Aero - Hangar One Contract Analysis

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LASD AS350-B2 PURCHASE AND INSTALLATION

DOCUMENT REVIEW

After reviewing the following documents, there are four areas of concern that supports initiating

an investigation for violations of Department Policy, County Purchasing Codes, and possible

criminal misconduct. The information these documents reveal include:

• The unprecedented fixed labor cost charged by Hanger One Avionics.

• The after market charge for airframe and engine installation, usually completed by the

Eurocopter factory.

• The excessive cost of the equipment purchased, compared to the competitive market.

• The purchase of equipment that is not directly related to the helicopter acquisition and

electronics installation, along with the excessive cost and the number of items purchased.

Public accessible information for this report was obtained from various Los Angeles County

Departments. Price comparisons were obtained via the internet. The prices provided in the bid

submitted by Hanger One Avionics were compared to prices posted via GSA pricing,

manufacturer's price lists, and retail avionics internet sites. The maintenance/avionic shop

hourly "Shop Rate"and typical bidding procedures were obtained from an aircraft maintenance

shop owner.

Reviewing the established minimum bid requirements indicates the bidding process appears to

have been manipulated. The bidder requirements established limitations that eliminated

competitors and favored Hanger One Avionics, who appears to be the only company that met the

minimum requirements.

Reviewing the equipment list, there were a number of overcharges discovered for services and

equipment provided by Hanger One. Additionally, this bid was packed with numerous extra

equipment purchases, which were sent directly to LASD Aero Bureau.

One significant issue is the three hundred and fifty thousand ($350,000) charge just for labor, per

helicopter. This cost is far beyond the normal shop rate bid, which is based on the number of

hours required to complete the work.

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Additionally, Hanger One Avionics is being used as a "store front operation" in order to obtain

additional items for LASD Aero Bureau. They have purposely bypassed the established

.purchasing code protocols. Some items purchased, if assessed as a stand alone purchase, would

have exceeded the $100,000 and $250,000 dollar limits that requires the Board of Supervisor's

review and approval. LASD Aero Bureau managers have potentially violated numerous L.A.

County Codes and Guidelines.

Reviewing information that has been made available, it should be questioned why Hanger One

wasawarded the bid. Hanger One Avionics has been in business only two and a half years and

have only a few helicopter installations to their credit. There is a history with some Hanger One

employees, who have worked for companies that provided poor installation workmanship for

previous LASD helicopter purchases. The bid process was influenced to reduce competition.

Hanger One Avionics bid includes airframe and engine work, which they may not be qualified to

perform or will be required to out source. Only a detailed investigation will disclose all the facts.

The excessive equipment and labor charges reaches amounts totaling $10,971,362.31. Aninvestigation and audit to fully account for these expenditures should be initiated.Additionally, any conflict of interest between LASD and Hanger One representativesshould also be investigated to determine if any Department Policies or Criminal violationshave occurred.

Copies of all supporting documents have been submitted with the review.

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Hanger One profile:

Hanger One claims to have been in business since October 2007. The FAA did not issue their

Air Agency Certificate until December 20th, 2007, which is required to legally operate as a repair

station.

Hanger One claims to have over 30,000 square feet of hanger space. Hanger One's parent

Company, Schubach Aviation, is ajet charter service. The parent company occupies most of that

hanger space.

Hanger One claims to have an extensive background in airborne avionics installation. Since they

began operating in the beginning of 2008, they have only completed three, one time, installations

for a law enforcement agency. These installations were for East Bay Regional Park Police (AS

350-B3), Placer County Sheriffs Department (AS350-B3), and San Diego Police (AS350-B3).

The Avionics Manager and an Avionics Technician both claim experience with Cinema Air

Avionics. LASD had negative experiences with that former company and the individuals

associated with Cinema Air Avionics. LASD experience with Cinema Air Avionics began with

their work on the purchase of the MD 520N and 600N helicopters. LASD had numerous

installation and quality assurance issues with that company. After the completion of the LASD

helicopters, Cinema Air closed their business.

During 2003-2004, LASD purchased the first group of the AS350-B2's. The Unit Commander in

charge of Aero Bureau then, made it a requirement that another small avionics shop, Van Isle

Avionics, be selected to complete the helicopter avionics installation. There were a number of

former Cinema Air employees who had created a partnership with the Van Isle Avionics group

and opened a shop in the San Diego Area. Again, the workmanship and quality assuranceprovided by this company was poor. After the 5th LASD helicopter completion, American

Eurocopter assumed responsibility for the remaining helicopters and finished the completions.

