Pentagon contractor accused of overcharging is sued by lawmakers

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Rep. Carolyn Maloney, DN.Y. chairman of the House Oversight and Reform Committee, speaks during a hearing in Washington, DC on October 28, 2021. (Ting Shen/Bloomberg)

Two high-ranking lawmakers have joined the Pentagon in pushing for TransDigm Group to pay $20.8 million in voluntary reimbursements for spare parts costs deemed excessive by the Department of Defense’s inspector general.

The $20.8 million “may just be the tip of the iceberg,” wrote Democratic Rep. Carolyn Maloney of New York, chair of the House Oversight Committee, and Republican Senator Chuck Grassley of the US. ‘Iowa in a letter to TransDigm Group Chairman Kevin Stein, published Monday.

TransDigm, one of the Pentagon’s largest parts suppliers, earned excess profits on 105 parts from early 2017 to mid-2019, according to a two-year inspector general investigation into the Pentagon’s business model. company published in December.

The watchdog “reviewed a sample of just 3% of TransDigm’s contracts from January 2017 through June 2019. The Inspector General has not reviewed any contracts from July 2019 through today, when the DoD awarded TransDigm more $500 million worth of contracts,” the lawmakers wrote. .

TransDigm has in recent years become a sole supplier of spare parts for Pentagon aircraft and helicopters, including F-16 jets and AH-64 Apache and CH-47 helicopters. From October 1, 2014 through April 11, 2019, the Department of Defense executed 4,697 contract actions with TransDigm and its subsidiaries worth $634.7 million.

Maloney said TransDigm’s strategy is to identify vendors for specialty, sole-source contracts on critical parts, buy those businesses, and then raise prices.

In January, the Pentagon’s Defense Logistics Agency sent 31 letters to Cleveland-based TransDigm and its affiliates asking for voluntary refunds. The letters called on TransDigm and its subsidiaries “to return their excess profits” and to “demonstrate a good faith effort to correct poorly spent taxpayer dollars,” Maloney and Grassley said in their letter.

As of Friday, no refund had been received, according to the Ministry of Defence. The Pentagon’s defense contracts and awards office is “awaiting a response,” Jessica Maxwell, a spokeswoman for the Pentagon’s procurement office, said in an email.

If TransDigm denies the refund request, the department cannot “compel TransDigm to provide a voluntary refund,” she said.

After an uproar in Congress over earlier pricing revelations, TransDigm agreed in May 2019 to reimburse $16 million for overcosts related to purchases from 2015 to 2017.

But TransDigm has consistently opposed a voluntary refund in the current case, saying the inspector general’s methodology for calculating “excess profit” was seriously flawed.

“We continue to be in contact with the DoD to discuss the report and concerns about the arbitrary standards used to arrive at the suggested voluntary reimbursement,” TransDigm spokeswoman Jaimie Stemen said in a statement.

Democratic Senator Elizabeth Warren of Massachusetts, a member of the Armed Services Committee, said in an email that “reimbursement of excess profits from defense companies should be mandatory, not voluntary. When we continue to do business as d usual with companies that rip off Americans, we urge them to continue picking taxpayers’ pockets.”

Maloney and Grassley said in their letter that if TransDigm chooses not to issue a refund, it must produce by April 29 the Pentagon contract documents from July 1, 2019, to the present, which include the description and the stock number of the parts sold, TransDigm’s manufacturing cost per unit, the contract price per unit and the total contract value.

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