New bill aims to reduce the price of spare parts for the DoD

WASHINGTON — House Oversight Committee Chair Carolyn Maloney on Wednesday proposed legislation to force government suppliers to publicly disclose data about their costs, a move intended to help the government negotiate better deals for parts. replacement.

“We’re here today to say enough is enough,” Maloney, DN.Y., said Wednesday during his panel’s hearing on the Pentagon’s inspector general’s findings that he had overpaid for parts of the Pentagon. commercial and military aircraft from the manufacturer TransDigm Group.

“Congress must act to hold contractors accountable when dealing with greedy contractors like TransDigm,” Maloney said.

The law would require companies to provide the government with uncertified cost data when contracting officers need it to determine whether a price is fair and reasonable. The bill, released as a discussion draft, would apply to government-wide contracts, beginning one year after its enactment.

During the hearing, the Pentagon’s senior director for defense pricing and contracts, John Tenaglia, said Maloney’s legislation has Pentagon support.

Contracting officers regularly review historical prices paid or the prices of equivalent trade coins, he said. When that’s not enough, they can ask companies to provide cost information, but they don’t always get it.

“I think having access to cost data would give our bargaining agents a better chance of negotiating fair and reasonable prices,” Tenaglia said.

Defense industry reception should be cooler. The National Defense Industrial Association has not seen the legislation and has not yet taken a position, but said the situation with TransDigm – which is not a member – is “the result of a declining defense industrial base and a supply chain that has an increasing number of sole and unique suppliers.

“The answer to these challenges is to expand the defense industrial base, not to erect new burdens that will further reduce the number of vendors supporting our warfighters,” the NDIA said in a statement.

The hearing comes as the Pentagon seeks reimbursement of $20.8 million from TransDigm – the second such request in three years, after its watchdog found the company made ‘excess profits’ on its defense contracts. A 2019 audit found the company received $16.1 million in excess profits from 112 contracts between 2015 and 2017 — and TransDigm then refunded the money to the DoD.

The Defense Logistics Agency said in a statement that it is “voluntarily seeking reimbursement of excess profit paid on spare parts,” as recommended by the Inspector General. Bloombergciting an official familiar with the matter, letters were sent to 32 specific TransDigm units requesting the $20.8 million reported by the IG.

The inspector general and lawmakers on Wednesday criticized TransDigm’s business model, saying the company identifies and acquires companies that offer high-tech replacement parts, making it the DoD’s exclusive supplier. The recent audit revealed that TransDigm had made excess profits on 105 spare parts under 150 contracts.

TransDigm executives argued that the company had not broken any laws or rules and that the audit’s standard for an acceptable profit – 15% – was “arbitrary”. TransDigm chief executive Kevin Stein also said the company has not decided to pay the $20.8 million.

“The IG failed to acknowledge that the majority of audited coins have trade equivalents and that on average the DoD received a 25% discount,” Stein said. “The question is not how much it costs to produce a coin, but whether the government gets a fair and reasonable price.”

While most Democrats on the panel took aim at TransDigm, Republicans largely argued that TransDigm was singled out for systemic problems at the Pentagon. Ranking panel member Rep. James Comer, R-Ky., called on the DoD to better consolidate its orders, keep more spare parts in stock, and leverage information technology to anticipate its needs .

“These are changes we should be focusing on, making government more efficient. What we shouldn’t be discussing today is putting more burdens on businesses, especially American businesses,” he said.

Along these lines, the Pentagon IG has recommended that the DoD pursue alternative contracting strategies and combine parts purchases to achieve cost savings. In 60% of DoD contracts with TransDigm, it buys fewer than 25 spare parts, the inspector general found.

In an exchange with Rep. Virginia Foxx, RN.C., Tenaglia said securing intellectual property rights for parts isn’t usually part of the calculus for contract agents, but the DoD is exploring how to expand the practice to better manage the life cycles of its systems. .

Foxx said she would welcome it, noting it could save taxpayers billions.

“I want to urge you because we’re spending way too much money because you’re signing these sole-source contracts, and other companies could supply the parts much cheaper,” she said.

Tenaglia said the Defense Logistics Agency has an initiative to assess which parts are ripe for reverse engineering, but there is “limited ability for us to do that.” However, DLA works with certain companies to create “technical data packages” and then reproduce the parts it needs.

TransDigm has been ranked the 50th largest defense company in the world in the latest Defense News report Top 100 List. The company earned $2.18 billion in defense-related revenue in fiscal year 2020; defense sales represent 43% of its total revenue during this period.

Joe Gould is a senior Pentagon reporter for Defense News, covering the intersection of national security policy, politics and the defense industry.

Previous Northam pranks Youngkin with life-size Trump cutout and items from his past
Next SHOT Show 2022: six new full-size guns