Democrats on the House Oversight and Reform Committee want to claw back $21 million in excess profits from a spare parts manufacturer who they say has repeatedly fleeced the Pentagon.
TransDigm Group Inc. already ponied up $16.1 million to the Defense Department after a 2019 inspector general report found that the company received excess profits on 46 of 47 spare parts reviewed as part of an audit.
Last month, the Pentagon released a follow-up that found that the company had excess profits on an additional 105 parts.
“Pay back the money,” House Oversight Committee Chairwoman Carolyn B. Maloney, New York Democrat, demanded Wednesday. “Overcharging taxpayers, even if you get away with it under the law, is just plain wrong.”
TransDigm executives were hauled before Congress in 2019 after the Defense Department’s initial report was released, and appeared for a second grilling by lawmakers Wednesday in response to the Pentagon’s latest findings.
The Pentagon’s follow-up audit was in response to the committee’s request following the hearing in 2019.
The Pentagon says TransDigm, the parent company of several subsidiaries that manufacture spare parts for military and civilian aircraft, has continued to gouge the government on several sole-source spare parts contracts since the 2019 report was released.
The auditors say the company’s business model is to buy up smaller companies with existing sole-source Pentagon contracts and immediately hike prices on those parts — in some cases tacking on ten-fold margins.
The auditors also say the company withholds cost data needed to determine fair price estimates and capitalizes on smaller contracts that fall below total cost thresholds requiring more detailed cost analysis by the Pentagon.
Both reports recommend changes in the contract bid negotiations process, including legislative changes that would allow the Defense Department to obtain “necessary cost or pricing data to negotiate fair and reasonable prices.”
TransDigm says the auditors used “arbitrary standards” that resulted in “flawed” and “misleading” findings. They also say the auditors ignored “real costs incurred by the business” and presented the company’s margins “in a misleading and provocative manner.”
TransDigm President and CEO Kevin Stein said that since the hearing in 2019, the company has “instituted many initiatives” to improve transparency with the Defense Department and that specific contracts audited in the Pentagon’s latest probe are from the same timeframe as the previous audit and predate the 2019 hearing.
“After over two years of review and thousands of documents produced, the recently released audit came to the same conclusion as the previous two: that TransDigm businesses followed all applicable laws and policies in their fixed-price contracts with the DoD,” Mr. Stein said before the committee Wednesday.
The top Republican on the committee, Rep. James Comer of Kentucky, defended the company, which he said followed the law.
“I agree the government needs to be a good steward of taxpayer dollars,” Mr. Comer said. “And I agree DOD should not be forced to pay exorbitant prices. I don’t agree with attacking one company that, frankly, followed the law.”
He accused committee Democrats of recycling a spectacle from three years ago to distract from pressing issues spurred by Democrats’ failed policies.
“Instead of focusing on any of these crises, we are here today to conduct a hearing that already happened,” Mr. Comer said. “We had this exact same hearing in 2019. Not a similar hearing, the exact same one, with almost the exact same witnesses.”