelf somewhere. I think that 6% then went to another government department who most likely spent it on achieving another so-called target.
It was all to do with the magical JIT (Just In Time) idea that some stupid twit impressed a minister with and was meant to ensure that the private sector only supplied bits to us when we actually needed them.
Great idea, but the Services tend to go to war and need an item now, not last week or next week, but now! JIT therefore, in a lot of cases, proved to be JTFL (Just Too Fecking Late) but we can't question our leaders can we?
Pity for the guys out in sand pits though when their JIT new boots have not been made yet!
MTB
Your friendly supplier informed you that x NATO stock number had not been demanded for some while so as not to incur further charges for storing an unused and undemanded asset, the offending item had to be disposed of.
The paperwork duly appeared before your eyes and was then signed. Said item then became the property of some quango who no doubt received and re-labeled it and then it sat on their shelf for a change.
Some weeks later, same range manager says 'look boss, we're in a bit of bother, you know the kit that the super-duper-supply-computer had you sell a few weeks ago, well, they need one like yesterday so can you sign here to buy it back please?'
So, at further public expense it's then bought back and put into a storehouse, brought on charge and then issued to the person/unit that wanted it. It's called 'Asset Management' as far as I can remember and I think it cost something like 6% per annum on the cost of your item that you'd already bought to have it sitting on a shelf somewhere. I think that 6% then went to another government department who most likely spent it on achieving another so-called target.
It was all to do with the magical JIT (Just In Time) idea that some stupid twit impressed a minister with and was meant to ensure that the private sector only supplied bits to us when we actually needed them.
Great idea, but the Services tend to go to war and need an item now, not last week or next week, but now! JIT therefore, in a lot of cases, proved to be JTFL (Just Too Fecking Late) but we can't question our leaders can we?
Pity for the guys out in sand pits though when their JIT new boots have not been made yet!
MTB
MTB
What you describe (very accurately) resulted in an unholy uproar between those in MoD(PE) who disagreed with the waste and SMBs, in particular a certain AVM, who insisted on the waste. Only the instruction was to DESTROY the spares, not retain them elsewhere, which meant that, by definition, demands could not be met for 12-18 months (the production lead time).
This DELIBERATE waste soon got into 9 figures, and the auditors were called in by PE and, unsurprisingly, supported PE. However, as I said, the people who called in the auditors were crucified, the auditors were ignored by 2* and above (leading to the rulings I mentioned earlier) and the upshot is that the waste continues - although I believe the base policy which started it has been changed and it's not as bad these days. Still hundreds of millions though.
For my part, I refused the order to destroy kit (not just detail parts spares, but modules and LRUs) on my projects and was threatened with the sack by above AVM. Some of us lied, and said we scrapped the kit, but actually hid it away at air stations. When others saw what happened to us, they just signed away the waste and walked away.
What you describe (very accurately) resulted in an unholy uproar between those in MoD(PE) who disagreed with the waste and SMBs, in particular a certain AVM, who insisted on the waste. Only the instruction was to DESTROY the spares, not retain them elsewhere, which meant that, by definition, demands could not be met for 12-18 months (the production lead time).
This DELIBERATE waste soon got into 9 figures, and the auditors were called in by PE and, unsurprisingly, supported PE. However, as I said, the people who called in the auditors were crucified, the auditors were ignored by 2* and above (leading to the rulings I mentioned earlier) and the upshot is that the waste continues - although I believe the base policy which started it has been changed and it's not as bad these days. Still hundreds of millions though.
For my part, I refused the order to destroy kit (not just detail parts spares, but modules and LRUs) on my projects and was threatened with the sack by above AVM. Some of us lied, and said we scrapped the kit, but actually hid it away at air stations. When others saw what happened to us, they just signed away the waste and walked away.
I don't own this space under my name. I should have leased it while I still could
MTB,
Yup.
I needed a paint locker. There were none available - £500. However my local military surplus store had the one I needed for just £35. It turned out he was actually selling it on behalf of a customer. Yes, you guessed it, MOD!.
