Bipartisan senators call for probe into reports of price gouging by defense contractors

A bipartisan group of senators sent a letter to Defense Secretary Lloyd Austin on Wednesday urging him to open an investigation into reports of systematic price gouging by defense contractors.

The letter, which included the signatures of Sens. Bernie Sanders (I-Vt.) and Chuck Grassley (R-Iowa), cites a CBS News “60 Minutes” report on major defense contractors overcharging the Pentagon on a wide range of equipment and weapons.

The senators expressed concern that defense contractors were securing profits of 40 percent, and sometimes as high as 4,000 percent.

“Lockheed Martin, Boeing, Raytheon, and TransDigm are among the offenders,” the senators wrote, “dramatically overcharging the Department and U.S. taxpayers while reaping enormous profits, seeing their stock prices soar, and handing out massive executive compensation packages.”

A spokesperson for Lockheed Martin said the company “constructively and ethically works with the U.S. government to support its national defense, intelligence, and international security cooperation objectives.”

“We negotiate with the government in good faith on all our programs to meet its mission needs with the best and most effective technologies and systems in compliance with Federal Acquisition Regulations and all other applicable laws,” the spokesperson said in a statement.

The Hill has reached out to the other companies cited in the letter for comment.

Wednesday’s letter was also signed by Sens. Elizabeth Warren (D-Mass.), Mike Braun (R-Ind.) and Ron Wyden (D-Ore.).

The Pentagon has requested a record $842 billion budget for the next fiscal year, about half of which is expected to go toward private defense contractors.

The CBS News investigation included interviews with former Pentagon officials and retired auditors who said as contract spending is going up, there is less oversight on pricing in the Pentagon.

In the letter, senators expressed concern about the Defense Department’s ability to audit, track and mitigate fraud risk, saying a history of unaccountable spending stretches back decades.

Lawmakers also cited a 2021 Government Accountability Office (GAO) report that found the Defense Department has failed to implement a comprehensive approach to combating fraud.

The bipartisan group urged a full investigation into the CBS report along with an account of how Pentagon has implemented financial management practices and fraud risk prevention recommendations in the GAO report.

“The DOD can no longer expect Congress or the American taxpayer to underwrite record military spending while simultaneously failing to account for the hundreds of billions it hands out every year to spectacularly profitable private corporations,” they wrote.

“These companies have abused the trust government has placed in them,” lawmakers continued, “exploiting their position as sole suppliers for certain items to increase prices far above inflation or any reasonable profit margin.”

Updated: 1:36 p.m.