Pratt uncovers "Fraudulent Testing Scheme"

A Stunning Public Disclosure from Pratt and Whitney Regarding Faulty Supplier Testing 0 comments Posted by Bob Ferrari on Mar 4, 2013 in Aerospace Supply Chain, Existence of counterfeit and tainted products across supply chains, Procurement and Sourcing, Product Quality | 0 comments

The Wall Street Journal featured a troubling article today, one which adds more credence to the growing problem of quality and conformance lapses that exist in certain industry supply chains. The article, Pratt Discloses Faulty Testing (paid subscription required or free metered view ) reports that United Technologies Corp.’s Pratt & Whitney unit has disclosed that it had uncovered an alleged fraudulent-testing scheme by a sister United Technologies business unit, Carmel Forge Ltd..

The scheme is reported to involve previously unreported multi-year efforts to doctor metallurgical tests involving the production of tens of thousands of engine parts used on business jets and turboprop aircraft.  The alleged period is from the mid-1990’s to the summer of 2011, when a disgruntled whistleblower employee of the Israeli Carmel Forge unit provided an insider tip to Pratt officials.

The WSJ characterizes this disclosure as one of the aerospace industry’s longest and most –pervasive examples of improper testing.  While the report indicates that the parts in question do not pose any safety hazard, Pratt officials acknowledged that the extent and duration of the testing irregularities shocked them, and has prompted a reassessment of quality control and oversight processes among suppliers.

The U.S. Federal Aviation Administration (FAA) launched a formal administrative proceeding after it was informed in September 2011, which is reported to be closing without any imposition of fines or other penalties. The WSJ reports that United Technologies and Pratt officials have worked aggressively to get to the bottom of these reported testing irregularities and has since replaced the top management structure at Carmel Forge.

The obvious question, at least for Supply Chain Matters, was why was this alleged fraudulent testing undiscovered for as long as it was, and why has it taken this long for these details to emerge. The article quotes Pratt officials as indicating “that all the subject parts produced over the years met basic engineering specifications ensuring their safety, though many weren’t properly subjected to Pratt & Whitney’s tougher internal testing requirements.”  Perhaps, a statement dictated by a panel of lawyers, and not very comforting. Readers and industry players can certainly draw their own conclusions.

From our perspective, yet more evidence that the notion of lean supply chains seems to include lean or minimal controls on supplier and testing conformance. For the aerospace industry, already dealing with numerous challenges of backlogged supply chains and the ramifications of the ongoing grounding of Boeing’s 787 Dreamliner, yet another disclosure adds additional stress to supplier relationships.

Bob Ferrari