The $32,000 Refrigerator: DLA Seeks Refunds The Defense Logistics Agency has overhauled its prime vendor program after revelations that the military paid vastly inflated prices for food-service equipment, including a $32,000 refrigerator and a $20 ice tray. DLA will no longer buy food-service equipment through the prime vendor program, according to the House Armed Services Committee, which conducted hearings on the issue. (SAA, 11/18/05) Prime vendors are pre-selected wholesale distributors that promise just-in-time delivery of commodities. The committee said DLA is seeking refunds for alleged overcharges “through both voluntary and legal means” and has asked the Defense Criminal Investigation Service to conduct a criminal inquiry into pricing problems. DLA “discovered problems far more serious than previously realized,” said Rep. Ike Skelton (MO), the committee’s ranking Democrat. “I am pleased to see that they are now taking action to clean up their processes.” DLA spokesman Jack Hooper said the agency is pursuing voluntary refunds totaling about $300,000 from food-service vendors. “The amount of refunds is not necessarily a measure of wrongdoing,” he said in an e-mail message. “…When contract overcharges are positively identified, refunds are not voluntary and those are pursued under the strict terms and conditions of the contract.” Knight Ridder newspapers uncovered evidence of overcharges in the prime vendor program last year. The news reports sparked the congressional hearings. Prime vendors compete for a place in the program, but there is no competition on individual purchase orders. Knight Ridder examined more than 7,000 purchase orders and found that prime vendors charged an average of 20% more for food-service equipment than other DLA vendors outside the program. Knight Ridder reported that the Defense Department paid $32,643 for an aircraft refrigerator, almost twice the manufacturer’s suggested price. The $20 ice-cube tray was sold for 85 cents by other vendors. The committee said several DLA employees involved in the refrigerator purchase have been disciplined, re-assigned or have resigned. The committee said DLA will begin using full and open competitions for food-service equipment after its current contracts expire in June. At the November hearing, DLA’s director, Vice Adm. Keith Lippert, said the prime vendor program has saved taxpayers millions of dollars. He said the agency had begun requiring more frequent reviews of prime vendor pricing.