Originally published in The National Interest
As a matter of practice, military contractors have overcharged the Pentagon for years—at the expense of both taxpayers and the military.
However, several members of Congress are working to end the practice. Last year, Senators Warren (D-MA), Braun (R-IN), and Grassley (R-IA) teamed up with Reps. Garamendi (D-CA) and Deluzio (D-PA) to introduce legislation that will address the legal loopholes that enable military price gouging.
Acquisition experts understand these loopholes well, but unfortunately, most lawmakers are still unaware of how common it is for contractors to overcharge the military. Without a better understanding of the true scale of military price gouging, Congress is unlikely to pass legislation to prevent it.
That’s why Congress should include in the final FY 2025 defense policy bill Rep. Doggett’s (D-TX) provision to investigate potential overcharging by sole-source suppliers of military products and services. Due to unchallenged market power, sole-source contractors are well positioned to profiteer. Doggett’s provision would establish a panel to review sole-source military contracts and “determine whether the Department of Defense paid fair and reasonable prices.” By focusing on sole-source contracts, the panel would shine much-needed light on the issue of military price gouging writ large, the scale of which is near impossible to discern because so much of it is legal.
Over the course of decades, military contractors have consolidated and harnessed market power to slowly obscure military price gouging. Industry consolidation began when the Cold War ended, and the Clinton administration slashed defense spending. However, as Richard Loeb—former Executive Secretary and Counsel of the Cost Accounting Standards Board in the Office of Management and Budget—has pointed out, the administration simultaneously catalyzed an era of “acquisition reform” to protect contractor profits even as defense spending plummeted and the number of prime military contractors shrank from over fifty to just five. Merger mania has continued, further concentrating market power among the few. Military contractors wield that power on Capitol Hill, lobbying Congress to gradually chip away at acquisition laws designed to protect the government from unfair pricing schemes on military contracts. In so doing, lawmakers have left the Pentagon in the dark about contract negotiations with the defense industry.
Read the full article in The National Interest.
Originally published in The National Interest
As a matter of practice, military contractors have overcharged the Pentagon for years—at the expense of both taxpayers and the military.
However, several members of Congress are working to end the practice. Last year, Senators Warren (D-MA), Braun (R-IN), and Grassley (R-IA) teamed up with Reps. Garamendi (D-CA) and Deluzio (D-PA) to introduce legislation that will address the legal loopholes that enable military price gouging.
Acquisition experts understand these loopholes well, but unfortunately, most lawmakers are still unaware of how common it is for contractors to overcharge the military. Without a better understanding of the true scale of military price gouging, Congress is unlikely to pass legislation to prevent it.
That’s why Congress should include in the final FY 2025 defense policy bill Rep. Doggett’s (D-TX) provision to investigate potential overcharging by sole-source suppliers of military products and services. Due to unchallenged market power, sole-source contractors are well positioned to profiteer. Doggett’s provision would establish a panel to review sole-source military contracts and “determine whether the Department of Defense paid fair and reasonable prices.” By focusing on sole-source contracts, the panel would shine much-needed light on the issue of military price gouging writ large, the scale of which is near impossible to discern because so much of it is legal.
Over the course of decades, military contractors have consolidated and harnessed market power to slowly obscure military price gouging. Industry consolidation began when the Cold War ended, and the Clinton administration slashed defense spending. However, as Richard Loeb—former Executive Secretary and Counsel of the Cost Accounting Standards Board in the Office of Management and Budget—has pointed out, the administration simultaneously catalyzed an era of “acquisition reform” to protect contractor profits even as defense spending plummeted and the number of prime military contractors shrank from over fifty to just five. Merger mania has continued, further concentrating market power among the few. Military contractors wield that power on Capitol Hill, lobbying Congress to gradually chip away at acquisition laws designed to protect the government from unfair pricing schemes on military contracts. In so doing, lawmakers have left the Pentagon in the dark about contract negotiations with the defense industry.
Read the full article in The National Interest.
