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August 5, 2019 By AMK

New DoD policy aims to crack down on alleged price gouging by TransDigm

Defense procurement officials have taken a step toward cracking down on what they have called price gouging within the military spare parts market. They issued a new edict that requires DoD contracting officers to gather cost and pricing data when they enter into agreements with TransDigm Group.

The memo, signed on Friday by Kim Herrington, DoD’s acting director for Defense Pricing and Contracting, tells contracting officers they must “require” that TransDigm turn over uncertified cost data to support the prices the company is charging the government. The mandate applies to situations where TransDigm or its subsidiaries are the only makers of a particular part, a scenario that applies to the vast majority of the company’s business.

The order also tells contracting officers to treat many of their contracts for parts the company makes as non-competitive — even when two or more resellers are bidding to supply the same item.

“The definition of adequate price competition does not address the fact that a sole manufacturer (such as TransDigm) participating in a competition can effectively control the competition by its ability to establish the material pricing for all other offerors,” Herrington wrote. “In these situations, the department does not consider such rigged competitions to be adequate price competition, based on independently submitted offers.”

The memo is highly unusual in that it targets one particular company, rather than laying out a broadly-applicable policy.

It was prompted by a February 2019 DoD inspector general report which found that TransDigm was routinely earning “excess profits” in its Defense contracts. For 17 of the 47 parts in a sample auditors examined, they calculated the company’s profit margins at 1,000% or more, and deemed all but one of the parts to have been marked up to unreasonable levels.

Keep reading article at: https://federalnewsnetwork.com/defense-main/2019/06/new-dod-policy-aims-to-crack-down-on-alleged-price-gouging-by-transdigm/

Filed Under: Government Contracting News Tagged With: adequate price competition, cost and pricing data, Defense Pricing and Contracting, DoD, policy, price gouging, spare parts, TINA, TransDigm

June 5, 2019 By AMK

A Pentagon contractor’s 9,400% profit on a half-inch metal pin is challenged

As the Pentagon weighs whether to recommend legislation to require more disclosure by contractors, the House Committee on Oversight and Reform will review the audit and TransDigm’s pricing policies in a hearing on Wednesday.

The inspector general’s report “exposes how a company entrusted with supporting our military men and women took advantage of American taxpayers by overcharging the government more than $16 million” in parts sales sold between 2015 and 2017, Oversight Chairman Elijah Cummings said in a statement. The hearing will “investigate whether these pricing issues are more widespread, and demand answers,” he said.

From 2013 through 2015, according to the audit, the contractor increased the price of a valve that opens and closes to change the pressure of fuel moving through an engine to $9,801 from $543. In those years, TransDigm also charged $1,443 each for a “non-vehicular clutch disk” that cost $32 to make.

Planes, Copters

The Pentagon’s inspector general first raised pricing concerns over TransDigm in a 2006 report, followed by the one this year that was released in redacted form in February.

TransDigm manufactures spare parts for airplanes and helicopters including the AH-64 Apache, C-17 Globemaster III, F-16 Fighting Falcon and the CH-47 Chinook. From April 2012 through January 2017, DOD issued 4,942 contracts valued at $471 million to TransDigm.

Liza Sabol, a spokeswoman for the Cleveland-based company, said in an email “that we are not providing comments on specific questions related to the IG report.”

Keep reading article at: http://amp.timeinc.net/fortune/2019/05/14/transdigm-pentagon-costs

Filed Under: Government Contracting News Tagged With: acquisition regulation, aerospace, audit, contracting officers, defense contracts, Defense Logistics Agency, Federal Acquisition Streamlining Act, House Committee, investigation, legislation, military, oversight, parts contracts, Pentagon, policy bills, pricing, reform, taxpayers, TransDigm, watchdog

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