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Defense Contractor Prices Skyrocket House Hearing Today on Legislation that Would Roll Back Taxpayer Protections

March 7, 2002 

 

Under reduced oversight, the Pentagon is getting increasingly fleeced by defense contractors, according to a new report. Today's report coincides with a House hearing to consider legislation aimed at loosening oversight over contractors performing services for the government, the Services Acquisition Reform Act (SARA).

"The tremendous increase in defense contractor ripoffs are due to the kinds of policy changes that are being discussed at today's hearing," according to Danielle Brian, Executive Director of the Project On Government Oversight (POGO).

In the 1990's, Congress and the Clinton Administration rolled back laws preventing defense contractor ripoffs: the result is double-digit increases in spare parts prices and other types of ripoffs. Among the oversight laws POGO cites that were weakened in the 1990's are:

  • the Competition in Contracting Act which helped foster increased competition in government contracting and access for businesses to federal contracting opportunities;
  • the Truth in Negotiations Act which requires contractors to submit cost and pricing data to the government, particularly in situations where there is no competition (competition helps keep prices low and quality high) in the bidding of a contract; and
  • the Cost Accounting Standards (CAS) Board which sets accounting rules to ensure that defense contractors do not use accounting gimmicks to cheat the government.

According to the report, in recent years numerous General Accounting Office (GAO) and Inspector General reports have documented "sticker shock." For example, a March 2001 study revealed that the Pentagon paid $409 for what should have been a $39 sink. A Fall 2000 GAO study found that one out of seven spare parts (14%) ordered by the military experienced a price increase of 50% or more in just one year, 1998. Thousands of extreme price increases were also documented: the cost of 2,993 spare parts increased by 10 times (1,000%) or more of their original price in 1998. In most cases, the defense contractors had underestimated the cost of the spare parts then jacked up prices later. (See POGO Alert November 17, 2000.)

Click here for POGO's report, Pick Pocketing the Taxpayer: the Insidious Effects of Acquisition Reform.


Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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