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

A bilateral group of US senators asked The Defense Department will open a long-running investigation into price gouging by defense contractors on Wednesday.

Letters to Secretary of Defense Lloyd Austin, Sens. Bernie Sanders (D-VT), Elizabeth Warren (D-MA), Chuck Grassley (R-IA), Mike Brown (D-IN) and Ron Wyden (D-OR) I ) said he was prompted by a Six months of investigation by 60 minutes Which exposed the price gouging. Experts told 60 Minutes that military contractors overcharge the Pentagon for nearly everything the DoD buys each year.

The senators wrote, “Lockheed Martin, Boeing, Raytheon, and TransDegum are among the culprits, making huge profits, seeing their stock prices soar, and handing out massive executive compensation packages. , dramatically overcharged the Department and the American taxpayer.” “These companies have abused the trust reposed in them by the government, and have taken advantage of their position as sole suppliers of certain commodities to raise prices far beyond inflation or any reasonable profit margin. Is.”

In March, Deputy Defense Secretary Kathleen Hicks announced the Pentagon’s largest budget ever: 842 billion dollars. About half will go to defense contractors.

“Dollars that are wasted on high-cost weapons or spare parts cannot be spent to combat adversaries or support service members,” the senators wrote.

In 2020, the Defense Department’s Office of the Inspector General reported that the five senators’ letter to Defense Secretary Lloyd Austin stated that About 1 in 5 His ongoing investigation was related to procurement fraud. The Department of Defense is on the Government Accountability Office’s high-risk list. Financial management Since 1990.

The senators wrote, “DoD can no longer expect Congress or the American taxpayer to underwrite record military spending while simultaneously failing to account for the hundreds of billions it generates in spectacular profits every year. Bounties are given to private corporations.”

Assad, now retired after becoming the Defense Department’s most senior contract negotiator, pointed to the Patriot weapons system on 60 Minutes as an example. In 2015, Assad ordered a review and military negotiators discovered that Lockheed Martin and its subcontractor, Boeing, were charging the Pentagon and US allies hundreds of millions of dollars for Patriot PAC-3 missiles. were

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

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

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

Retired Air Force Lt. Gen. Chris Bogdan, who oversaw the procurement of some of the nation’s most critical weapons systems, pointed out on 60 Minutes another difficult Lockheed Martin deal. 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 below original estimates. Bogdan said the biggest costs are yet to come. Taxpayers could lose $1.3 trillion in support and maintenance.

Lockheed is providing the planes that the Pentagon paid to design and build, but under the contract, the company and its suppliers have to share some proprietary information — design and repair data — that helps repair and maintain the planes. required to upgrade, retained control of

The 60 Minutes report also looked at Raytheon, where Assad was a top executive before working at the Defense Department. Army negotiators said Raytheon made “unacceptable profits” from the Patriot missile defense system by dramatically overestimating the cost and hours spent building the radar and ground-based equipment. Raytheon said it was working to “fairly resolve” the matter and the company informed investors that it had set aside $290 million for potential liability.

TransDigm, a fast-growing company led by CEO Nick Hawley, was also part of the 60 Minutes report. TransDigm has taken over companies that make military spare parts. Last year, Holley was called before Congress for the second time on allegations of price gouging. Assad’s review team found that the government would pay TransDigm $119 million for parts that should have cost $28 million.

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

On Thursday, the company told 60 Minutes in an emailed statement: “TransDigm companies manufacture more than 500,000 parts for most commercial aircraft used worldwide and provide the DoD with reliable, high-quality aircraft products. … TransDigm has worked directly with DoD to ensure better information sharing and will continue to work with DoD to improve procurement processes as it collaborates with TransDigm. It’s about his business…”

The Department of Defense previously responded to Sunday’s 60 Minutes report, which read in part: “The Department is fair and appropriate to minimize costs to taxpayers and maximize warfighting capability and services. The Department is committed to reviewing all DoD contracts for pricing. Strong competition within the defense industrial base is one of the surest ways to obtain a fair price on DoD contracts. However, for some Defense requirements, the Department relies on sole suppliers. depends, and contracting officers must legally negotiate sole-source contracts.and regulatory authorities that protect the interests of taxpayers.

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

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