October 27, 2022

Warren Obtains Department of Defense Commitment to Protect Taxpayer Dollars, as DoD Indicates It Does Not Want to Adjust Contracts for Inflation

 Text of Senator Warren Letter to DoD (PDF) | DoD’s Response to Senator Warren’s Letter (PDF)

Washington D.C. – In response to questions from U.S. Senator Elizabeth Warren (D-Mass.), a member of the Senate Armed Services Committee, about defense industry pressure on the Department of Defense (DoD) to increase the price of existing defense contracts, the Under Secretary of Defense for Acquisition and Sustainment, Bill LaPlante said that the Department “does not intend to enact a policy to increase contract prices due to inflation.”

“As major defense contractors brag to their shareholders about increasing dividends and buybacks, they can’t expect taxpayers to further underwrite their profits. Industry contractors should not be able to pressure DoD into increasing the price of existing contracts without certified cost or pricing data,” said Senator Elizabeth Warren. “I will continue to take action to ensure that the Department protects taxpayers from defense industry profiteering.”

In the October 3 letter to Under Secretary LaPlante, Senator Warren raised concerns about reports that DoD was considering making costly adjustments to contracts under the guise of inflation, and insisted DoD obtain certified cost data to justify any changes writing, “there are too many instances where major defense companies made tens of millions, and my office has been made aware of instances of hundreds of millions of dollars, in excess profit on individual firm fixed price contracts.”

In the DoD response to Sen. Warren’s letter, Under Secretary LaPlante added that contracting officers “should not agree to requests for adjustment due to changed economic conditions as cost impacts attributable to unanticipated inflation are not a result of contracting officer directed changes.” Contracting officers are expected to enlist the support of the Defense Contract Audit Agency (DCAA) and the Defense Contract Management Agency (DCMA) for any significant contract changes.

Senator Warren has been a leading voice for making sure that the defense industry does not exert undue influence on the Department of Defense:

  • In June 2022, Senator Warren 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 in the National Defense Authorization Act.
  • In April 2022, at a hearing of the Senate Committee on Armed Services, U.S. Senator Elizabeth Warren (D-Mass.) questioned Lloyd Austin III, the Secretary of the Department of Defense (DoD), and made the case for not increasing the DoD budget. When asked if taxpayers should be expected to subsidize higher profits for contractors that are using inflation as a cover to raise prices above and beyond what’s justified by their expenses, Secretary Austin said, “no” and added, “you have my commitment, and the commitment of my entire team, that we're going to do everything within our power to make sure that we are managing contracts and monitoring behavior so that we enable the people, the United States of America, to get the best value for its investments.”
  • 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 July 2020, in response to questioning from Senator Warren in a hearing of the Senate Armed Services Committee, the Under Secretary of Defense for Acquisition and Sustainment Ellen Lord said big defense contractors cannot divert the increased progress payments towards share buybacks, dividends, or executive salaries.
  • In May 2019, Senator Warren introduced the Department of Defense Ethics and Anti-Corruption Act, which would enforce limits to the influence of contractors on the military, restrict foreign influence on retired senior military officers, and assert greater transparency over contractors and their interaction with the DoD.
  • In May 2017, Senator Warren wrote to DoD Inspector General Glenn Fine to request an investigation into TransDigm for potential waste, fraud, and abuse in the military spares market.