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Pentagon waved off tip on $1,000 toaster
by Seth Borenstein    NorthJersey.com
Entered into the database on Wednesday, February 01st, 2006 @ 09:50:17 MST


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A retired Army Reserve officer complained to the Pentagon's fraud hot line last year that the Defense Department had overpaid for kitchen appliances, paying $1,000 for popcorn makers and toasters and $5,500 for a deep-fat fryer that cost other agencies $1,919.

Although he provided a four-page spreadsheet showing 135 cases of higher prices, the Defense Department dismissed his tip without checking with him.

"We've got an agency that is not doing its job of being a watchdog for the taxpayers," said U.S. Rep. Walter Jones, R-N.C.

Documents acquired under the Freedom of Information Act reveal that the retired officer, Paul Fellencer Sr., tried to blow the whistle on as much as $200 million in what he called wasteful spending.

At issue is a multibillion-dollar Pentagon purchasing program that uses middlemen who set their own prices, instead of buying directly from manufacturers or going out for competitive bids.

Called the prime vendor program, it was the object of a Knight Ridder investigation that found that the Pentagon had paid prime vendors higher prices for 102 of 122 pieces of food equipment than the government did to contractors outside the system. For example, Knight Ridder found that the Pentagon had paid $20 apiece for ice cube trays that retail for less than a dollar.

Last year, the Pentagon's waste and fraud hot line received four tips complaining about the prime vendor program. One was from Fellencer, who documented Defense Department purchases in a spreadsheet complete with stock numbers and purchase orders. It showed that the Pentagon had spent 39 percent more using prime vendors, compared with buying the items through the civilian General Services Administration.

Pentagon investigators never called Fellencer. They spent a total of eight hours investigating his tip, talked to the officials responsible for the program and dismissed the tip as "unsubstantiated," the documents show.

"They never did anything; not a whisper from them," Fellencer, a retired Army Reserve lieutenant colonel, said. "It's just typical."

According to Diana Stewart, a Defense Logistics Agency spokeswoman, investigators didn't need to contact Fellencer because his letter and spreadsheets "provided adequate information for the examining official to conduct the review."

Stewart defended the agency's inquiry. She said a Defense Logistics Agency investigator found that prime vendors were charging reasonable prices most of the time "based on interviews with the food service-equipment prime vendor team and his own evaluation of a statistically valid sample of food service-equipment item prices."