Pentagon Creates ‘Cadre of Pricing Experts’ to Curb Parts Abuses

(Bloomberg) -- The Pentagon has created a “Cadre of Pricing Experts” to identify pricing trends for spare parts and suppliers that should be monitored to prevent a continued “assault on the American taxpayers,” according to chief weapons buyer Ellen Lord.

TransDigm Group Inc. was accused by Lord’s deputy, Kevin Fahey, at a congressional hearing in May of “gouging” taxpayers through spare parts markups as high as 4,451% from 2015 through 2017, as the company repeatedly declined to provide backup data on costs.

At the time, Liza Sabol, a spokeswoman for Cleveland-based TransDigm, said “the company “has been and remains committed to conducting business within the framework of applicable laws and regulations.”

In a letter this month to Republican Senator Chuck Grassley, who had asked what was being done to curb abuses by companies with sole rights to parts, Lord, the undersecretary for acquisition, said the Defense Department “is actively investigating potential reverse engineering for over 1,000 sole source parts produced” by TransDigm and other companies “to create competitive alternatives and drive down prices for those parts.”

“Where the TransDigm situation is unique is that in the past few years, it has initiated and, in fact, accelerated, a corporate business model designed to acquire entities and the intellectual property rights to sole source spare parts, and then grossly increase the prices for those parts,” Lord wrote.

She said contracting officials are being told to “identify sellers who routinely refuse to provide cost information.”

©2019 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.