The Defense Department proudly announced last month that two of its largest contractors, Boeing and General Electric, had instituted what might be called money-back guarantee policies on spare parts. Henceforth if the department bought parts or other minor items that it later decided were "unreasonably priced," these major suppliers would let it return them for credit, no questions asked. The announcement was meant as reassurance, a further sign that contractors are mending their ways, that the government will no longer be buying such exotica as $7,000 coffee pots and $700 pairs of pliers. Unfortunately, the effect was the opposite. The department and contractors seemed to be promising not so much to reform the process as to be contrite when caught. And they are playing around the edges of the defense budget problem, not at its heart.
The spare-parts horror stories of the past two years have had a galvanic effect on public opinion. They have been cited time and again on Capitol Hill as Congress has moved to restrain the Reagan defense buildup. The items have been powerful political symbols precisely because they have been homely. No one knows what a new missile should cost; everyone can identify with an overpriced ash tray or a common wrench. The problem, as often in such matters, is that the symbols are peripheral, even trifling in their way. The prices complained of are not the reason the defense budget is so high. They are also not so much proof of greed as constructs of accounting, not unlike the sometimes outrageous lesser items in a hospital bill. They are not meant to reflect costs, merely to cover them. There are grievous problems with the defense procurement process, and in a way the horror stories take the debate in wrong directions.
The department and the contractors recognize this. The horror stories are problems for them, but can also be welcome distractions. Boeing, the fifth- largest contractor, was first with its letter. Its executives say that for two years it has been recommending that the Air Force turn elsewhere for spare parts that it cannot economically supply. It has declined to bid on some spare-parts contracts on its own planes. It politely reminded the Pentagon in its letter in April that all of the prices now complained of had been agreed to by the Air Force earlier, that in some cases prices were being challenged long after products had been delivered. It was nevertheless establishing a policy "whereby any item that has been purchased at prices that thereafter appear to have been unreasonable can be returned to Boeing." GE, in a similar letter, noted that for minor items it, too, has for some time "encouraged our government customers to buy direct from outside suppliers where we add limited value to the procurement at hand."
Boeing and GE have done a good thing. It is wholesome to have the department and its suppliers seeking to stamp out horror stories. But it must also be remembered that this only nibbles a the defense budget and the fundamental questions that now surround it.