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We just found two provisions buried in the 344-page Pentagon spending bill that allow private contractors to massively fleece taxpayers — read today’s story to find out how lawmakers are siding with military companies. Also: - 🏠 If you have a landlord, you might be getting duped into paying junk fees.
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Rock the boat.
New Bipartisan Bill Allows Military Contractors To Fleece Taxpayers
By Freddy Brewster
[View in browser] A year after military contractors were caught dramatically overcharging the Pentagon, a bipartisan group of lawmakers who’ve been showered with campaign donations from the military industry is pushing a bill to make it even easier for those companies to rip off the Defense Department, according to a Lever review of the bill. After receiving more than $3.8 million in 2024 campaign donations from political action committees and individuals associated with the military industry, members of the House committee overseeing Pentagon spending just inserted two provisions into an upcoming bill that would exempt many more private products and services from competitive pricing guidelines and provide contractors far more leeway in what they can charge the Defense Department. Last year’s Pentagon spending bill totaled nearly $884 billion. Over the past decade, more than half of that budget has gone to military contractors, according to an analysis from the Quincy Institute for Responsible Statecraft. Many of the top military contractors — including Boeing, RTX Corporation, Lockheed Martin, General Dynamics, and Northrop Grumman — have seen sizable stock-value increases since the war in Gaza began in October 2023 while shooting down shareholder efforts at increased transparency. The provisions in the 2025 Pentagon spending bill are part of the 344-page National Defense Authorization Act of 2025 (NDAA), an annual piece of legislation that outlines policy and funding for the Defense Department. The provisions in question — Sections 811 and 812 — make good on a wishlist of policy changes that many military companies have been lobbying on for years, said Julia Gledhill, a research associate at the Stimson Center, a nonpartisan think tank focused on international security. “These provisions are terrible policy and [the military] industry might as well have written them,” Gledhill told The Lever. “It’s really clear that [military contractors] don’t want us to know their profit margins, so they’re just trying to further conceal their costs.” The Pentagon spending bill was drafted by the House Armed Services Committee, which has been a focus of campaign donations from the military industry. So far this election cycle, military industry political action committees and affiliated individuals have given more than $3.8 million to the 58 members of the committee, according to data compiled by Open Secrets. Rep. Mike Rogers (R-Ala.), chairman of the committee, has received nearly $2 million from the military industry for election efforts throughout his 20-year career. Rep. Adam Smith (D-Wash.), ranking member of the committee, has received more than $1.5 million from the military industry for election efforts throughout his 26-year career. Spokespeople for Rogers and Smith forwarded requests for comment to the House Armed Services Committee's communications directors, who did not respond before publication. “As a member of the House Armed Services Committee, I’m disappointed to see provisions in the NDAA that would allow contractors to further obscure pricing data,” Rep. Ro Khanna (D-Calif.) told The Lever. “This would lead to more inflated costs and waste taxpayer money when we could be investing it instead on a modern national security to actually keep us safe and domestic priorities like education and healthcare.” One of the bill’s provisions would expand the definition of commercial products — items available to the general public that aren’t subject to the Pentagon’s fair-pricing controls — to include the parts and components of larger products such as planes and computers, as well as the services associated with building and repairing those products. “[The military] industry has successfully lobbied Congress for decades to expand what is considered commercial in the defense contracting realm,” Gledhill said. The other provision in the Pentagon spending bill would allow military contractors to charge the Defense Department for products and services based on prices from the past 12 months, rather than continuing to require a market analysis to determine their actual fair-market price. The idea behind the pricing change is that the free market keeps prices reasonable, so the analysis isn’t necessary, said William Hartung, senior research fellow at the Quincy Institute for Responsible Statecraft, a nonprofit think tank. But for some military contractors, the U.S. government is their only domestic customer, so the argument that competition will drive down prices doesn’t really apply. “The argument is that the market will take care of it, but for some of these things, they’re very specific services or components so there’s not really people out there in the commercial world trying to buy these things and driving the price down,” Hartung told The Lever. “I think it is an attempt to give them even more leverage on the company side.” The bill comes a year after a CBS News investigation found that military contractors were overcharging the Defense Department for various products and services. Many military companies sign Pentagon contracts that stipulate a fixed 12 to 15 percent profit, but Pentagon analysts found that many companies were overcharging, which “boosted total profits to nearly 40 percent or more,” according to a May 2023 news release from a bipartisan group of senators. “Lockheed Martin, Boeing, Raytheon, and TransDigm are among the offenders, dramatically overcharging the department and U.S. taxpayers while reaping enormous profits, seeing their stock prices soar, and handing out massive executive compensation packages,” the senators wrote. The House Armed Services Committee is scheduled to debate the National Defense Authorization Act on Wednesday, May 22, when amendments and revisions can be added to the bill.