The first five helicopters completed by Van Isle has had continuing issues that were unable to be

resolved. Van Isle Avionics closed some time after the LASD helicopter installation contract

was cancelled. The issues created by the Van Isle group caused both cost increases and loss of

operational time in the previous helicopter upgrade program.

On November I"2009, LASD entered into an "Agreement Vendor" contract with Hanger Onefor avionic services for all LASD aircraft. It also included the purchase and installation of

avionic equipment. This contract established an hourly shop rate of $90 dollars an hour. This

shop rate also raises serious concerns why they were awarded 350 thousand dollars a helicopter

for installation work on the new helicopters.

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LASD established an "Agreement Vendor"contract with Hanger One Avionics (located in the

San Diego Area) a year before they were awarded the bid contract for the new helicopters. The

need for this contract is questionable, since for many years prior, LASD has had on going long

term "Agreement Vendor" contracts with various other aviation companies. Additionally, LASD

has a full time avionics staff. The LASD Avionics Staff have the ability to purchase avionics,

parts, and accessories directly through various manufactures and distributors. They have

serviced all the helicopters and even did an electrical and avionics installation in the H-3 rescue

helicopters.

One of the major avionics manufactures (Cobham/Chelton) lists Hanger One (in their companies

directory) as a "fix wing"only avionics installer. This company manufactures the Flight Logic

artificial flight display that is being installed in the LASD helicopters.

Bidding requirement, potential conflict of interest:

In the LASD BIDDER'S MINIMUM REQUIREMENT, it specifies "bidder shall have

successfully provided law enforcement-specific completion services to at least two (2) brand

new, unequipped American Eurocopter Corporation (AEC) AS 350 series helicopter within the

past 36 calendar months. This requirement makes no sense. In the past three years, because of the

poor economy, many air units around the United States have either been forced to shut down or

have been significantly reduced in their size. The demand for new law enforcement helicopters

have stalled, with very few new orders being made. There are established shops with many years

of experience who may have completed only one new AS350 helicopter installation, and/or who

have done new installations or retrofits on other helicopter models within this same time period.

Requiring the completion of two new helicopters of the same specific helicopter make, within a

36 month block would have made many installation shops ineligible to bid, even though they

possess years of prior experience in law enforcement helicopter installations. The restrictivelimitations established by LASD under the "bidder requirements" made most companies if not all

others, except for Hanger One, ineligible to bid.

So far, no other competitive bids from other companies have been produced for cost comparison.

(REFER TO HANGER ONE PROPOSAL IN RESPONSE WORK ORDER SOLICITATION).

Helicopter Cost Comparison:

Two law enforcement helicopter installations completed within the past three years were

identified for a comparison. The cost of the two purchases and installations are being used in this

report as a comparison to the Hanger One installation price submitted to LASD.

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During the 06/07 fiscal year Riverside County Sheriffs purchased an AS350-B3 with a full

electronics package installed, along with an exterior rescue hoist. All installation work was

completed at the American Eurocopter factory. The AS350-B3 airframe from Eurocopter

(helicopter only) purchase cost is more then five hundred thousand dollars over the AS350-B2

airframe purchased by LASD. The total cost for the helicopter and completion package for

Riverside County Sheriff Department's helicopter was $3,598,408.23

Less information was found on Placer County Sheriffs purchase that occurred in 2009, however,

public information specified 3.5 million for a completed AS350-B3 helicopter. The avionic

installation was completed by Hanger One Avionics.

LASD cost is in the four million dollar range per helicopter. The LASD purchase and

completion cost is much higher than the Riverside County Sheriffs helicopter.even with their

helicopter airframe costing over five hundred thousand dollars more then LASD's. Prices have

remained stable since the purchase of these helicopters, with little or no cost increase.

Hanger One is charging LASD $350,000.00 finn fixed price labor for each helicopter

installation. This per aircraft amount cannot be justified. Typical shop rates for aircraftmaintenance and avionic shops average $80 to $90 dollars an hour. Hanger One, in the 2009

Agreement Vendor contract, charges LASD $90 dollars an hour shop rate. Bids are formulated

on this hourly shop rate. Shops will estimate the amount of time required to complete the work

and quote prices based on these rates. In our current economy, competition is fierce due to the

soft avionics market.

Hanger One Avionic's shop rate of $90 dollars is on the avionics industry high side, especially in:

the current economy. The 350 thousand dollar charge (per helicopter) for labor on these new

installations is unreasonable and it is extremely excessive. Hanger One Avionics' $90 dollars an

hour shop rate, factored into the amount LASD is being charged for the new helicopter

installation, would equate to 3,888 shop hours. Compared to a typical eight hour shift five days a

week (160 work hours a month) this would equate to over 24 months of work. The normal

installation time per aircraft should not exceed two or three months. Even at three months (480

shop hours) the labor cost would only amount to $43,200 per aircraft.

