June 20, 2023

Senators Warren, Braun, Representative Garamendi Reintroduce Bipartisan Stop Price Gouging the Military Act

Legislation would Strengthen Acquisition Laws and Close Loopholes to Prevent Defense Contractor Price Gouging

One Pager (PDF) | DoD Study (PDF) | Bill Text (PDF)

Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), Chair of the Armed Services Subcommittee on Personnel, Senator Mike Braun (R-Indiana) and Representative John Garamendi (D-Calif.)  Ranking Member, House Armed Services Committee Subcommittee on Readiness, reintroduced the bipartisan Stop Price Gouging the Military Act which would close loopholes in current acquisition laws, tie financial incentives for contractors to performance, and provide the Department of Defense (DoD) the information necessary to prevent future rip-offs. Senator Warren originally introduced this legislation with Rep. Garamendi last year. 

As they stand, current acquisition laws contain loopholes that make it nearly impossible for DoD to obtain the necessary data to combat price gouging. The legislation would require contractors to provide cost or pricing information to DoD if there isn’t adequate price competition that results in at least two responsive and responsible offers.

With the introduction of the Stop Price Gouging the Military Act, Senator Warren also made public a recent study from DoD on which contractors denied information requested by contracting officers to determine price reasonableness.

“Defense contractors have been exploiting loopholes in the law and raking in massive profits by price-gouging the Pentagon and American taxpayers,” said Senator Elizabeth Warren. “My bipartisan bill with Senator Braun and Representative Garamendi would close these loopholes and ensure that DoD has the necessary tools to prevent these abuses.” 

“As a senior member of the House Armed Services Committee, I know how much we pay for parts to keep military equipment ready,” said Representative John Garamendi. “We know that taxpayers and service members are routinely overcharged by defense contractors due to loopholes in current regulations. We cannot allow taxpayer money to be wasted to inflate the bottom lines of giant defense contractors. Our service members need the tools to properly negotiate prices. This is just common sense, and that’s why we introduced the ‘Stop Price Gouging the Military Act’. I thank Senators Warren and Braun for doing the same in the United States Senate. We will work together to ensure this legislation becomes law.”

“Defense contractors are taking advantage of the DoD and American taxpayers by charging more and delivering less,” said Senator Mike Braun. “This bipartisan legislation will inject transparency and accountability into the process by closing loopholes to prevent defense contractor price gouging.”

Specifically, the Stop Price Gouging the Military Act would:

  • Strengthen Truth In Negotiations Act Provisions. Closes a loophole in the law to require contractors to provide the federal government cost or pricing information if there isn’t adequate price competition that results in at least two responsive and responsible offers. 
  • Revision of Definition of Term “Commercial Item” for Purposes of Federal Procurement Statutes. Restores market dynamics to the commercial item definition by adopting an Obama administration proposal to tie to whether a good or service is actually sold to other customers. 
  • Progress Payments Incentive Pilot. Initiates a Department of Defense pilot first proposed by the Trump administration to tie payments to performance by lowering advanced payments for companies to 50% while providing contractors the opportunity to receive payments up to 95% if they meet certain conditions. Specifically, contractors would be rewarded for: 
    • Meeting program schedules and milestones 95% of the time; 
    • Not having major outstanding corrective action requests; 
    • Having required business systems; 
    • Timely responses to requests to provide certified cost or pricing information;
    • Disclosing first tier subcontractor data, beneficial owners, and total executive compensation; 
    • Meeting small business subcontracting goals; and 
    • Providing subcontracting opportunities for the blind and severely disabled.
  • Disclosure by Traditional Defense Contractors. Mirroring disclosures already required by publicly traded companies, requires traditional defense contractors to annually share with the Under Secretary of Defense for Acquisition and Sustainment changes in the volume of goods or services sold, changes in the average price, and gross margins.

As a champion for American consumers and a secure and healthy economy, Senator Warren has engaged in oversight over corporations, including military contractors, for their role in increasing prices for consumers as Americans face inflation.

