Gouging the taxpayer

  • 21 May 2019
  • NormanL

We've often written that federal spending is out of control, and poses a long-term term threat to the nation's fiscal health and stability. While the political class scoffs at the notion of extensive amounts of waste, fraud, and abuse in federal programs, it's an ongoing problem. Consider this latest example from the Department of Defense, which to its credit, is trying to clamp down:

The Defense Department said it is implementing a series of steps meant to detect and deter price gauging [sic] by its contractors. It’s responding, in part, to an investigation that found one of its largest spare parts suppliers routinely overcharged the military, often by four-digit margins.

For starters, DoD has ordered the top officials within each of its contracting organizations to report to the Pentagon when vendors decline to provide cost and pricing information when asked. A group of Defense pricing experts will then review those reports to  help  identify companies who routinely refuse to cooperate with those requests.

Price gouging in the DoD? Yes, it's still a thing. The troubling part is it's been allowed to continue for what appears to be a long time:

In February, the Pentagon’s inspector general found that the company [TransDigm] had earned excess profits on all but one contract out of a sample of 47 auditors examined. The most extreme case involved a 4,400% markup, but 17 of them included profit margins of 1,000% or more.

In many cases, TransDigm was the sole-source supplier for those parts, and in all but one instance, its representatives refused to supply the company’s cost data to DoD contracting officers to help justify their prices, putting the military in a take-it-or-leave-it situation for critical parts.

“Is what TransDigm is doing illegal? No. Do I consider gouging our taxpayers for excessive costs immoral and unconscionable in the face of getting our warfighters what they need to fight? Yes,” Fahey told the House Oversight and Reform Committee.

The IG recommended that DoD pursue refunds for at least the excess profits it specifically identified in its audit sample: $13.5 million.

If the Pentagon, and the rest of the federal bureaucracy, decides it's time to stop the gouging, then maybe -- just maybe -- there's reason to hope other wasteful government behaviors can be reformed as well.