How Sole Sources of Military Spare Parts Squander Defense Dollars, Risk National Security

The Daily Signal | 6/25/2019 | Staff
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Emma Watkins is a research assistant in The Heritage Foundation's Center for National Defense.

Nathan Royce is a member of the Young Leaders Program at The Heritage Foundation.

Store - Gallon - Milk - Price - Times

How would you react to a store selling a gallon of milk for $180, a price about 45 times the average cost?

The House Oversight and Reform Committee confronted this question recently at a hearing on TransDigm, a company that left the Defense Department with the dilemma of choosing between wasting taxpayer resources or failing to meet capability standards.

TransDigm - Subsidiaries - Parts - Aircraft - AH-64

TransDigm and its subsidiaries provide spare parts for many military aircraft, such as the AH-64 Apache helicopter and the F-16 Fighting Falcon. The Pentagon’s inspector general found that the company was making excess profits on 46 of the 47 parts it reviewed.

In some cases, TransDigm was charging more than 4,000 times the value of the part, according to the inspector general. In total, TransDigm earned $16.1 million beyond the government benchmark for reasonable profits.

Government - Officials - Contracts - Corporation

Who are we to blame for this, the government officials who signed the contracts or a greedy corporation?

Due to systemic flaws in the defense-contracting process, neither party is totally at fault. A number of factors made it almost impossible for Pentagon contracting officers to determine how much they should pay for the products.

Issues - TransDigm - Information - Company - Requests

One of the issues was that TransDigm was not forthcoming with its costing information. The company received requests for costing information on 16 of the 47 products, yet it refused to provide it on 15 of those requests.

That lack of candor prevented contracting officers from determining a price based on production costs.

TransDigm - Source - Products

TransDigm is the sole source of 39 of the 47 products examined. The...
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