Lawmakers again target military contractors’ price gouging

A bipartisan group of lawmakers is set to reintroduce a bill to rein in price gouging by military contractors, CBS News has learned. 

The Stop Price Gouging the Military Act, first introduced by Sen. Elizabeth Warren and Rep. John Raymond Garamendi in June of last year, would close acquisition law loopholes, tie financial incentives for contractors to performance and provide the Department of Defense with information needed to prevent future rip-offs. 

“Defense contractors have been exploiting loopholes in the law and raking in massive profits by price-gouging the Pentagon and American taxpayers,” Warren said in a statement, adding that the bill “would close these loopholes and ensure that DOD has the necessary tools to prevent these abuses.”

The main changes to the bill since it was first introduced will focus on ensuring that the companies that do the most business with the Defense Department are the ones subject to increased transparency and accountability, a Warren aide said. 

Price gouging has long been a problem for the Pentagon. The DOD has been on the Government Accountability Office’s high-risk list for financial management since the 1990s. In 2020, the Pentagon’s Office of Inspector General reported that roughly 20% of its ongoing investigations were related to procurement fraud. 

Contractors overcharge the DOD on almost everything the military buys each year, experts told “60 Minutes” over the course of a recent six-month investigation. Almost half of the Pentagon’s budget for the upcoming fiscal year, the largest ever, will go to defense contractors. 

Some of those contractors withhold pricing information from the Defense Department. Boeing refused to share cost information for nearly 11,000 items between October of 2020 and September of 2021, according to an annual DOD report to Congress on pricing data. That same report found TransDigm, a subcontractor, was responsible for 275 data denials. 

There were 401 instances of pricing data denials listed in a previously undisclosed Pentagon report for October 2021 through September of 2022. Each one involved items whose original equipment manufacturer’s parent company was TransDigm. 

Warren and Garamendi on May 25 sent letters to Boeing, TransDigm and the DOD regarding pricing transparency. 

“These denials make it impossible for DOD officials to make sure the agency is not being ripped off,” they wrote in the letter to the Pentagon.

In their letter, Warren and Garamendi gave the Defense Department, Boeing and Transdigm until June 12 to respond to questions. An aide for Warren confirmed the lawmakers had received responses, but said those responses needed to be reviewed in more detail.

“We take very seriously our responsibility to support the warfighter and our commitments to the U.S. government and taxpayer,” a Boeing spokesperson said about the letter.

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 prices. 

The Defense Department also did not comment on the letter, but responded to the “60 Minutes” price gouging report last month, saying in part: “The Department is committed to evaluating all DOD contracts for fair and reasonable pricing in order to minimize cost to the taxpayer and maximize the combat capability and services delivered to the Department. Robust competition within the defense industrial base is one of the surest ways to obtain reasonable pricing on DOD contracts. For some defense requirements, however, the Department is reliant on single suppliers, and contracting officers must negotiate sole-source contracts using statutory and regulatory authorities that protect the taxpayers’ interests.”

A bipartisan group of senators in May asked the Defense Department to launch an investigation into longstanding price gouging. They called out Lockheed Martin, Boeing, Raytheon and TransDigm. 

“These companies have abused the trust government has placed in them, exploiting their position as sole suppliers for certain items to increase prices far above inflation or any reasonable profit margin,” the senators wrote.