Warren, Grassley, Braun, Fetterman Send Bipartisan Letter to DoD Seeking Information on Efforts to Address Contractor “Sweeping” and Other Price Gouging Practices
“DoD contractors should not be getting away with price gouging, and these abusive practices.”
Washington, D.C. – Senators Elizabeth Warren (D-Mass.), Chair of the Senate Armed Services Subcommittee on Personnel and Chuck Grassley (R-Iowa), Ranking Member of the Senate Committee on the Budget, led a letter with Mike Braun (R-Ind.) and John Fetterman (D-Pa.) demanding the Department of Defense (DoD) provide answers about military contractors’ price gouging tactics that cost the Pentagon billions of dollars every year in overpayments.
The lawmakers sought information on the practice of “sweeping,” in which contractors delay submitting cost or pricing data that would enable the government to negotiate fairer prices. Instead of providing the information prior to reaching an agreement, contractors often overwhelm DoD contracting officers with documents and data immediately after reaching a handshake agreement. This tactic allows defense contractors to release themselves of liability and potentially hide data that might give the DoD a better price.
In fiscal year 2022, the DoD awarded $414.5 billion in contracts to the defense industrial base. A CBS News investigation last year uncovered several defense contractors repeatedly overcharged the DoD to secure excess profits of 40 to 50 percent, costing the Pentagon, and taxpayers, hundreds of millions of dollars. The DoD’s Inspector General (IG) found that the TransDigm Group, a large defense contractor, alone “overcharged the military by at least $16 million” with profit “margins up to 4,451 percent” for parts and supplies.
Following these revelations, lawmakers urged DoD to investigate price gouging and follow the Government Accountability Office’s (GAO) recommendations for addressing financial management and fraud risk reduction.
In 2018, DoD’s Defense Pricing and Defense Procurement and Acquisition Policy department issued a memo outlining changes to DoD’s policy addressing “sweeping.” The memo called for contractors to submit important current cost or pricing data “as soon as practicable, but no later than five business days” after the price agreement is reached. In addition, it called for officers to wait to consider “sweep data” until after the contract award and that the data be considered defective pricing if it would have changed the price the government paid. If a contractor’s “sweeping” is habitual, the memo said contracting officers must take corrective action to address the practice.
DoD and its practices are frequently included on the GAO’s “High Risk List,” a list “of programs and operations that are vulnerable to waste, fraud, abuse or mismanagement, or in need of transformation.”
“DoD must better explain the challenges it faces with the contract process that has caused the government to overpay for goods and services and what steps DoD has taken to solve the problem,” wrote the lawmakers. Accordingly, the senators request answers about DoD’s progress to address “sweeping” by June 12, 2024.
Senator Warren has led the fight to hold DoD accountable and transparent to ensure taxpayers are not being price gouged and the defense industrial base remains resilient:
- In February 2024, Senator Warren and Representative Garamendi (D-Calif.), sent a letter to Secretary of Defense Lloyd J. Austin III, expressing concerns with the Department of Defense’s (DoD) insufficient review process for consolidation in the defense industrial base and the resulting impact on supply chains, innovation, and national security.
- In November 2023, Senator Warren and Representative Garamendi sent letters to the Department of Defense and TransDigm, pressing them to provide transparency on cost and pricing data to ensure that taxpayers aren’t being overcharged for expensive DoD contracts.
- In July 2023, chairing a hearing of the Senate Armed Services Subcommittee on Personnel, Senator Warren called out DoD for wasting billions in taxpayers dollars due to price gouging by defense contractors for services and in health care, and identified opportunities for cost savings when DoD buys personnel-related goods and services.
- In June 2023, Senators Warren and Mike Braun (R-Ind.), alongside Rep. Garamendi, reintroduced the bipartisan Stop Price Gouging the Military Act, which would close loopholes in current acquisition laws, tie financial incentives for contractors to performance, and provide DoD the information necessary to prevent future rip-offs.
- On May 25, 2023, Senators Warren, Sanders, Braun, Grassley, and Wyden sent a letter to DoD urging an investigation into contractor price gouging.
- In October 2022, Senator Warren obtained a commitment from DoD not to increase contract prices due to inflation.
- In October 2022 Senator Warren sent a letter to DoD urging them to insist on receiving certified cost or pricing data to justify any contract adjustments.
- In June 2022, Senator Warren and Representative Garamendi introduced the bicameral Stop Price Gouging the Military Act, which would enhance DoD’s ability to access certified cost and pricing data. Part of Senator Warren’s legislation was incorporated into the FY 2023 National Defense Authorization Act reported to the Senate.
- In September 2020, Senator Warren and Representative Ro Khanna (D-Calif.) formally requested that the Department of Defense (DoD) Inspector General (IG) investigate reports that the Pentagon redirected hundreds of millions of dollars of funds meant for COVID-19 response via the Defense Production Act (DPA) to defense contractors for "jet engine parts, body armor and dress uniforms.”
- In May 2020, Senator Warren wrote to the Department requesting clarification on how the Department would prevent profiteering following a recent change to increase payments to contractors in response to the COVID-19 pandemic.
- In May 2017, Senator Warren wrote to the DoD Inspector General, requesting an investigation into TransDigm for potential waste, fraud, and abuse in the military spares market.
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