The total cost for (installation only) labor charges assessed by Hanger One Avionics totals$4,900,000.

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Another identified area of concern is the airframe and engine installations, which are usually

completed by the manufacturer, American Eurocopter. Instead, there have been equipment

charges assessed by Hanger One Avionics for these items. Some of these installations ( i.e. the

wire cutter installation) are structural and require certain expertise. The below listed parts and

installations are unusual for an avionics shop to complete, especially a shop with minimal

experience in this field. The parts and equipment cost from Hanger One Avionics for 14

helicopters is listed below (Refer to attachment, Equipment pricing, pages 2-5).

TIE DOWN RINGS

EUROCOPTER EXTENDED PANEL

WINDSHIELDS

EMERGENCY FLOATS

CARGO SLINGS

ANTI- TORQUE PEDDLE EXTENSIONS

GROUND POWER HYDRAULIC RECEPTACLE

CARGO MIRRORS

FUEL PUMPS

FULL LENGTH DART BOARDING STEP

MAIN ROTOR TIE DOWNS

DUEL FLIGHT CONTROLS

TACTICAL HARD POINTS

ENGINE WASH KITS

WHELEN LED BELLY LIGHTS

WHELEN LED VERTICAL STABILIZER LIGHT

LED POSITION LIGHTS

STEERABLE LANDING LIGHT

PULSE LANDING LIGHTS

MAP LIGHTNVG COCKPIT LIGHTING

SKID SHOES

AEROSPACE ENGINE AIR FILTER

WIRE STRIKE KITS

200 AMP STARTER GENERATOR

FACET ENGINE OIL FILTER

AIR CONDITIONING

REAR CABIN SEATS

$24,156.08

152,253.78

59,232.08

320,099.40

94,634.82

49,262.65

63,364.85

13,265.09

106,606.06

64,029.64

23,207.13

134,207.13

7,682.50

23,047.50

23,817.29

8,002.29

9,956.32

111,626.57

18,219.05

13,060.25758,250.20

75,288.50

326,352.60

230,106.24

145,967.50

39,320.57

263,847.78

460,950.00

Total amount charged for factory associated equipment installations: $3,619,813.87

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Excessive Pricing/Hanger One Avionics:

LASD has "direct purchasing" access to many manufactures. Additionally, LASD is eligible for

Federally negotiated pricing (GSA pricing). A review of some equipment charges are excessive

compared to eligible purchase pricing through various channels. Additionally, with the number

of LASD helicopters and the soft aviation market, pricing should be very competitive.

Charge discrepancies for these products should be verified and validated:

Examples:

FUR

Ultra 9HD (2 prices by Hanger One) page 5 $297,434

page 20 $356,775

GSA pricing Ultra 8500FWLP $231,697

Star Safire (2 prices by Hanger One) Page 6....$770,671

Page 20..$749,816

GSA pricing for the highest price unit $724,850

Spectrolab SX 16 Searchlight (Hanger One)

Omaha PD record of purchase 11/18/10

$ 42,832.65

$28,421.20

Several flight instruments and other accessories also appear to have inflated prices. Various

example have been included with the included documents.

Equipment purchases through Hanger OnelDirect Delivery to LASD Aero Bureau

The Los Angeles County Board of Supervisors approved up to 56.7 million dollars to purchase

the helicopters and install the necessary law enforcement equipment and avionics in these

helicopters. Numerous items have been purchased as part of the helicopter acquisition, but these

items are not, and should not be, considered part of the helicopter installation. The items

purchased were not disclosed as a separate purchase request, instead, it is identified in Hanger

One Avionics bid sheet as "other support equipment". A few purchases fall under the guidelines

of Capital Purchases, requiring the Board of Supervisors approval. Additionally, Hanger One

Avionics is being used as a "store front" in order to obtain these items, which has not been

properly disclosed.Many items were ordered in excessive amounts and the total numbers that were ordered can not

be justified, especially in the current economic state of the Government, as well as LASD.

Additionally, some prices have been artificially inflated. County Purchasing violations appear to

have occurred.

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The below listed equipment is not considered part of the helicopter installation. Itwas

purchased under the pretense of Standard Equipment/Cabin Equipment-Furnish (refer to

bid sheet pages 18 and 19 under Standard Equipment/Cabin Equipment-Furnish).

