The chairwoman of a House panel that oversees federal contracting on Wednesday released a draft bill aimed at enabling federal contracting officers to require cost information from contractors when necessary to help determine whether prices submitted for contracts are fair and reasonable, legislation that is aimed at closing a gap in existing law that prevents the government from being able to obtain cost data below a certain threshold.
The draft bill, which Rep. Carolyn Maloney (D-N.Y.) is circulating for feedback from her colleagues, comes in the wake of two hearings over the past nearly three years and reports by the Defense Department’s Office of Inspector General that aerospace and defense contractor TransDigm Group [TDG] frequently overcharged the Defense Department for spare parts on a sample of contracts between 2017 and 2019.
“Congress must act to empower contracting officers when they are negotiating with greedy contractors like TransDigm,” Maloney, chairwoman of the Oversight and Reform Committee, said in a statement. “Today, I am releasing a discussion draft that would require companies to provide cost information when necessary to determine if proposed prices are fair and reasonable. This will enable government contracting officers to ensure the government is paying a fair price.”
The Fair Pricing with Cost Transparency Act is based is based on a DoD proposal. Last December, the department’s IG’s Office said that TransDigm earned $20.8 million in excess profits on 105 spare parts on 150 contracts that the company wasn’t required to provide certified cost data. The data wasn’t required because the award values fell below the $2 million threshold mandated in the Truth in Negotiations Act.
The discussion draft says that “If the contracting officer determined that the information on the prices submitted by the offeror or contractor is not adequate for evaluating the reasonableness of the price of the contract,” subcontract, or modification of the contract or subcontract, the offeror, contractor, or subcontractor shall be required to submit to the contracting officer uncertified cost information to the extent necessary to determine the reasonableness of such price.”
The IG’s office is recommending that TransDigm repay the government for the over-charging. A number of Democrats at the hearing also called for the company to repay the excess profits. The company hasn’t said what it will do and points out that the IG report found that it was in compliance with all laws and regulations.
The contracts in question are sole-source because TransDigm has no competition. That said, DoD officials at a hearing hosted by the committee on Wednesday said the problems aren’t limited to TransDigm.
“The issues raised in this audit are not limited to just this company and its contracts with the DoD,” Theresa Hull, the deputy IG, said in her prepared remarks at the hearing. “Sole source contractors’ unwillingness to share cost data, and DoD contracting officers’ limited success in negotiating fair and reasonable prices for sole-source parts, are common findings that the DoD IG has highlighted in our audit reports for more than 20 years.”