CBS News has learned that a bipartisan group of lawmakers is working to reintroduce a bill to curb price gouging by military contractors.
The Military Law Stop Price Gouging Act, first introduced by Sen. Elizabeth Warren and Rep. John Raymond Garamendi in June of last year, would close loopholes in acquisition law, tie financial incentives to contractors to performance and provide the Department of Defense with information needed to prevent future thefts.
“Defense contractors are exploiting loopholes in the law and making huge profits through price gouging at the Pentagon and American taxpayers,” Warren said in a statement, adding that the bill “would close these loopholes and ensure that the Department of Defense has the tools to prevent these abuses.”
A Warren aide said major changes to the bill since it was first introduced would focus on ensuring that the companies that do the most business with the Defense Department are the ones subject to increased transparency and accountability.
Price gouging has long been a problem for the Pentagon. The Department of Defense was on the Government Accountability Office’s high risk list for Financial management Since the 90s. In 2020, the Pentagon’s Office of Inspector General reported that about 20% One of its ongoing investigations involved procurement fraud.
Contractors overcharge the Department of Defense for almost everything the military buys each year,Over the course of six months since the last investigation. Almost half the largest of all, would go to defense contractors.
Some of these contractors withhold pricing information from the Department of Defense. Boeing declined to share cost information for nearly 11,000 items between October of 2020 and September of 2021, according to the Department of Defense’s annual report to Congress on pricing data. The same report found that TransDigm, a subcontractor, was responsible for 275 data refusals.
There were 401 pricing data denials included in the previously undisclosed Pentagon report from October 2021 through September 2022. Each one involved items whose equipment manufacturer’s parent company was TransDigm.
Warren and Garamandi on May 25 sent letters to Boeing, TransDigim and the Department of Defense regarding price transparency.
“This denial makes it impossible for Department of Defense officials to ensure that the agency has not been stolen,” they wrote in the letter to the Pentagon.
In their letter, Warren and Garamandi gave the Department of Defense, Boeing and Trandigm until June 12 to respond to questions. A Warren aide confirmed that lawmakers had received responses, but said those responses needed to be reviewed in more detail.
A Boeing spokesperson said of the letter: “We take very seriously our responsibility to support the fighter and our obligations to the United States government and taxpayers.”
While TransDigm did not respond to a request from CBS News for comment, a company spokesperson previously told “60 Minutes” that the company follows the law and charges market rates.
The Ministry of Defense did not comment on the letter, but responded to the “60 Minutes” program.Last month, he said in part: “The department is committed to evaluating all DoD contracts for fair and reasonable prices in order to minimize cost to the taxpayer and maximize combat capability and services to the department. Strong competition within the defense industrial base is one of the surest ways to get prices.” Reasonable for DoD contracts. However, for some defense requirements, the Department relies on individual suppliers, and contracting officials must negotiate sole-source contracts using legal and regulatory authorities that protect taxpayer interests.”
A bipartisan group of senators in May asked the Department of Defense to do just thatprice gouging for a long time. They called Lockheed Martin, Boeing, Raytheon, and TransDigim.
The senators wrote that “these companies have abused the confidence the government has placed in them, taking advantage of their position as the sole supplier of certain items to raise prices far above inflation or any reasonable profit margin.”