A bipartisan group of senators is demanding that the Pentagon reveal so-called price gouging tactics by military contractors that they say can cost the U.S. military billions of dollars every year in overpayments.
In a letter sent to Defense Secretary Lloyd Austin on Tuesday night, Senators Elizabeth Warren (D-Mass.), Chuck Grassley (R-Iowa), Mike Braun (R-Ind.) and John Fetterman (D- Pa.) say they are particularly concerned that defense contractors are exploiting loopholes, including the practice of “sweeping.” Such a tactic – in which contractors delay submitting data on costs or prices that would allow the government to negotiate fairer prices – allows companies to charge the military more for a product.
“We remain concerned about audits and press reports that reveal that defense contractors regularly mislead the military,” they wrote, according to the letter obtained by The Hill. “DoD contractors should not get away with price gouging and abusive practices. DoD should better explain the challenges it faces with the contracting process that caused the government to overpay for goods and services and what steps [the Defense Department] took to solve the problem.”
The Pentagon did not respond to a request for comment from The Hill by press time.
In fiscal year 2022, the Pentagon awarded $414.5 billion in contracts to the defense industrial base, according to data from the U.S. Government Accountability Office.
But lawmakers have expressed outrage that part of that sum is due to defense contractors using loopholes to routinely refuse to provide the Department of Defense (DOD) with legally required data to prove that the prices of their products are fair. , even in contracts awarded without competition.
They point to a CBS News report last year, which found that several defense contractors repeatedly overcharged the DOD to make excessive profits of 40% to 50%. Contractors did so by failing to provide necessary cost information before reaching an agreement, instead overwhelming Pentagon contracting agents with documents and data that only arrived after an agreement had been reached – the tactic known as like scanning. Such a move frees defense companies from liability and potentially hides data that could have been used by the Pentagon to demand better deals.
“This practice costs billions of dollars and allows contractors to make excessive profits at taxpayers’ expense,” the lawmakers write.
The Pentagon has historically paid inflated prices for military spare parts, with a 2019 DOD inspector general report finding that TransDigm Group, a major defense contractor, charged $4,361 for a half-inch metal pin, an excess profit of almost 9,400%.
Another report from the DOD inspector general found that the same contractor cheated the government out of $21 million on one contract by pricing items up to 3,850 percent more than the reasonable cost.
Legally, all companies involved in a sole-source – that is, non-competition – contract with the Pentagon do not have to disclose pricing data for deals under $2 million.
That limit was increased from the $750,000 anticipated in the fiscal 2018 defense policy bill after industry, citing excessive capture of competitive information, sought to undermine the Pentagon’s ability to demand cost data.
And for years before that, the Pentagon rarely required companies to comply with this rule.
Another loophole allows contractors to retain Pentagon cost data if a part is similar to another that could be sold commercially.
Warren, who sits on the Senate Armed Services Committee, last year repeatedly pressed the Pentagon on the issue of procurement fraud, asking for more information about what companies are hiding from defense officials when it comes to to the prices of military parts.
In the latest letter, lawmakers ask Austin several detailed questions about challenges the DOD is likely to face in the contract process due to scanning or other tactics, as well as what steps the department has taken to resolve the issue.
These questions include whether companies provide proof of cost or pricing data prior to so-called scanning, how extensive the practice is with DOD contractors, how the process works, what actions DOD takes to prevent contractors from providing scanning data, and any other tactics companies use during contract negotiations that can delay deals or prevent the Pentagon from ensuring they are receiving a good price.
They are asking the Pentagon for answers to questions by June 12.
This story originally appeared on thehill.com read the full story
