New Legislation Aims to Cut Price of DOD Spare Parts

Jan 25, 2022 | Your Source

The House Committee on Oversight and Reform met January 19 to examine a report by the Department of Defense’s (DOD) Inspector General (IG) that a defense contractor was overcharging for mission-critical spare parts for aircraft.

At the request of the Committee, the report reviewed the contractor’s business practices, which it said included a pattern of buying companies that are sole manufacturers of a given part and then selling that part for higher prices. The company did this while keeping individual contracts below the value that would require it to provide more detailed information to the government.

In the fiscal year 2018, the National Defense Authorization Act (NDAA) raised that threshold below which detailed cost reporting is not mandatory from $750,000 to $2 million. Raising the threshold was done in an effort to streamline the acquisition process.

DOD awards many small quantity, low-dollar value contracts for spare parts. The IG reported that the company in question had close to $21 million in “excess” profits from 150 contracts for aircraft parts over several years. The government now appears poised to seek a refund for this “excess” profit.

During her opening statement at the start of the hearing, Chairwoman of Committee the Rep. Carolyn Maloney (D – NY) released a discussion draft of the Fair Pricing with Cost Transparency Act. If enacted, the legislation would:

  • Require contractors to submit uncertified cost information if requested by a contracting officer.
  • Apply governmentwide, including at DOD.
  • Apply to contracts starting one year after enactment.
  • Require agencies to report to Congress on compliance within 18 months of enactment.

As this conversation continues, let’s hope it will include some discussion on why we have so many single- or sole-source parts and how we can better address that issue as well…

 

By Sharon Lo Managing Editor, Defense Transportation Journal and The Source

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