Warren, Garamendi Renew Call for TransDigm to End Price Gouging, Provide Pricing and Cost Transparency to Defense Department
New Transdigm Information Shows Company is “Taking Advantage of Loopholes in Federal Contracting Law” to Drive Up Prices for Taxpayers while Earning Exorbitant Profits Price Gouging Creates National Security Vulnerability; Lawmakers Call on DoD to Enforce Pricing Transparency Laws to Prevent Contractor Ripoffs
Washington, D.C. – After new reports that defense contractor TransDigm refused to provide cost and pricing information needed to prevent price gouging of taxpayers and the Department of Defense (DoD), 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 the Department of Defense and TransDigm, pressing them to provide transparency on cost and pricing data to ensure that taxpayers aren’t being overcharged for expensive DoD contracts.
The lawmakers are asking DoD for answers about its practices to prevent price gouging, while also pushing TransDigm to provide cost or pricing data for its contracts after reports that the defense contractor was price gouging and earning record profits. In May 2023, the lawmakers wrote to Boeing and TransDigm, calling out the defense contractors for their refusal to provide cost and pricing data, and called on DoD to take action.
“(T)he Truthful Cost or Pricing Act, requires the government to obtain data to determine whether prices are fair and reasonable,” wrote the lawmakers in their letter to DoD. “This data is necessary for the Department to ensure government contractors are not overcharging taxpayers. DoD has reported, however, that there are ‘chronic issues’ with contractors refusing to provide that data… Contractors who consistently refuse to turn over cost and pricing data continue to rake in DoD contracts. For example, three previous inspector general reports, and a subsequent DoD report, have found TransDigm and its subsidiaries have repeatedly refused to provide requested cost or pricing data.”
The DoD’s latest Annual Report to Congress on Denials of Contracting Officer Uncertified Cost or Pricing Data Requests, provided to Congress earlier this year, contained deeply troubling findings that TransDigm and its subsidiaries continue to refuse to provide pricing data, failing to respond to 401 requests from the Defense Logistics Agency (DLA). In its response to the lawmakers’ letter, TransDigm “question(ed) an assertion that TransDigm companies refused to provide cost or pricing data supporting the reasonableness of their prices,” and claimed they are “not currently aware of any such instances” where TransDigm companies refused to provide cost or pricing data. TransDigm additionally refused to provide information about how many transactions in the last year fell below and above the TINA reporting requirement threshold.
“The explanation for the discrepancy between TransDigm’s claims and the DoD IG findings is that TransDigm appears to be taking advantage of loopholes in contracting law,” continued the lawmakers.
“Other defense contractors have worked to make it easier for military products to be labeled as ‘commercial,’ and TransDigm has benefited greatly from this loophole. TransDigm informed us that ‘products manufactured for commercial aircraft have near identical military counterparts’ which allows for a loophole to deny producing cost or pricing data by claiming ‘commerciality.’ In the latest report to Congress, TransDigm claimed ‘commerciality’ in about 90 percent of cases.”
Multiple DoD IG reports have also revealed that the overwhelming majority of TransDigm transactions fell below the threshold. And DoD shared with the lawmakers that the “Department is confident that the process is being followed and it shouldn’t be a surprise to any company (TransDigm) that a (contracting officer) requested specific data and it did not provide that data. In fact, in some cases the data is asked for multiple times during the elevation process to the head of the contracting activity.”
In response to the lawmakers’ May 2023 letter, Under Secretary of Defense for Acquisition and Sustainment Dr. William A. LaPlante shared that the Head of the Contracting Activity (HCA) must make the decision to award a contract, including in cases where a contractor refuses to provide cost or pricing data if certain criteria were met. DoD also shared that it would not support an increase to the TINA threshold “due to concerns it would have a significant, negative impact on contracting officers’ ability to determine price reasonableness and negotiate reasonable prices.” DoD also shared that the Department does not track contractor delays in providing certified cost or pricing data, or data other than certified cost or pricing data.
“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. “This lack of market competition leaves our military and national security vulnerable. In a statement before the House Committee on Oversight and Reform, the DoD’s Principal Director for Defense Pricing and Contracting, John Tenaglia, stated “the price we pay matters because the more we pay, the less combat capability we can acquire for a ready force.” DoD has also highlighted these concerns, sharing with us that “there could be instances where the Department purchases less due to increases in prices.” TransDigm’s ongoing refusal to provide DoD with pricing data is unacceptable given the company’s record of ripping off the government and taxpayers.”
Given these serious concerns, the lawmakers are asking DoD and TransDigm to answer a set of questions about cost or pricing data by December 13, 2023 to ensure taxpayers aren’t being price gouged.
Senator Warren has led vigilant oversight to hold military contractors accountable for price gouging DoD and consumers:
- In July 2023, chairing a hearing of the Senate Armed Services Subcommittee on Personnel, Senator Warren called out DoD for wasting billions in taxpayers dollars due to price gouging by defense contractors for services and in health care, and identified opportunities for cost savings when DoD buys personnel-related goods and services.
- In July 2023, Senator Warren sent a letter to Secretary Austin and Director of the Defense Health Agency, Lieutenant General Telita Crosland, regarding a series of DoD Inspector General reports finding that DoD is failing to prevent price gouging and overpayments to contractors in the TRICARE health program.
- In May 2023, Senator Warren and Representative Garamendi sent letters to Boeing and TransDigm, calling out the defense contractors for their refusal to provide cost and pricing data to DoD, and they sent a letter to DoD calling on it to take action to address these contractors’ refusals to provide cost and pricing data.
- 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.
Next Article Previous Article