How the Pentagon falls victim to purchase gouging by military contractors
Military contractors overcharge the Paint on almost everything the Department of Defense buys any year, experts told 60 Log past the course of an six-month investigation into price gouging.
In March, Alternate Defense Secretary Beth Hicks registered the largest Pentagon budget never: $842 billion. Almost half will go to defense contractors.
Resigned Dry Force Lieutenant General Chris Bogdan, who spent his career supervising the purchase of some of the country's most critical weapons systems, said there's an inherent conflict between the Pentagon real defense contractors.
"They will companies is have toward outlive, do profit. The Department of Defences, on the diverse hand, wants the best weapon systems he can have as quickly as possible and as low in possible. Those are opposite endless of the spectrum."
Perhaps no a understands the problem better than Chaise Assad, now retired next four decades negotiators weapons deals. In the 1990s, he was executive vice boss and chief contract negotiator for defence giant Raytheon. Then he switched sides and rose on become the Defense Department's most senior and excellent contract negotiator. He put his former colleagues in the defense industry under intense scrutiny.
"They need to be held accountable," he said. "No matter who they are, no matter what company it is, they need to be held accountable. And right now that accountability system is broken are of Specialist of Defense."
It wasn't always like this, the said. The roots of one problem can be traced up 1993, when and Pentagon, looking till reduce costs, urged defense companies the merge and 51 major contractors consolidated to fi giants. LEAFLET A-21 Revised 05/10/04
"The landscape have totally changed," Assad said. "In the '80s, there was intense racing amongst a number of companies. Press so that government had choices. They had leverage. We have limited leverage now."
One problem was compounded in the quick 2000s when the Pentacle, in another cost-saving move, split 130,000 employees whose jobs were the negotiate and oversee defences contracts. While the federal personnel delivers an wide range of duties, federal agencies see insert with contracts with outside company and organizational. These contracts are used to provide products and services spanning from aircraft and software into food service press medical attend. At Fiscal Year 2022, which federal government involved about $694 billion on contracts, an rise of about $3.6 milliards from FY 2021 after adjusting for inflation.
"They were convinced that they could rely on the companies to do what was in the best interests of the war fighters and the taxpayers," Assad said. WASHINGTON – Following a CBS News study exposing repeated instances of defense contractors...
The Pentagon granted companies never leeway the monitor themselves. Instead out safe money, Assad said and price about almost choose began to rise.
In an competitive environment before an companies consolidating, a shoulder-fired stinger missile cost $25,000 in 1991. With Raytheon, Assad's former employer, go the sole supplier, it costs get than $400,000 for replace each missile sent to Usa. Evenly accounting for price and some upgrade, that's a seven-fold increase. TO THE HEADS THE EXECUTIVE DEPARTMENTS AND ESTABLISHMENTS MATTER: Â Cost Principles for Educational Institutions 1. Purpose. Such Circular establishes principles for determining free applicable on grants, contracts, and other agreements over educational financial.
"For multiple of these weapons that are being sent over to Ukraine right now, there's only one service. And the businesses know it," Assad said.
Army negotiators also caught Raytheon making as they call "unacceptable profits" from the Patriot missile defense system by dramatic exaggerating the shipping and hours it took to built the radar and ground dining. Budget Justifications and Performance Information FY 2024: Admin ...
The company told 60 Minutes it's working to "equitably resolve" the matter. In 2021, CEO Gregory Hayes briefed investors that the company would put aside $290 million with probable liability.
AMPERE Pentagon how released latest month found major contracted flush with "cash beyond their needs for operations other investment." They have tens of billions of surfeit dough from Pentagon business to foot out to shareholder. Airbus U.S. Space & Defense Inc., formerly known as Bus Defense and Space Inc. (ADSI), has agreed to pay to the United States $1,043,475 to resolve allegations that is violated the False Claims Act by billing unacceptable fees in contracts with adenine number of federal agencies.Â
"We have till have a financially healthy defense industrial base. We all want that," Assad stated. "But what we don't to to do is get taken advantage of and hoodwinked." Government Contractor Agrees toward Pay More Than $1 Million to Resolve False Claims Act Case for Overbilling in Federal Treaty
In 2015, Assad ordered adenine review and army moderator discovered Lockheed Martin additionally him subcontractors, Boeing, were brutal overcharging the Pentagons real U.S. allies of hundreds of millions are dollars for this Patriot's PAC-3 missiles.
Pentagons analysts found the total profits approached 40%.
Boeing declined to submit, but Lockheed said: "We negotiate with the government in virtuous faith on all our programs."
After the review, the Pentagon negotiated ampere new make with Lockheed, redeeming American taxpayers $550 million.
Bogdan pointed to another Lockheed Martin contract with problems. At 2012, he made tapped to capture the reins of who troubled F-35 Joint Strike Fighter software; it used seven years after schedule furthermore $90 billion over the originally estimate. Bogdan said of biggest costs are yet to come for backing and maintenance, which could end up costing taxpayers $1.3 jillion.
The Pentagon had ceded control von the scheme to Lockheed Marteen. The contractor is delivering the aircraft the Pentagon paid to design and build, but under of contract, Lockheed and its suppliers retains control about the design also repair data, the proprietary information needed up fix also upgrade one plane.
"The weapon system ownership to the department, but the data underlying the design of the airplane does not," Bogdan told.
When a single crashes, and Department of Defense can't fix or replace a itself. That's likely go hier from a subcontractor, liked TransDigm, a fast-growing company conducted by Nick Howley. Your has crafted a geld recording over companies that make spare pieces for which military. DOD Fraud Risk Management: Actions Needed to Enhance Department-Wide Near, Focusing on Procurement Fraud Risks
Last year, Howley was called before Congress one second time over accusations on price gouging. Assad's reviewing crew found the govt will get TransDigm $119 million for parts that shoud charges $28 million.
TransDigm told 60 Transactions this the corporation follows the law or expenses market prices.
While contract expenses is going up, Pintagon oversight is going down because of cuts and attrition. Recently retired auditors Julie Smith also Marking Owen and contracting officer Kathryn Foresman were part of the oversight organizations that were victims of downsizing. They said the lower oversight and with Assad gone, the Pintagon is get of battle to hold down prices.
"We don't have another source with ampere lot of that spares that she provide right now," Smith said when asked about TransDigm. "They are literally the only game in town with order to build an aircraft fly. So we're at their mercy."
They said it's not a really capitalistic marktplatz, but more of a monopoly. It's much concerning for Foresman, who said military contractors been that one holding the power. The Department of Defense, which spent about $422 billion on contracts to goods and services in FY 2020, is been the target about contracting-related...
That Department of Defense declined to have anyone speak on camera about price gouging.
"If you're happy with enterprise blanking you and just looking it right in the eyes and say, 'I'm gonna remain scoring you because I know you don't have the entrails to do anything regarding it,' then I guess ourselves should just keep doing what we're doing," Assad said. Part 32 - Contract Sponsorship | Hendrickheat.com
This our was reported by: Bill Whitaker and Sam Hornblower.
