Bipartisan US Senators Press Pentagon to Address Contractors Overcharging Military For Parts, Services

Ryan Morgan
By Ryan Morgan
May 29, 2024US News
Bipartisan US Senators Press Pentagon to Address Contractors Overcharging Military For Parts, Services
The Pentagon building in Arlington, Va., on Dec. 26, 2011. (Staff/AFP via Getty Images)

A group of four Democratic and Republican U.S. Senators is renewing calls for the U.S. Department of Defense to investigate claims private military contractors are ripping off the department with unreasonably high invoices for parts and services.

Sen. Elizabeth Warren (D-Mass.), working with fellow Sens. John Fetterman (D-Pa.), Mike Braun (R-Ind.), and Chuck Grassley (R-Iowa), sent a letter to Defense Secretary Lloyd Austin on May 28 urging his department to continue pursuing investigations into allegations that the U.S. military’s private partners have engaged in price gouging.

The Tuesday letter cites reports in recent years by the DOD’s Office of Inspector General (OIG) and various news media outlets of contractors overcharging for parts and services.

A December 2021 report by the DOD OIG, for instance, states a manufacturer of aerospace spare parts had garnered “excess profit” on 46 of the 47 types of parts it sold to the Defense Logistics Agency (DLA) and the U.S. Army between 2017 and 2019; with profit margins for those parts ranging from 17 percent to 4,451 percent. Only one part sold by the contractor fell within the 11 percent profit margin the DOD OIG determined to be reasonable for such parts contracts.

Price gouging practices have been a past point of focus for Ms. Warren, Mr. Braun, and Mr. Grassley. Those three senators, along with Sens. Ron Wyden (D-Ore.) and Bernie Sanders (I-Vt.), called on Mr. Austin to bring renewed scrutiny to prices military contractors have been billing the DOD.

“We continue to be concerned by audits and press reports that find defense contractors regularly gouge the military,” the May 28 letter reads.

In their latest letter, Ms. Warren and Messrs. Fetterman, Braun, and Grassley noted the DOD’s various programs routinely end up on the Government Accountability Office’s (GAO) “High Risk List”—a list of government programs and operations that the GAO assesses are particularly vulnerable to waste, fraud, abuse, mismanagement, or that need reform.

An April 2023 GAO report states that 37 government programs and operations remain on its “High Risk List,” including four DOD components. The GAO report concluded that the DOD Approach to business transformation component made improvements, while the department’s weapons systems acquisition and its Weapon Systems Acquisition marked no change, and its business systems modernization component had regressed.

‘Sweeping’ Price Gouging Concerns

The four U.S. senators raised particular concern about an alleged manipulative pricing practice they referred to as “sweeping.” The practice entails contractors withholding cost or pricing data that were reasonably available at the time of a price agreement, making it more difficult for the DOD to negotiate lower prices for parts and services.

“Instead of providing appropriate information prior to reaching an agreement, contractors have drowned DoD contracting officers in a deluge of documents and data immediately post handshake, using this tactic to release themselves of liability and potentially hide data that might give the DoD a better price,” the four senators wrote on Tuesday. “This practice costs billions of dollars and allows contractors to collect excessive profits on the backs of the taxpayers.”

The bipartisan group of senators called on Mr. Austin to address 14 questions about the DOD’s contracting practices and its efforts to prevent price gouging. Of the questions, 13 focused specifically on this “sweeping” practice, while a 14th question focused on what other behaviors private contractors may engage in to either delay contract negotiations or hinder the DOD’s efforts to obtain fair prices for parts and services.

The senators asked the defense secretary to provide more details about how price “sweeping” may play out in the DOD’s contracting processes, what impact it has on awarding contracts, and how pervasive the practice may be across the department. They also asked whether there’s a process for DOD contracting officers to report suspected price-sweeping behavior, otherwise prevent “sweeping,” or take corrective actions against contractors the DOD believes habitually engage in this practice.

The senators asked Mr. Austin to provide answers to their questions by June 12.

NTD News reached out to Mr. Austin’s office for comment about the letter and the alleged price-gouging practices but did not receive a response by press time.

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