I have pretty limited experience but this seems like a poor practice for a dive operation. Knowingly continuing to use defective equipment to rent to divers?
We were not "renting" anything to divers. The tour operator, Club Vacanze, did provide free diving for all their customers. So they did not "pay" for "renting" equipment, all was provided "for free" (actually already included in the holidays package).
Of course this was very attractive for diving customers, and almost half of the customers were divers, who did expect to get at least one dive per day, often two, included in the "all inclusive" package - this did also include many other sports, such as kayak, windsurf, fishing, etc. - actually the only extra a customer had to pay for was for super-alcoholics (wine and beer were included, too)... And tipping was strongly forbidden!
Actual using cash in the resort was entirely forbbiden, for purchasing super-alcoholics the customers had to use some coloured plastic daisy-chains.
So it was not possible NOT to provide diving to them.
And we had to do with what was available, as getting spare parts from Italy was a long procedure. We did take more than one month before receiving a good batch of O-rings, During the weekly flight, we received two times other batches of bad O-rings, as the people in Italy purchasing them did take care only of their proper size, and not of their proper durometry.
So, as those O-rings were the only ones available, what could have been done differently? Luckily enough the safety procedures adopted by Club Vacanze provided the added safety, thanks to the double-valves and double complete regs, and the availability of spare tanks hanging below the boat (to be used for deco, but also in case of O-ring extrusion).