HIDDEN EXCESS COSTS FOR FLEETLIFE IS $1.1 BILLION

THE DOJ AND USCG PAID THE DEFENDANTS
TO FIX THE DEFENDANT'S OWN ENGINE DEFECTS

        In a civil fraud lawsuit settlement, the DOJ agreed to pay to the defendant almost twice the normal or "anticipated" maintenance "man-hour" rate to fix the defendant's own engine defects.
        The Defendant was paid his full price of the engine at initial delivery. They should have lasted 2400 hours before the first overhaul would be required. Defective engine overhaul was required 10 times more often, per engine, than was originally contracted for. These two multipliers equated to an excess cost to the taxpayers of almost 20 times what the cost should have been, until it was redirected by a secret settlement.

        When the Defendant, in negotiations, absorbed the overhaul responsibility of the defective engines and parts, the DOJ and USCG simply shifted this cost back to the Defendant. They did not eliminate it. Taxdollars paid for it from 1985 to 1990 at about $20,000,000.00 per year.
        It was exactly the excess cost described in the original civil fraud lawsuit filed by the author. The DOJ and USCG publically misrepresented and mislabeled the total fraud value as only $17,000,000.00, when in fact, the USCG's internal reports clearly show that the fleet-life excessive cost or excess damages were exactly what the author had claimed in his lawsuit's Original Complaint's DEMANDS. (CLICK HERE)
        The DOJ, USCG, and Defendant negotiated the settlement while the case was still "sealed" and misrepresented and hid three major secrets:

    • The defective engines required almost 10 times the overhauls anticipated by the original prime contract. Internal USCG reports state that the engines had to be overhauled 9.41 times as often as originally contracted for ! ( = $ x 10 )

    • In order to obtain final settlement approval, the negotiated settlement's "Cost Per Overhaul" was deceivingly represented as about half of the USCG's in-house cost to overhaul. Shockingly, this was not only the wrong cost to use (it should have been the "industry's standard "costs-to-overhaul"), it was twice the "man-hour" rate originally contracted for, anticipated and industry-standard, at that time. ( = $ x 10 x 2 )

    • The USCG used public bid responses to misrepresent and justify its calculations. Concurrently, their own internal USCG reports repeatedly acknowledged that the Defendant was the "SOLE SOURCE" supplier of the engine and its repair parts and that the defects were in the design and manufacturing process and a third-party overhaul house could not fix this.

        The DOJ and USCG both knew these numbers to be true and did it anyway. What was labeled and originally disclosed to the FBI as fraudulently hidden defects was relabeled as a "Product Improvement Program" and later covertly folded into the negotiated 6-year, "Power-By-The-Hour" maintenance, repair and overhaul contract, at excessive prices and frequency. It is the author's belief that this is still going on today.
        The table below uses the numbers directly from the USCG's internal reports. The annual cost was originally contracted for and anticipated to be about $1,000,000.00 per year. USCG reports clearly state that the internal excess costs were about $22,000,000.00 per year. This amount was clearly neither budgeted nor appropriated by Congress. These are taxpayer dollars.

 
Current Actual Costs Comparisons
 
    Prime Contract   TSC/RSPA   AR&SC
    (Anticipated)   (Estimate)   (Estimate)
             
(+) Mean Time To Depot (In Engine Hours)   2400   255   255
(x) Power-By-The-Hour   $40   $142.00   $213
(=) Depot Cost Per Overhaul   $96,000   $57,015.00   $54,315
(x) Overhauls Per 2400 Engine Hours (per Engine)   1   9.41   9.41
(=) Overhaul Cost (per 2400 Engine Hours, per Engine)   $96,000   $536,511   $511,104
             
             
(*) 7 Months Engine Hours ((07/88-02/89)   104,580   104,580   104,580
             
(+) Annual Engine Hours = [ (104,580 / 7)*12 ]   179,280   179,280   179,280
(/) Mean Time To Depot (In Engine Hours)   2400   255   255
(=) Overhaul Frequency Per Year   75   703   703
(x) Depot Cost Per Overhaul   $96,000   $57,015   $54,315
(=) Overhaul Cost Per Extrapolated Year   $720,000   $40,081,545   $38,183,445
             
(+) Overhaul Cost Per Extrapolated Year   $720,000   $40,081,545   $38,183,445
(x) Estimated Fleet-Life of Engines (In Years)   20   20   20
(=) Overhaul Cost Per Fleetlife (In Dollars)   $14,400,000   $801,630,090   $763,668,900
             
(+) Overhaul Cost Per Extrapolated Year   $720,000   $40,081,545   $38,183,445
(x) Estimated Fleet-Life of Engines (In Years)   30   30   30
(=) Overhaul Cost Per Fleetlife (In Dollars)   $21,600,000   $1,202,446,300   $1,145,503,300


    "DEMANDS

    "Wherefore, Plaintiffs demand:

    "1. That Defendants be required to pay to Plaintiffs the sum of $10,000 plus 3 times the excess of costs of engines actually required on account of defective performance over costs contractually guaranteed, said excess being $360,000,000.

    EMPHASIS ADDED: 3 X $360,000,000 = $1,080,000,000 + FINES.
    ( Note that USCG's internal reports prove Relator's claims ! )

    "2.That, in addition, Defendants be required to pay to Plaintiffs 3 times the excess of costs of spare parts and services actually required on account of Defendants' failure to comply with contractual obligations or failure to disclose non compliance over costs actually contemplated by contract, said excess being unknown but estimated as equal to excess engine costs.

    EMPHASIS ADDED: SEE COLUMNS 3 & 4 IN LAST LINE IN TABLE ABOVE !
    ( Note that USCG's internal reports prove Relator's claims ! )

    "3.In the alternative, that Defendants be required to pay Plaintiffs $10,000 plus 3 times the excess cost of re-engining all contracted aircraft plus 3 time the excess cost of spare parts and services plus 3 times the excess cost of interim maintenance and replacement and services."

    EMPHASIS ADDED: SEE COLUMNS 3 & 4 IN LAST LINE IN TABLE ABOVE !
    ( Note that USCG's internal reports prove Relator's claims ! )


Reference: USA ex rel. R. C. Ballew, Plaintiffs v. Aerospatiale Helicopter Corp. and Textron Lycoming Corp., Defendants, Civil Action No. CA-4-88-287-K, Filed - May 9, 1988, In The United States District Court For The Northern District Of Texas, Fort Worth Division.