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“Expands Their Ability To Price Gouge”Redefining what constitutes a commercial item could have a massive effect on the Defense Department’s spending. Commercial items can be exempted from the Truthful Cost and Pricing statute, which outlines fair pricing schemes and requires companies to charge the government fair prices. The statute also requires companies to submit certified cost and pricing data so that Pentagon analysts can justify the expenses. “‘Certified’ is a key word here, it means that the cost and pricing data is current, complete, and accurate,” Gledhill said. “In cases where contractors aren’t required to give certified cost and pricing data, they can give just any cost and pricing data, whether it’s incomplete, inaccurate, or old.” Military contractors have long fought to expand the commercial definition to exempt more products from competitive pricing, Gledhill added. “Once you have a commercial designation, you do not have to give certified costs and pricing data,” Gledhill said. “The theory being that if it’s commercial, it’s price competitive, but what we see are a lot of military items, equipment, and spare parts that have no commercial uses, and have in fact never been sold to the public. And contractors don’t actually have to give costs and pricing data for them, which really expands their ability to price gouge and fleece the taxpayer.” A wide range of products are already considered “commercial,” including planes, computers, medicine, technology updates, and other items, according to the Defense Department’s own website. The department stipulates that the commercial market includes the international commercial market, as well as items sold to state and local governments, which may help explain why the C-130J transport plane — a “medium-range, tactical airlift aircraft designed primarily for transport of cargo and personnel within a theater of operations” — is considered a commercial item. Section 811 of the new Pentagon spending bill would redefine what kinds of products and items would be considered commercial. The section would expand the definition to include smaller parts and components of larger products, as well as services associated with those products. Earlier this year, RTX Corporation, a weapons manufacturer formerly known as Raytheon, paid $60,000 to the lobbying firm Invariant, to “educate members on commercial items in [fiscal year] 2024 and [fiscal year] 2025 National Defense Authorization Acts, [fiscal year] 2025 Department of Defense appropriations” and other issues, a 2024 regulatory filing shows. RTX, which received more than $2.7 billion in military contracts in 2022, paid Invariant $290,000 to “educate members on commercial items” and lobby on other issues in all four quarters of 2023 as well, disclosures show. Section 812 of the Pentagon spending bill would loosen other military contractor spending controls. Previously, the Defense Department was required to undertake a market analysis and only pay the fair-market value for certain products. But the new provision would curtail the market analysis and allow contractors to charge prices based on the past 12 months. Gledhill said this change is particularly problematic because it allows too much interpretation of recent or historical price data. “I don’t see what the point of this is beyond helping contractors make more money,” she said. Additionally, the prices military contractors charge would be based on market prices, but oftentimes only a few companies, and sometimes only one, make these products, which can lead to an uncompetitive market, said Hartung with the Quincy Institute. “At some levels there’s competition and at others it’s almost nil,” he said. “And then there’s different kinds of contracts, some are supposed to be fixed price, but there’s always loopholes that the companies end up running over.” Together, these two new provisions would gut key parts of the Truthful Cost and Pricing statute, Gledhill said. “If you’re expanding the commercial item definition to exempt [contractors] from giving certified costs and pricing data, and on top of that you’re also letting [the Defense Department] rely on historic data of recent prices,” she said, “then what is the point of having [the statute] in place at all?” “Fines Are Almost Worth It” This is not the first time that military contractors have price gouged the Pentagon, and in many instances these contractors jack up prices for spare parts that are essential to operate the sophisticated machinery they sell to the military. Outrage about Defense Department spending took off in the 1980s when contractors were caught charging the government $400 for a plastic knob on a fighter jet and $37 for a single screw for a ballistic missile. More recently, the TransDigm Group, an aerospace manufacturing company, was caught overcharging the Pentagon on 46 out of 47 spare parts sold to the Defense Department between January 2015 and January 2017. The company agreed to repay $16.1 million to the Defense Department, but the overcharging continued. In 2021, Pentagon analysts found TransDigm was overcharging the government roughly $21 million on 105 out of 107 spare parts the company sold to the government between January 2017 and June 2019. In a report to lawmakers, Theresa S. Hull, deputy inspector general, said that the spare parts TransDigm sold to the Defense Department came with a 15 percent fixed profit, but TransDigm was charging much more than that.
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“On 105 of the 107 spare parts, we determined that TransDigm earned excess profits over 15 percent, ranging from 2.8 percent to over 3,850 percent,” Hull wrote to lawmakers, adding that TransDigm refused to hand over cost data on 25 out of 27 contracts, preventing analysts from performing a proper cost analysis. In 2023, Pentagon investigators found that TransDigm was still refusing to hand over cost data on more than 400 parts sold to the Defense Department between October 2021 and September 2022. “The Department believes the problem in obtaining data from contractors to support fair and reasonable prices may be more prevalent than what has been collected to date, particularly with respect to sole source commercial products,” Pentagon investigators wrote. Since the first quarter of 2022, TransDigm has spent $830,000 lobbying Congress and the Departments of Defense and Army on three issues: the National Defense Authorization Act, “commercial item acquisitions,” and “oversight of [Defense Department] contracts,” disclosures show. TransDigm was not the only company caught overcharging the Pentagon. In 2012, Lockheed Martin agreed to pay $18 million to resolve multiple allegations that it submitted fraudulent government contracts. In 2023, L3Harris Technologies, a communications equipment manufacturer, agreed to pay nearly $22 million to resolve allegations that it submitted false claims to the Defense Department. Last year saw the highest amount of money that the Justice Department recovered in fraud settlements with Defense Department contractors in more than a decade, according to an analysis by Morrison Foerster, an international law firm based in San Francisco. The Justice Department recovered more than $550 million in fiscal year 2023, which “marks a 400 percent increase from the amount it obtained in [fiscal year] 2022 ($103 million),” the law firm wrote in a February blog post. But these fines are often just a drop in the bucket for military contractors, which earn hundreds of millions, if not billions, of dollars in yearly profits. Now, if the new contractor provisions are allowed to pass as part of the 2025 Pentagon spending bill, experts fear the overcharging will accelerate. “The fines are almost worth it to the company, they’ve made out in a big way,” Hartung said. “Sometimes the penalties aren’t commensurate with the benefits. I think one of the arguments now is that the U.S. is supplying all these wars and we’re going to crank stuff out the door. But of course, if the money’s being wasted, it’s not helping, regardless of what you think about these wars, it’s not helping anybody except the companies.”
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