US Should Insist TransDigm Refund $ 20 Million In “Excess Profits”

WASHINGTON – One new report Office of the Inspector General of the Pentagon recommends that the department seek a refund of at least $ 20.8 million from TransDigm, a company long criticized for what Defense Department officials see as a model for fundraising. “Excess profits”.

TransDigm, which makes spare parts for commercial and military aircraft, repaid the Pentagon $ 16 million in 2019, although a senior executive noted that this was not an admission of wrongdoing. and that it was simply “in the best interests of the business”.

The company has been the target of bipartisan anger. At a hearing in 2019, Representative Ro Khanna, D-Calif., Said Congress will not tolerate “war profiteers, those who seek to use the fact that we are at war to hold us hostage and raise their prices on mission critical defense items to astronomical levels.

Lawmakers requested the latest audit, which aimed to examine whether the company has made excess profits as well as how its DoD contracts are structured and the company’s impact on the defense market.

IG’s latest report, released on Monday, found that TransDigm made $ 20.8 million in excess profit on 105 spare parts out of 150 contracts.

“Multiple audit reports over the past 23 years have highlighted the problem of DoD paying excess profits on sole source contracts where cost analysis was not used to determine fair and reasonable prices. and this problem continues to occur, ”the report says.

The report called on the director of defense pricing and contracts to work with the head of the Defense Logistics Agency to consider “alternative outsourcing strategies” to buy more efficiently from companies like TransDigm.

The IG also recommended that the Defense Pricing Chief consider whether DoD policy adequately addresses when to use cost analysis to determine if a price is reasonable for supplier spare parts. unique. If the current policy is not sufficient, the director “should take steps to review and update the policy and guidance.”

TransDigm disputed the findings, saying in a statement that the IG used “arbitrary standards and analysis”.

“The report ignores the significant real costs incurred by the company and, contrary to the law, marks these costs as excess profits,” the statement said. “The report presents the profit percentages in a misleading and provocative manner. This includes calculating profit as a percentage of cost rather than a percentage of sales – the internationally recognized business standard and method. “

TransDigm named 50th largest defense company in the world in Defense News’ latest top 100 list. The company achieved $ 2.18 billion in defense-related revenue in fiscal 2020; that’s 43% of his total income during that period.

Marjorie Censer is the editor of Defense News. She is also the host of the television news program Government Matters. She was previously editor-in-chief of Inside Defense. She also worked as a defense editor at Politico and as a writer for the Washington Post, Carroll County Times, and Princeton Packet.

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