Representative Garamendi and Senator Warren Introduce the Bicameral Stop Price Gouging the Military Act

Press Release

Today, Congressman John Garamendi (D-CA), Chair of the House Armed Services Subcommittee on Readiness, and United States Senator Elizabeth Warren (D-MA), a member of the Senate Armed Services Committee, introduced the "Stop Price Gouging the Military Act" which would strengthen acquisition laws to help prevent price gouging by military contractors. Numerous Inspector General reports have found defense contractors regularly charge the military excessive prices, including $71 for a pin that should have cost less than a nickel and $80 for a drain pipe segment that should have cost $1.41. Loopholes in current acquisition laws make it nearly impossible for the Department of Defense (DoD) to obtain the data necessary to prevent price gouging. This legislation seeks to close those loopholes, tie financial incentives for contractors to performance, and provide the DoD with the information necessary to prevent future rip-offs.

"As Chair of the Armed Services Subcommittee on Readiness, I know how much we pay for parts to keep military equipment ready. We know that taxpayers and service members are routinely overcharged by defense contractors due to loopholes in current regulations. We cannot allow taxpayer money to be wasted to inflate the bottom lines of giant defense contractors. Our service members need the tools to properly negotiate prices," said Congressman Garamendi. "This is just common sense, and that's why I introduced the "Stop Price Gouging the Military Act' today in the U.S. House of Representatives. I thank Senator Warren for doing the same in the United States Senate. We will work together to ensure this legislation becomes law," concluded Congressman Garamendi.

"For far too long, military contractors have been price gouging the Pentagon to make fatter profits, and American taxpayers shouldn't have to foot the bill. The end result is a military budget that is way too large. We need some basic rules on the road to prevent military contractors from price gouging," said Senator Warren.

The "Stop Price Gouging the Military Act" would:

Strengthen Truth In Negotiations Act Provisions:
- Closes a loophole in the law to require contractors to provide the federal government cost or pricing information if there isn't adequate price competition that results in at least two responsive and responsible offers.

Revision of Definition of Term "Commercial Item" for Purposes of Federal Procurement Statutes:
- Restores market dynamics to the commercial item definition by adopting a Department of Defense proposal to tie commercial item determinations to whether a good or service is actually sold to other customers.

Progress Payments Incentive Pilot:
- Initiates a DoD pilot to tie payments to performance by lowering advanced payments for companies to 50% while providing contractors the opportunity to receive payments up to 95% if they meet certain conditions.

Disclosure by Large Defense Contractors:
- Mirroring disclosures already required by publicly traded companies, requires large defense contractors to annually share with the Under Secretary of Defense for Acquisition and Sustainment changes in the volume of goods or services sold, changes in the average price, and gross margins.
- Requires reports to be publicly posted a year later to enhance public oversight while protecting proprietary information that could undercut competition.
- Creates penalties, including being reported to contractor responsibility databases' contracting officers' review when awarding contracts, imprisonment, civil fines up to $200,000, liability, or being temporarily or permanently suspended from receiving future contracts for contractors who fail to provide these disclosures.

"Senator Warren's Stop Price Gouging the Military Act is the first piece of legislation I have seen in some time that attempts to address the disastrous effects and virulent abuses pricing spawned by the so-called "acquisition reform' movement of the last quarter-century," said Richard C. Loeb, Adjunct Professor of Government Contract Law at the University of Baltimore Law School and former Acting Deputy Administrator of the Office of Federal Procurement Policy at the Office of Management and Budget. "Senator Warren's bill is an attempt to restore some modicum of sensible pricing policies on government contracts which have been completely eviscerated by industry-led efforts that allow for non-competitive awards with absolutely no price transparency. Government contracting officers have been left helpless and blind in their efforts to negotiate better prices by laws that actually prevent access to contractor pricing data and discourage robust negotiations that would result in better deals for taxpayers. The Stop Price Gouging the Military Act restores commonsense taxpayer protections and accountability that were in place for decades before neoliberal policies of the past few decades made Swiss cheese out of them."

"The commercial item definition has been abused by dominant defense contractors for far too long," said American Economic Liberties Project Research Director Matt Stoller. "This legislation would finally start moving Pentagon procurement in the right direction. By ensuring that the Department of Defense is more wary of abuses in sole source contracting, as well as forcing large defense contractors to disclose their margins and paying them when they perform, Congress could ensure that the military gets better weapons at a lower cost."

"Military contractors have long bamboozled the Pentagon into bad deals. The Stop Price Gouging the Military Act would help close accountability loopholes in acquisition law that allow contractors to sell the Pentagon overpriced spare parts in pursuit of excessive profits. POGO applauds Sen. Warren and Rep. Garamendi for taking action to ensure the Pentagon gets the best prices for essential goods and services, protecting the warfighter, saving taxpayer dollars, and increasing competition in military contracting." -- Julia Gledhill, Analyst for the Center for Defense Information at the Project On Government Oversight

This legislation is endorsed by the American Economic Liberties Project, Project On Government Oversight, and Public Citizen.

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