  • On May 25, 2023 Senator Warren and Representative John Garamendi sent letters to DoD, Boeing, and TransDigm on companies’ refusal to provide cost or pricing data.
  • On May 25, 2023 Senators Warren, Sanders, Braun, and Grassley sent a letter to DoD urging an investigation into contractor price gouging.
  • In October 2022, Senator Warren obtained a commitment from DoD not to increase contract prices due to inflation.
  • In October 2022 Senator Warren sent a letter to DoD urging them to insist on receiving certified cost or pricing data to justify any contract adjustments.
  • In June 2022, Senator Warren and Representative Garamendi introduced the bicameral Stop Price Gouging the Military Act, which would enhance DoD’s ability to access certified cost and pricing data. Part of Senator Warren’s legislation was incorporated into the FY 2023 National Defense Authorization Act reported to the Senate.
  • On May 12, 2022, Senators Warren and Tammy Baldwin (D-Wisc.) and Rep. Jan Schakowsky (D-Ill.) introduced the Price Gouging Prevention Act of 2022, which would prohibit the practice of price gouging during all abnormal market disruptions – including the current pandemic – by authorizing the FTC and state attorneys general to enforce a federal ban against unconscionably excessive price increases, regardless of a seller's position in a supply chain. 
  • On March 16, 2022, Senator Warren introduced the Prohibiting Anticompetitive Mergers Act to help stomp out rampant industry consolidation that allows companies to raise consumer prices and mistreat workers. The bill would ban the biggest, most anticompetitive mergers and give the Department of Justice and FTC the teeth to reject deals in the first instance without court orders and to break up harmful mergers. 
  • On March 2, 2022, Senator Warren and her colleagues called out drug manufacturers for squeezing American families with rapid and widespread price hikes on prescription drugs. 
  • In February 2022, at a hearing, Senator Warren called out corporations for abusing their market power to raise consumer prices and boost profits. 
  • That same month, Senator Warren requested the Department of Justice to take aggressive action against corporations violating antitrust laws to hike prices for consumers. 
  • In January 13, 2022, Senator Warren questioned Federal Reserve nominee Lael Brainard about market concentration and price gouging driving inflation.
  • At a hearing in January 2022, Senator Warren pressed Fed Chair Jerome Powell on the role of corporate concentration in driving up prices for consumers during his renomination hearing to be Chair of the Board of Governors of the Federal Reserve System.
  • In December 2021, Senator Warren slammed Hertz's $2 billion dollar buyback plan, which would line the pockets of company executives and the private equity firm Apollo Global Management, while they raised rental car costs for consumers. 
  • In November 2021, Senator Warren identified 11 energy companies for inflating natural gas prices for consumers while reaping record profits. 
  • That same month, she requested the Department of Justice to investigate the poultry industry's anticompetitive behavior as turkey and chicken prices soar.
  • In the past year, Senator Warren has urged the Biden administration to closely scrutinize potential anticompetitive mergers that could lead to higher prices for consumers and accelerate industry consolidation. She has led letters about the proposed mergers of Frontier and Spirit airlines, Sanderson-Wayne, WarnerMedia-Discovery, and Amazon-MGM.
  • In September 2020, Senator Warren and Representative Ro Khanna (D-Calif.) formally requested that the Department of Defense (DoD) Inspector General (IG) investigate reports that the Pentagon redirected hundreds of millions of dollars of funds meant for COVID-19 response via the Defense Production Act (DPA) to defense contractors for "jet engine parts, body armor and dress uniforms.”
  • In May 2020, Senator Warren wrote to the Department requesting clarification on how the Department would prevent profiteering following a recent change to increase payments to contractors in response to the COVID-19 pandemic.
  • In March 2020, Senator Warren joined her colleagues in urging the FTC to use its full authority to prevent abusive price gouging on consumer health products during the COVID-19 pandemic. 
  • In May 2017, Senator Warren sent a letter to the Department of Defense Inspector General asking for an investigation into defense contractor TransDigm’s refusal to provide cost information to the Department of Defense.