The Department of Defense Office of Inspector General (DoD OIG) has released a critical audit report, “Audit of C-17 Spare Parts Pricing,” highlighting significant concerns regarding the Air Force’s procurement practices for spare parts of the C-17 Military Transport aircraft. Initiated in response to a DoD Hotline allegation, the audit aimed to determine if the Air Force secured fair and reasonable prices for C-17 spare parts under performance-based logistics (PBL) contracts.
Inspector General Robert P. Storch emphasized the urgency for improved financial oversight. “The Air Force needs to establish and implement more effective internal controls to help prevent overpaying for spare parts for the remainder of this contract, which continues through 2031,” stated IG Storch. He warned that “Significant overpayments for spare parts may reduce the number of spare parts that Boeing can purchase on the contract, potentially reducing C-17 readiness worldwide.” This directly impacts the operational capability of the C-17 Globemaster III, a cornerstone of global military transport.
The audit revealed that the Air Force did not consistently adhere to Federal Acquisition Regulation guidelines, resulting in unreasonable pricing for C-17 spare parts. Specifically, the DoD OIG estimated that approximately 26% of reviewed spare parts, amounting to $4.3 million, were purchased at unfair prices. Furthermore, for over 54% of spare parts, valued at over $22 million, auditors could not definitively assess price fairness due to the Air Force’s lack of historical cost data and the Defense Contract Management Agency Item Group’s inability to secure supplier quotes or identify comparable commercial parts. This lack of transparency and data management led to nearly $1 million in overpayments for just a dozen types of spare parts.
A striking example of the overspending involved a lavatory soap dispenser. The Air Force paid over 80 times the commercially available cost for this item, marking a staggering 7,943% markup. This single instance vividly illustrates the extent of the pricing discrepancies uncovered in the audit.
The DoD OIG pinpointed several key deficiencies in Air Force procurement processes that contributed to these overpayments. These included:
- Failure to validate the accuracy of data used during contract negotiations.
- Lack of contract surveillance to detect price increases throughout the contract lifecycle.
- Inadequate review of invoices to ensure fair and reasonable pricing before payment processing.
Additionally, the audit found that the Department of Defense itself did not mandate verification of bill of materials accuracy before negotiation, nor invoice reviews for cost reasonableness prior to payment by the contracting officer.
To rectify these issues and prevent future overspending on C-17 military transport spare parts, the DoD OIG issued eight recommendations. These recommendations include directing the Commander of the Air Force Life Cycle Management Center to instruct the C-17 contracting officer to rigorously review spare parts prices throughout the C-17 PBL contract execution. This review should specifically target price increases of 25% or more, requiring Boeing to provide justification for such increases. The DoD OIG has committed to ongoing monitoring of the DoD’s implementation of these crucial recommendations.
Full Report: Audit of C-17 Spare Parts Pricing (Report No. DODIG-2025-009)
