June 09, 2022

Senator Warren and Representative Garamendi Introduce the Bicameral Stop Price Gouging the Military Act

Legislation would strengthen acquisition laws to help prevent price gouging by military contractors

Washington, D.C. - Today, United States Senator Elizabeth Warren (D-Mass.) a member of the Senate Armed Services Committee, and John Raymond Garamendi (D-Calif.) introduced the Stop Price Gouging the Military Act which would strengthen acquisition laws to help prevent price gouging by military contractors. Numerous Inspector General reports have found defense contractors regularly charge the military excessive prices, including $71 for a pin that should have cost less than a nickel and $80 for a drain pipe segment that should have cost $1.41. Loopholes in current acquisition laws make it nearly impossible for the Department of Defense (DoD) to obtain the data necessary to prevent price gouging. This legislation seeks to close those loopholes, tie financial incentives for contractors to performance, and provide the DoD with the information necessary to prevent future rip-offs.

"For far too long, military contractors have been price gouging the Pentagon to make fatter profits, and American taxpayers shouldn't have to foot the bill. The end result is a military budget that is way too large. We need some basic rules on the road to prevent military contractors from price gouging," said Senator Warren.

“As Chair of the Armed Services Subcommittee on Readiness, I know how much we pay for parts to keep military equipment ready. We know that taxpayers and service members are routinely overcharged by defense contractors due to loopholes in current regulations. We cannot allow taxpayer money to be wasted to inflate the bottom lines of giant defense contractors. Our service members need the tools to properly negotiate prices,” said Congressman Garamendi. “This is just common sense, and that’s why I introduced the ‘Stop Price Gouging the Military Act’ today in the U.S. House of Representatives. I thank Senator Warren for doing the same in the United States Senate. We will work together to ensure this legislation becomes law,” concluded Congressman Garamendi.

The Stop Price Gouging the Military Act specifically would:

Strengthen Truth In Negotiations Act Provisions:

Closes a loophole in the law to require contractors to provide the federal government cost or pricing information if there isn’t adequate price competition that results in at least two responsive and responsible offers.

Revision of Definition of Term “Commercial Item” for Purposes of Federal Procurement Statutes:

Restores market dynamics to the commercial item definition by adopting a Department of Defense proposal to tie commercial item determinations to whether a good or service is actually sold to other customers.

Progress Payments Incentive Pilot:

Initiates a DoD pilot to tie payments to performance by lowering advanced payments for companies to 50% while providing contractors the opportunity to receive payments up to 95% if they meet certain conditions.

Disclosure by Large Defense Contractors:

Mirroring disclosures already required by publicly traded companies, requires large defense contractors to annually share with the Under Secretary of Defense for Acquisition and Sustainment changes in the volume of goods or services sold, changes in the average price, and gross margins.
Requires reports to be publicly posted a year later to enhance public oversight while protecting proprietary information that could undercut competition.
Creates penalties, including being reported to contractor responsibility databases’ contracting officers’ review when awarding contracts, imprisonment, civil fines up to $200,000, liability, or being temporarily or permanently suspended from receiving future contracts for contractors who fail to provide these disclosures.

“Senator Warren’s Stop Price Gouging the Military Act is the first piece of legislation I have seen in some time that attempts to address the disastrous effects and virulent pricing abuses spawned by the so-called ‘acquisition reform’ movement of the last quarter-century,” said Richard C. Loeb, Adjunct Professor of Government Contract Law at the University of Baltimore Law School and former Acting Deputy Administrator of the Office of Federal Procurement Policy at the Office of Management and Budget. “Senator Warren’s bill is an attempt to restore some modicum of sensible pricing policies on government contracts which have been completely eviscerated by industry-led efforts that allow for non-competitive awards with absolutely no price transparency. Government contracting officers have been left helpless and blind in their efforts to negotiate better prices by laws that actually prevent access to contractor pricing data and discourage robust negotiations that would result in better deals for taxpayers. The Stop Price Gouging the Military Act restores commonsense taxpayer protections and accountability that were in place for decades before neoliberal policies of the past few decades made Swiss cheese out of them.”

