The Defense Logistics Agency and the Army overpaid aerospace contractor TransDigm Group Inc. [TDG] for nearly all aircraft parts in a sample of contracts over a two-year period, the Pentagon’s Inspector General (IG) says in a new report.
The excess profits relate to 113 contracts valued at $29.7 billion from January 2015 and January 2017, with the over payments totaling $16.1 million on 112 of the contracts, the IG says in its report released on Feb. 25. The report says that the company earned excess profit on 46 of 47 parts purchased by the Defense Department.
“When we compared the awarded prices for the 47 parts on 113 contracts to TransDigm’s uncertified cost data, our analysis determined that only one part purchased under one contract was awarded with a reasonable profit of 11 percent,” the IG says. “The remaining 112 contracts had profit percentages ranging from 17 to 4,451 percent for 46 parts. We determined profit percentages of 15 percent or below to be reasonable.”
A spokeswoman for TransDigm told Defense Daily that the report doesn’t suggest any “wrongdoing” on the company’s part.
Reasons cited for the high prices include overpricing for parts when first purchased and over time, and also because TransDigm was able to “set the market price for those parts” as it was the only manufacturer of them.
The IG recommends that DLA and the Army consider seeking a “voluntary refund from TransDigm” to get back the extra profits. It also suggests reviewing acquisition regulations so that contracting officers have appropriate cost data and “expand the reporting requirements to all contractor denial of cost data for acquisitions of parts produced by one manufacturer.”
The TransDigm spokeswoman said the company is reviewing whether it will make a refund, which she noted is voluntary.
“We value our business with the U.S. government and look forward to working with the DoD and other government agencies to satisfy the government’s requirements and to continue to provide good value by supplying reliable, high quality products and technical solutions delivered on time to support the U.S. military as it further advances its critical missions,” she said.
The Army and DLA agreed with the IG’s recommendations.