He has tons of stuff we want but while we can make a case for having it we cannot afford to buy it back.
OTOH I have new socks, boots, sleeping bags, gloves whatever at a knock down price and less hassle than trying to blag it from stores.
Yup.
I needed a paint locker. There were none available - £500. However my local military surplus store had the one I needed for just £35. It turned out he was actually selling it on behalf of a customer. Yes, you guessed it, MOD!.
He has tons of stuff we want but while we can make a case for having it we cannot afford to buy it back.
OTOH I have new socks, boots, sleeping bags, gloves whatever at a knock down price and less hassle than trying to blag it from stores.
MTB
Have a look at this place on Google Earth - 50°59'18.46"N 3°12'49.27"W
That's where your quango sent the stuff. It's Eldorado in another guise.
I visited that site just before I left the service and it was awash with spares our engineers were crying out for. I went there to recover (at great public expense) so spares for our jets. It was the same kit that I had received disposal instruction some 4 weeks earlier.
The disposal lists we received at unit level were unbelievable. Kit we had just received in from contractors or the depot was being binned. It was a criminal and scandalous waste of resources and money and seemed, to me anyway, the only purpose was to satisfy the bean-counters and their obsession with RAB.
I joined the RAF as a Supplier and left it as a Disposer - no wonder you guys are pulling your hair out!
Have a look at this place on Google Earth - 50°59'18.46"N 3°12'49.27"W
That's where your quango sent the stuff. It's Eldorado in another guise.
I visited that site just before I left the service and it was awash with spares our engineers were crying out for. I went there to recover (at great public expense) so spares for our jets. It was the same kit that I had received disposal instruction some 4 weeks earlier.
The disposal lists we received at unit level were unbelievable. Kit we had just received in from contractors or the depot was being binned. It was a criminal and scandalous waste of resources and money and seemed, to me anyway, the only purpose was to satisfy the bean-counters and their obsession with RAB.
I joined the RAF as a Supplier and left it as a Disposer - no wonder you guys are pulling your hair out!
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Spotting help required
Have a look at this place on Google Earth - 50°59'18.46"N 3°12'49.27"W
That's where your quango sent the stuff. It's Eldorado in another guise.
That's where your quango sent the stuff. It's Eldorado in another guise.
(Hat, Coat etc)
To be un-PC about things, it should be noted that C&D, as a "woman-owned" business, is considered a small/disadvantaged business. Everyone (primes and program offices) has targets for the amount of business they're supposed to steer to SDBs. Does it mean they get looked at less? Not necessarily, but the incentive to meet the numbers is there.
CK
According to the folks who worked there, it was complete in every respect and ready to drive away. The only things that were missing were the price sticker on the windscreen and the man in an Arfur Daley coat.
According to the folks who worked there, it was complete in every respect and ready to drive away. The only things that were missing were the price sticker on the windscreen and the man in an Arfur Daley coat.
The serious side to this is that, very quickly, safety and airworthiness was compromised. I recall one instruction from the Lynx IPT, issued no doubt in sheer exasperation, that transmission spares should be bought on Local Purchase Order from Halfords, and sod the Mil Std.
Another factor was that many of the scrapped spares were being held at 4th line as "buffer stock", for the sole purpose of effecting a swift turn round time. Some aircraft equipment was in such short supply that repair contracts stipulated seven days TRT; but to achieve this the MoD had to supply HUGE quantities of buffer stock. I'm thinking in particular of Hercules. Of course, scrapping this stock meant the TRT shot up to about 18 months. (Not only was the instruction issued to scrap the spares, but SMB also demanded they be immediately quarantined to avoid the company having access before they could be scrapped. And then had the cheek to demand action against companies and PE project managers when they couldn't satisfy the inevitable high priority demands). The (natural) reaction of, e.g. Lyneham, was to attempt repairs which they had no experience of, and for which they had no means of verifying the repair (which automatically breaches airworthiness rules).