EQUIPMENT NUMBER PURCHASED TOTAL COST

Night Vision Goggles 42 PAIRS $491,473.65

Aero Bureau has 10-12 NVG goggles which are sufficient to support any LASD mission. Basin

helicopter crews rarely have a need for NVG. Aero rarely has more than four patrol ships

operating at night. Very few additions would be required.

Stabilized Binoculars (Canon)

Stabilized Binoculars (Fujinon)

14 PAIRS

14 PAIRS

8,664.40

59,573.40

Aero Bureau Patrol crews are already issued the Canon binoculars. Very few additions would be

required. There is no justification for 14 Fujinons.

David Clark Headsets 56 PAIRS 20,573.18

Aero Bureau already has a supply of aviation headsets. Very few additions would be required.

Helmet Gallet 42 104,130.91

In 2002-2003 Aero Bureau researched the various helmets on the market, including the Gallet

(Made in France). The Gentex SPH 5 was selected as the flight crew helmet. A sufficient

number of helmets were purchase for the flight crews. Very few additions would be required.

Helmets are purchased at the same time the purchase request for all flight safety equipment

(flight suits, gloves, etc.) is submitted. Additionally, the Gallet helmet costs over $500 dollars a

helmet more than the Gentex.

Over Water Safety Gear 20 sets 31,827.50

Aero Bureau already has a sufficient amount of over water vests available to the crews and

passengers.

Air Crew Survival kit

Kannad Personal Locator Beacon

14

14

14,948.76

4,594.14

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The Kannad Personal Locator Beacon is a hand held device carried for backpacking, etc. The

helicopters are equipped with an Emergency Locator Transmitter ELT (FAA required). In a

crash, this unit automatically activates or a crew member can activate the ELT via a remote

switch in the cockpit. There is no justification for the purchase of these personal locators.

Total amount this section $631,655.03

The below listed items were purchase as extras and were not installed in the helicopters.This equipment was shipped directly to Aero Bureau. Hanger One Avionics was requestedto ship these items as directed by LASD Aero Bureau.

(refer to bid sheet pages 19-21 under AVIONICS SUPPORT INVENTORy).

FUR Ultra 9500 1 356,775.00

FUR Star Satire HD 1 749,816.00

Technisonic TDFM 7300 3 121,896.00

Becker DVCS 6100 3 81,067.50

Aero Computer IMU 1 14,539.25

Moving Map UC5100 1 83,479.25

Monitors 2 50,160.00

Scanner 2 1,100.00

Radar Altimeter 2 26,566.00

AvidyneTAS 1 11,893.00

Garmin SL30 4 13,185.00

Marker Beacon 2 7,423.00

Digital Clock 2 351.00

Transponder 2 5,994.00

Public Address Controller PSAIR22A 2 16,088.64

Public Address Controler A790 2 4,492.50

Searchlight 4 171,330.60

Total amount this section $1,716,156.74

The below listed items were purchase and shipped directly to Aero Bureau as extrainventory. (refer to bid sheet pages 22 under GROUND HANDLING/SAFETYEQUIPMENT). Hanger One Avionics was requested to ship these items as directed by

LASD Aero Bureau.

Helicopter mover

(Chopper Spotter)

3 36,382.00

Aero Bureau has 2 or 3 movers and for years it has been sufficient for the needs of the Unit.

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Tri Max fire extinguisher 6 67,354.67

LASD already has 2 or 3 Tri Max fire extinguishers. Ithas been sufficient to support the Unit.

(LASD paid Hanger One Avionics $10,228 for each unit. Posted GSA pricing is $6,500 per unit)

Total amount this section $103,736.67

Total amount for all equipment listed in Hanger One Avionicsbid contract pages 18-22 (excluding sales tax) $2,555,679.39Total amount charged for installation labor ........•.......................•..•.........4,900,000.00Total amount charged, possible factory related installed items 3,619,813.87

Total amount for charges in question $10,971,362.31

Note: The amounts listed above does not take into consideration any artificially inflatedpricing for equipment and accessories provided by Hanger One Avionics.

Conclusion:

The amount of the unaccounted charges for equipment installations, excessive labor charges,

inflated equipment pricing, and possible double charges, explains the highly inflated purchase

cost for LASD's helicopter purchase.

If you take the amount approved by the Board of Supervisors $56,700,000.00

Deduct the estimated amount of the excessive charges l0,971,362.31

The adjusted balance equals .45, 728,637.69

Divided this balance by the purchase (14 equipped helicopters) equals .... .3 ,266,3 31.26

The adjusted amount of $3,266,331.26 per completed helicopter, including tax, brackets the

actual market rate for a completed AS350-B2 helicopter.

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Aero - Hangar One Contract Analysis