Warren, Garamendi Call Out Boeing and TransDigm for Refusing to Provide Cost or Pricing Data to Defense Department, Potentially Price Gouging Taxpayers
Lawmakers Call on DoD to Take Action to Prevent Price Gouging and Require Transparency
Washington, D.C. – U.S. Senator Elizabeth Warren (D-Mass.), a member of the Senate Armed Services Committee, and U.S. Representative John Garamendi (D-Calif.), ranking member of the House Armed Services Committee Readiness Subcommittee, sent letters to Boeing and TransDigm, calling out the defense contractors for their refusal to provide cost and pricing data to the Department of Defense (DoD), as required by law. The lawmakers also sent a letter to DoD, calling on the Department to take action to address these contractors’ refusals to provide cost and pricing data.
“The Truth in Negotiation Act, later renamed the Truthful Cost or Pricing Act, requires the government to obtain data to determine whether prices are fair and reasonable... DoD has reported, however, that there are ‘chronic issues’ of contractors refusing to provide that data…(and) the new reports of contractor’s refusal to provide pricing data are unacceptable. DoD must act to address this failure and protect taxpayer dollars, ” wrote the lawmakers in their letter to DoD.
DoD’s latest Annual Report to Congress on Denials of Contracting Officer Uncertified Cost or Pricing Data Requests revealed that just two contractors, Boeing and TransDigm, denied Air Force and Defense Logistics Agency requests for pricing data 10,934 times, with Boeing accounting for 97% of the denials listed in the report. The report also raised concerns that denying cost or pricing data “may be more prevalent than what is represented in this report.”
“Boeing’s refusal to provide basic transparency on cost and pricing information represents a breach of the company’s duty to government, taxpayers, and our servicemembers, and raises questions about whether DoD should retain these contracts with Boeing,” wrote the lawmakers in their letter to Boeing “While Boeing refuses to provide DoD the data it needs to determine if its prices are fair and reasonable, the company continues to shovel taxpayer dollars to its executives and shareholders. Boeing has paid $1.2 billion in dividends in 2020, and engaged in a stock-buyback program of $18 billion in 2017. Executive compensation for FY2022 was nearly $58 million.”
Several previous Department of Defense Inspector General reports found TransDigm refused to provide cost and pricing data and collected excessive profits on parts sold to DoD. “When TransDigm refuses to act in good faith, there are two options for the DoD: buy from TransDigm at their exorbitant prices, or walk away without the parts they need, putting mission readiness at risk,” wrote the lawmakers in their letter to TransDigm.“While TransDigm refuses to provide DoD the data it needs to determine if its prices are fair and reasonable, the company continues to shovel taxpayer dollars out the door to its executives and shareholders via stock-buyback programs and generous executive compensation. In November 2017, TransDigm authorized a $650 million stock buy-back program and in FY2020, (the CEO) earned a salary increase of nearly 70 percent. The company authorized another stock buy-back program in January 2022 for $2.2 billion. The company paid its executives nearly $46 million in 2022,”
Given their concerns, Senator Warren and Representative Garamendi are asking DoD to take action to address this failure, and require companies to provide cost or pricing data. They are also asking DoD, Boeing, and TransDigm to answer a set of questions by June 12, 2023.
Senator Warren has led vigilant oversight to hold military contractors accountable for price gouging DoD and consumers:
- 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.
- In May 2021, 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 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 May 2017, Senator Warren wrote to the DoD Inspector General, requesting an investigation into TransDigm for potential waste, fraud, and abuse in the military spares market.
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