WASHINGTON – Following a CBS News investigation uncovering repeated instances of defense contractors overcharging the Department of Defense (DOD) to secure excess profits of 40 to 50 percent, costing the U.S. taxpayers hundreds of millions of dollars, Sen. Chuck Grassley (R-Iowa) joined Sens. Bernie Sanders (I-Vt.), Mike Braun (R-Ind.), Elizabeth Warren (D-Mass.) and Ron Wyden (D-Ore.) in urging Secretary of Defense Lloyd Austin III to launch a thorough investigation.
“These companies have abused the trust government has placed in them, exploiting their position as sole suppliers for certain items to increase prices far above inflation or any reasonable profit margin,” wrote the senators.
The CBS News report found that the DOD would often negotiate fixed price contracts providing for private profits of 12 to 15 percent, only for Pentagon analysts to find overcharges that boosted total profits to nearly 40 percent or more. Massive overcharges from defense contractors accounting for hundreds of millions of dollars were uncovered in the investigation. Lockheed Martin, Boeing, Raytheon, and TransDigm are among the offenders, dramatically overcharging the department and U.S. taxpayers while reaping enormous profits, seeing their stock prices soar, and handing out massive executive compensation packages.
The letter comes after a Government Accountability Office (GAO) report earlier this year showed that DOD accounting systems cannot generate reliable and complete information and are unable to even capture and post transactions to the correct accounts, in violation of statutory requirements. In 2021, a separate GAO report showed that the DOD had failed to implement a comprehensive approach to combat department-wide fraud, despite regularly awarding contracts worth hundreds of billions of dollars.
“The 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 hands out every year to spectacularly profitable private corporations,” the senators continued. “We ask that you please provide us an update on the Department’s efforts to implement outstanding GAO recommendations related to financial management and fraud risk reduction, as well as your efforts to investigate the price gouging uncovered by CBS’ recent reporting.”
Read the full letter, here.
Grassley has conducted a multi-year investigation into TransDigm’s price gouging at taxpayer expense, and pressed the DOD Inspector General to examine TransDigm’s contracts and business model. Grassley’s defense oversight work has also focused more broadly on financial mismanagement by the Pentagon.
Read more on Grassley’s TransDigm oversight HERE.
