Senators urge Pentagon to investigate price gouging by military contractors after 60 Minutes report

A bipartisan group of U.S. senators on Wednesday called on the Department of Defense to open an investigation into long-running price gouging by defense contractors.

In a letter to Secretary of Defense Lloyd Austin, Sens. Bernie Sanders (D-VT), Elizabeth Warren (D-MA), Chuck Grassley (R-IA), Mike Braun (D-IN) and Ron Wyden (D-OR) said they were prompted by a six-month investigation by 60 Minutes which revealed a significant price increase. Experts told 60 Minutes that military contractors overcharge the Pentagon on almost everything the DOD buys each year.

“Lockheed Martin, Boeing, Raytheon, and TransDigm are among the offenders, grossly overcharging the Department and U.S. taxpayers while reaping huge profits, seeing their stock prices skyrocket, and handing out huge compensation packages to leaders,” the senators wrote. “These companies abused the government’s trust in them, exploiting their position as exclusive suppliers of certain items to raise prices well above inflation or any reasonable profit margin.”

In March, Undersecretary of Defense Kathleen Hicks announced the largest budget ever seen by the Pentagon: $842 billion. Almost half will go to defense contractors.

“Dollars that are wasted on overpriced weapons or spare parts cannot be spent countering adversaries or supporting service members,” the senators wrote.

The letter from the five senators, addressed to Secretary of Defense Lloyd Austin, cites that in 2020, the Department of Defense Inspector General’s Office reported that approximately 1 in 5 of its ongoing investigations were related to the purchase fraud. The Department of Defense has been on the Government Accountability Office’s high risk list for financial management since the 1990s.

“The DOD can no longer expect Congress or the American taxpayer to fund record military spending while failing to account for the hundreds of billions it distributes each year to spectacularly profitable private corporations,” the DOD wrote. senators.

Shay Assad, now retired after becoming the Defense Department’s longest-serving and most awarded contract negotiator, cited 60 Minutes of the Patriot Weapons System as an example. In 2015, Assad ordered a review and military negotiators found that Lockheed Martin and its contractor, Boeing, were grossly overcharging the Pentagon and its US allies hundreds of millions of dollars for Patriot PAC-3 missiles.

Lockheed Martin told 60 Minutes that it “works constructively and ethically with the U.S. government to support its national defense, intelligence, and international security cooperation objectives.” “We negotiate in good faith with the government on all of our programs to meet the needs of its mission with the best and most efficient technologies and systems, consistent with federal procurement regulations and all other applicable laws.”

After the review, the Pentagon negotiated a new follow-on contract and saved the Department of Defense $550 million.

“…[W]We take our responsibility to support the fighter and our commitments to the U.S. government and taxpayers very seriously,” a Boeing spokesperson said.

Retired Air Force Lt. Gen. Chris Bogdan, who oversaw the purchase of some of the nation’s most critical weapons systems, pointed 60 Minutes to another problematic Lockheed Martin contract. He took over the reins of the troubled F-35 Joint Strike Fighter program in 2012, when the program was seven years behind schedule and $90 billion over the original estimate. Bogdan said the biggest costs are yet to come. Support and maintenance could end up costing taxpayers $1.3 trillion.

Lockheed is delivering the plane the Pentagon paid to design and build, but under the contract the company and its suppliers retained control of some of the proprietary information – design and repair data – needed to repair and upgrade. level the plane.

The 60 Minutes report also looked at Raytheon, where Assad was a top executive before going to work at the Defense Ministry. Army negotiators said Raytheon made “unacceptable profits” from the Patriot missile defense system by grossly exaggerating the cost and hours needed to build the radar and ground equipment. Raytheon said it was working to “fairly resolve” the matter, and the company told investors it had set aside $290 million for likely liability.

TransDigm, a fast-growing company led by CEO Nick Howley, was also part of the 60 Minutes report. TransDigm has taken over companies that manufacture spare parts for the military. Last year, Howley was summoned to Congress for a second time on price gouging charges. Assad’s review team found that the government would pay TransDigm $119 million for parts expected to cost $28 million.

TransDigm told 60 Minutes that the company follows the law and charges market prices.

The company told 60 Minutes in an emailed statement on Thursday, “TransDigm companies manufacture over 500,000 parts for most commercial aircraft used around the world and also take pride in supplying the DoD with reliable aerospace products. and high quality. … TransDigm has engaged directly with the DoD to ensure better information sharing and will continue to work with the DoD to improve the procurement process as it relates to its business with TransDigm. …”

The Department of Defense previously responded to Sunday’s 60 Minute report, writing in part, “The Department is committed to evaluating all DoD contracts for fair and reasonable pricing to minimize costs to the taxpayer and to maximize combat capability and services provided to Vigorous competition within the defense industrial base is one of the surest ways to obtain reasonable pricing for DoD contracts. , however, the Department is dependent on sole-sourcers, and procurement officers must negotiate sole-source contracts using law and regulatory authorities that protect the interests of taxpayers….”

CBS News has also reached out to Raytheon for comment regarding the senators’ letter.