All this went in one ear and out the other among suppliers and BCs. We got no help from our bosses in PE. You do the right thing and elevate through line management, but when the AD says "This is political dynamite, forget it" you have a choice. Do the right thing and ignore the instructions, or waste the money knowing safety is at risk. I'm sure some of you think I was wrong in going for the former.......
Another factor was that many of the scrapped spares were being held at 4th line as "buffer stock", for the sole purpose of effecting a swift turn round time. Some aircraft equipment was in such short supply that repair contracts stipulated seven days TRT; but to achieve this the MoD had to supply HUGE quantities of buffer stock. I'm thinking in particular of Hercules. Of course, scrapping this stock meant the TRT shot up to about 18 months. (Not only was the instruction issued to scrap the spares, but SMB also demanded they be immediately quarantined to avoid the company having access before they could be scrapped. And then had the cheek to demand action against companies and PE project managers when they couldn't satisfy the inevitable high priority demands). The (natural) reaction of, e.g. Lyneham, was to attempt repairs which they had no experience of, and for which they had no means of verifying the repair (which automatically breaches airworthiness rules).
All this went in one ear and out the other among suppliers and BCs. We got no help from our bosses in PE. You do the right thing and elevate through line management, but when the AD says "This is political dynamite, forget it" you have a choice. Do the right thing and ignore the instructions, or waste the money knowing safety is at risk. I'm sure some of you think I was wrong in going for the former.......
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I am reminded about an OU TV programme I saw many years ago when mathematicians word long hair, and paisley shirts with rounded collars.
The programme was essentially about Just in Time against the Cost of Holding. It was an excellent programme for I can remember it like yesterday.
They used a coal mine of the NCB as the illustration. They said how the mine usd some 10,000 nails per week, they costs little and they could be supplied on a weekly basis with an emergency buy if required. To hold 4 weeks or more supply would cost little but there was no advantage as the ordering scale and consumption were optimal.
The other item was a pit head winding wheel. The wheel cost £100k, it may not be needed for a year or 2 but if required would take 2-3 months for delivery. If there was a wheel in stock it would only take a week to fit. The cost in loss production would be about £5m. It was easy, in this illustration, to balance the cost of holding £6,000pa (assuming 6%) against the cost of not having it when needed.
Now in the Service there is a capital cost in holding but there is no cost attached to the waiting period - no cost in money terms unless we have to hire in paid help like with the Belfast's that we had to hire back from Heavylift in '82.
Did the bean counters miss the point?
Why order 2 washers? Order the whole box.
The programme was essentially about Just in Time against the Cost of Holding. It was an excellent programme for I can remember it like yesterday.
They used a coal mine of the NCB as the illustration. They said how the mine usd some 10,000 nails per week, they costs little and they could be supplied on a weekly basis with an emergency buy if required. To hold 4 weeks or more supply would cost little but there was no advantage as the ordering scale and consumption were optimal.
The other item was a pit head winding wheel. The wheel cost £100k, it may not be needed for a year or 2 but if required would take 2-3 months for delivery. If there was a wheel in stock it would only take a week to fit. The cost in loss production would be about £5m. It was easy, in this illustration, to balance the cost of holding £6,000pa (assuming 6%) against the cost of not having it when needed.
Now in the Service there is a capital cost in holding but there is no cost attached to the waiting period - no cost in money terms unless we have to hire in paid help like with the Belfast's that we had to hire back from Heavylift in '82.
Did the bean counters miss the point?
Why order 2 washers? Order the whole box.
"Why order 2 washers? Order the whole box."
Without wishing to make this thread the ultimate cure for insomnia - There was such a thing as a Pre-Packaged Quantity (PPQ) so if a single item, e.g 1 x washer , were demanded and its PPQ was - say 100 - then the depot would issue the PPQ. Engineer gets his one washer and the other 99 go into chiefy's drawer invisible to the system.
