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Pentagon agency says `prime vendor' program remains sound

WASHINGTON—The Defense Logistics Agency, completing an internal review of its $7 billion "prime vendor" purchasing system, has declared the program sound, even though it overpaid millions of dollars for common kitchen items.

Congress ordered the review after a Knight Ridder investigation last year found that the Pentagon had paid $20 a piece for plastic ice cube trays that previously had cost 89 cents and $81 each for coffee makers that it bought for years for $29.

Knight Ridder examined only food service equipment purchases, but found that the program cost taxpayers 20 percent more than the Defense Department's previous purchasing system.

Defense Logistic Agency officials are scheduled to explain the review Thursday for members of the House Armed Services Committee. A copy of the agency's briefing slides was made available to Knight Ridder on Wednesday, but agency officials weren't available for comment.

According to the presentation, the agency's review found inadequate management oversight, incomplete auditing and poor performance by a contracting official. But overall, the agency said, "the vast majority" of its purchases were appropriate and supported troops as intended.

A contracting officer and several supervisors were reassigned as a result of the review, according to the presentation. One government employee has resigned. Several additional disciplinary actions are under consideration, pending the outcome of a Pentagon criminal investigation.

A nonprofit government watchdog group said the review illustrates how little oversight is exercised over the agency's purchases.

"It's ironic," said Keith Ashdown, vice president of the Washington-based Taxpayers for Common Sense. "This program was set up to save money. But because of poor oversight, it has spent money like Paris Hilton at a shoe sale."

The DLA's prime-vendor program was set up about 15 years ago, partly in response to news reports of wasteful Pentagon spending in the 1980s, when stories about $800 toilet seats and $400 hammers were common.

The program was meant to save the Pentagon money by limiting purchases to a relatively small number of firms. By reducing the number of government buyers and inventory managers, the program was supposed to save money on items such as warehouse space and salaries. It also was expected to speed delivery of common commercial items to troops in the field.

The Pentagon describes the program as one of its "best practices" and credits it with hundreds of millions in savings.

The review materials provided to Knight Ridder said that the DLA purchased a total of $7 billion worth of items under the prime vendor program in fiscal year 2005, which ended Sept. 30. Of that, 75 percent, or $5.3 billion, was spent on pharmaceuticals and food.

But the materials don't say if the program saved money.

Knight Ridder's investigation, which included a computer analysis of prices paid under the program, found that the Pentagon spent more than it should have for items in 102 of 122 categories. All the items were food equipment, such as coffee pots and refrigerators.

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(c) 2006, Knight Ridder/Tribune Information Services.

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