“The commercial item definition has been abused by dominant defense contractors for far too long,” said American Economic Liberties Project Research Director Matt Stoller. “This legislation would finally start moving Pentagon procurement in the right direction. By ensuring that the Department of Defense is more wary of abuses in sole source contracting, as well as forcing large defense contractors to disclose their margins and paying them when they perform, Congress could ensure that the military gets better weapons at a lower cost.”

“Military contractors have long bamboozled the Pentagon into bad deals. The Stop Price Gouging the Military Act would help close accountability loopholes in acquisition law that allow contractors to sell the Pentagon overpriced spare parts in pursuit of excessive profits. POGO applauds Sen. Warren and Rep. Garamendi for taking action to ensure the Pentagon gets the best prices for essential goods and services, protecting the warfighter, saving taxpayer dollars, and increasing competition in military contracting.” – Julia Gledhill, Analyst for the Center for Defense Information at the Project On Government Oversight

This legislation is endorsed by the American Economic Liberties Project, Project On Government Oversight, and Public Citizen.

As a champion for American consumers and a secure and healthy economy, Senator Warren has engaged in oversight over corporations for their role in increasing prices for consumers as Americans face inflation. She has also been calling for more competition and stronger enforcement of antitrust laws to bring down prices for families, raise wages for workers, and protect small businesses:

On May 12, 2022, Senators Warren and Tammy Baldwin (D-Wisc.) and Rep. Jan Schakowsky (D-Ill.) introduced the Price Gouging Prevention Act of 2022, which would prohibit the practice of price gouging during all abnormal market disruptions – including the current pandemic – by authorizing the FTC and state attorneys general to enforce a federal ban against unconscionably excessive price increases, regardless of a seller's position in a supply chain.
On March 16, 2022, Senator Warren introduced the Prohibiting Anticompetitive Mergers Act to help stomp out rampant industry consolidation that allows companies to raise consumer prices and mistreat workers. The bill would ban the biggest, most anticompetitive mergers and give the Department of Justice and FTC the teeth to reject deals in the first instance without court orders and to break up harmful mergers.
On March 2, 2022, Senator Warren and her colleagues called out drug manufacturers for squeezing American families with rapid and widespread price hikes on prescription drugs.
In February 2022, at a hearing, Senator Warren called out corporations for abusing their market power to raise consumer prices and boost profits.
That same month, Senator Warren requested the Department of Justice to take aggressive action against corporations violating antitrust laws to hike prices for consumers.
In January 13, 2022, Senator Warren questioned Federal Reserve nominee Lael Brainard about market concentration and price gouging driving inflation.
At a hearing in January 2022, Senator Warren pressed Fed Chair Jerome Powell on the role of corporate concentration in driving up prices for consumers during his renomination hearing to be Chair of the Board of Governors of the Federal Reserve System.
In December 2021, Senator Warren slammed Hertz's $2 billion dollar buyback plan, which would line the pockets of company executives and the private equity firm Apollo Global Management, while they raised rental car costs for consumers.
In November 2021, Senator Warren identified 11 energy companies for inflating natural gas prices for consumers while reaping record profits.
That same month, she requested the Department of Justice to investigate the poultry industry's anticompetitive behavior as turkey and chicken prices soar.
In the past year, Senator Warren has urged the Biden administration to closely scrutinize potential anticompetitive mergers that could lead to higher prices for consumers and accelerate industry consolidation. She has led letters about the proposed mergers of Frontier and Spirit airlines, Sanderson-Wayne, WarnerMedia-Discovery, and Amazon-MGM.
In March 2020, Senator Warren joined her colleagues in urging the FTC to use its full authority to prevent abusive price gouging on consumer health products during the COVID-19 pandemic.
In May 2017, Senator Warren sent a letter to the Department of Defense Inspector General asking for an investigation into defense contractor TransDigm’s refusal to provide cost information to the Department of Defense.

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