In extreme circumstances, the Sqn on t'other side of airfield demand the same washer and get another 100 and same thing happens. Next thing is OC ESW jumping up and down about excessive holdings of 'C' stores.
On a more serious note, I attended a meeting about LITS , JIT deliveries and its application to the RAF Supply system. Also there, was a well-upholstered civvy "consultant" who just sat in a corner and nodded like a toy dog. If he said 'Yes' - it was in, - if he said 'Nah, civvy business don't do it' - it was out. The pushing point was that JIT worked for the likes of Ford and Sony so it must be good for the RAF. The big cheeses running the project couldn't grasp the fact that it wouldn't work in the Service environment because of the fast moving and ever-changing goalposts. However, they had the ear of the folks who made the final decisions and were on-message with what the minister wanted to hear. I'm not surprised to read about the situation that now appears to prevail - I wouldn't have trusted those folks to run a bath!!
I was only a tradesman, so what did I know about Supply?
Without wishing to make this thread the ultimate cure for insomnia - There was such a thing as a Pre-Packaged Quantity (PPQ) so if a single item, e.g 1 x washer , were demanded and its PPQ was - say 100 - then the depot would issue the PPQ. Engineer gets his one washer and the other 99 go into chiefy's drawer invisible to the system.
In extreme circumstances, the Sqn on t'other side of airfield demand the same washer and get another 100 and same thing happens. Next thing is OC ESW jumping up and down about excessive holdings of 'C' stores.
On a more serious note, I attended a meeting about LITS , JIT deliveries and its application to the RAF Supply system. Also there, was a well-upholstered civvy "consultant" who just sat in a corner and nodded like a toy dog. If he said 'Yes' - it was in, - if he said 'Nah, civvy business don't do it' - it was out. The pushing point was that JIT worked for the likes of Ford and Sony so it must be good for the RAF. The big cheeses running the project couldn't grasp the fact that it wouldn't work in the Service environment because of the fast moving and ever-changing goalposts. However, they had the ear of the folks who made the final decisions and were on-message with what the minister wanted to hear. I'm not surprised to read about the situation that now appears to prevail - I wouldn't have trusted those folks to run a bath!!
I was only a tradesman, so what did I know about Supply?
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Saw a (civilian) article the other day that American are replacing their MD-80 tail cones with a more aerodynamic model to save fuel - but are fabricating them at their own maintenance facility at Tulsa for about $US50k rather than the $200k or so Boeing were looking for...
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Asset management??
Prior to the pre- A.O.C's inspection Akrotiri '66, A.S.F disposed of countless surplus tools (still greasepaper wrapped) and an unused Canberra elevator et. al., down an old Roman well, situated near the hangar. However get caught exiting the main gate with a ratchet s/driver in the boot and you were in serious trouble! 
Some years ago when RAF Geilenkirchen closed, the order went round to 'dispose of surplus stock'. In this instance, it was brand-new OMQ furniture, still in its protective packing.
This was broken up with axes and burnt on the spot - no-one was allowed to buy it or even to sell it locally.
One of my QFIs had been there at the time on Canberras and filmed this wanton waste, before showing it to people and commenting "Don't ever think of billing me for any OMQ repair costs ever again!"
Told he was a trouble maker, he was posted away to be a UAS Chipmunk QFI....
And as for the legendary stories of waste - they finally got round to re-roofing the UAS 'submarine' at RAF Abingdon (the old ASCEU building) just as the place was due to close and become infested with pongoes.
This was broken up with axes and burnt on the spot - no-one was allowed to buy it or even to sell it locally.
One of my QFIs had been there at the time on Canberras and filmed this wanton waste, before showing it to people and commenting "Don't ever think of billing me for any OMQ repair costs ever again!"
Told he was a trouble maker, he was posted away to be a UAS Chipmunk QFI....
And as for the legendary stories of waste - they finally got round to re-roofing the UAS 'submarine' at RAF Abingdon (the old ASCEU building) just as the place was due to close and become infested with pongoes.