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Ro Khanna Forces Beltway Bandit to Refund Millions From Price Gouging

In a Congress dominated by dysfunction and partisan bickering, Congressman Ro Khanna may have found a model for success. In a resounding victory for what congressional oversight can achieve, the California Democrat recently got defense contractor TransDigm to refund $16.1 million in egregious price-gouging overcharges.

Lately, the deeply unpopular [1] Congress has focused much of its attention on ineffectual investigations into Donald Trump. Yet not so long ago, it wielded its powerful investigative tools to force accountability from industry and government alike. Congressman Khanna’s recent success illustrates that it’s still possible for the legislative branch to do so—should it choose to.

The TransDigm refund wasn’t accomplished through legislation. Instead, the defense contractor voluntarily returned the money because a member of Congress started asking questions.

“I had been in Congress for a few months, and I came across initial reporting from Capitol Forum about TransDigm and their business model, and the report suggested they were buying up small manufacturers supplying DoD and then jacking up the prices by 500 or 5,000 percent,” Congressman Ro Khanna said in an interview with TAC.

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After he wrote a letter to the Defense Department’s Inspector General, the IG launched an investigation that concluded with a scathin [2]g report [2] showing that TransDigm had made “excess profit” on 46 of 47 spare parts, with profit margins as high as 4,451 percent on some sole source parts. The IG also identified 12 parts that previously had been sold to DoD by another contractor. After acquisition by TransDigm, each part became significantly more expensive. Following a bruising House Oversight Committee hearing [3] where both Republicans and Democrats united in demanding that the company refund taxpayers, TransDigm agreed to return $16.1 million in overcharges to the Pentagon.

Chart prepared by House Oversight Committee staff from data from Defense Department Inspector General Report, Review of Spare Parts Purchased From TransDigm Group, Inc.

“There’s no political ideology that comes into play with this; it’s just right and wrong,” Congressman Khanna told TAC. “It’s offensive to those of us on the Armed Services Committee…to see a company profiting like this off our military and our men and women in uniform [who are] dependent on some of [the contractor’s] equipment. It’s appalling; it’s the worst kind of offense a company can” commit.

The legislative branch used to frequently deploy the Inspector General to investigate federal departments and to justify spending requests. These are “absolutely” the sort of investigations that Congress should be focusing on, Mandy Smithberger, an analyst at the Project on Government Oversight, told TAC.

“Congress used to do more of this kind of oversight, and we need to” return to that, said Khanna. “My sense is we have to be more vigilant in looking out for contractors who are abusing the system, anywhere in government, ask for investigations and try to be bipartisan about it. In this case I had [the assistance of] Congressman Mark Meadows who was very eloquent. The investigation wouldn’t have succeeded if it hadn’t been bipartisan, because that would have given the company an out”: claiming that the probe was motivated by partisan political posturing.

Still, the $16.1 million returned by TransDigm represents a drop in the bucket of government’s wasteful spending [4].

Federal departments and agencies have not implemented $87 billion worth of Inspectors General proposals. Of that, the Pentagon is responsible for approximately 38 percent, according to a 2016 report from the Senate Judiciary and Homeland Security committees. Since fiscal year 2014, the Pentagon failed to implement over half of the 1,122 recommendations made by the Government Accountability Office (GAO). Nearly a quarter of the unheeded recommendations were at least four years old, according to a GAO report. Of its recommendations to DoD, the GAO considers 68 to be “priority” proposals. Yet almost half of the solutions the GAO deemed most important were also ignored by the Pentagon.

A bill sponsored by Congressman Mark Walker and Senators Todd Young and Elizabeth Warren, and signed into law by President Trump this year, would force agencies to explain why they have ignored recommendations from either the IG or GAO starting in 2021.

“It’s unacceptable that Federal agencies ignore thousands of recommendations on how to become more efficient and save taxpayer dollars,” Congressman Mark Walker [5] said in a statement.

When implemented, the Good Accounting Obligation in Government (GAO-IG) Act [6] has the potential to make IG reports an even more powerful weapon in Congress’s oversight arsenal.

Inspectors General “aren’t writing these reports and recommendations for their health,” Steve Ellis, executive vice president of Taxpayers for Common Sense, said in an interview with TAC. “They’re asking serious questions and making recommendations for improvements within these agencies…. These reports cost taxpayers millions of dollars, and they actually could save taxpayers if they were implemented. This law would simply make the executive branch tell Congress why they’re not implementing these recommendations. …At least agencies will have to explain themselves, instead of simply ignoring them and sticking their heads in the sand while taxpayer dollars are being wasted.”

“I think this bill will be helpful at ensuring that Congress takes the work of the watchdogs seriously and makes sure the Department is being responsive to the concerns raised,” Smithberger told TAC. “However, I don’t know that this bill will be enough.”

Without the withholding of taxpayer dollars if departments are non-responsive, the new law could simply become a “paper-shuffling exercise” at the Defense Department and elsewhere, said Smithberger. The best way Congress can make the Pentagon accountable “is through the budget, and looking at restrictions and other penalties when the Department is not fixing the problems identified,” she said. “I think it’s good to have follow up requiring the departments to explain when they don’t implement the IG’s recommendations…. Sometimes there will be delaying tactics from the Department, and I think it will help Congress see how to put pressure on the appropriate parts of government to enact change.”

Congressman Khanna, who has also sponsored a bill to end U.S. troops fighting in Yemen, has requested that the GAO look into legislative fixes so as to prevent contractors overcharging in the future, and to make the procurement process less susceptible to fraud and abuse. One clear problem that stood out in the TransDigm case was that procurement officers are unable to request cost information for contracts under $2 million [7].

“Everyone at DoD knew TransDigm was jacking up prices. They were just helpless to do anything,” said Khanna.

While requiring pricing for every small part would make the government contracts overly burdensome, a change in the law that gives officers the discretion to request pricing if they suspect price gouging could prove useful.

The refund from TransDigm only came about because Khanna started asking uncomfortable questions and sent an Inspector General to investigate. The astonishing results show the power Congress still has.

Members of Congress would do well to heed this model for success: focus on bipartisan investigations that will save taxpayers money and put an end to fraud and abuse. The Inspectors General reports, coupled with the new GAO-IG bill, will strengthen Congress’s ability to hold the executive branch accountable, particularly if it ties non-compliance to taxpayer funding.

There’s another benefit, too. If Congress chooses to focus on “standing up for the American taxpayers,” it could restore trust in itself as an institution and in our government, said Khanna.

“When you can take actions on a bipartisan basis, like going after a bad contractor fleecing the American people, it shows that Congress is able to stand up for the public interest,” Khanna said. “That goes some way in restoring people’s confidence that Congress can function…this is why Oversight was established, and we need more wins like this to help Americans believe in the role Congress can play to help the American people.”

Barbara Boland is The American Conservative’s Foreign Policy & National Security reporter. Follow her on Twitter at @BBatDC [8].

19 Comments (Open | Close)

19 Comments To "Ro Khanna Forces Beltway Bandit to Refund Millions From Price Gouging"

#1 Comment By Fazal Majid On June 11, 2019 @ 11:01 pm

If more politicians remembered how Harry S Truman’s war on war profiteers brought him to the attention of FDR and ultimately the presidency, there would be more volunteers for the tough slog of making entrenched contractors disgorge their ill-gained profits at the expense of the taxpayer.

#2 Comment By EliteCommInc. On June 12, 2019 @ 1:04 am

Great. good. get after them. That is one of Congrsses mandates. Super. maybe a trillion more to go.

And then there is this,

“Congressman Khanna told TAC. “It’s offensive to those of us on the Armed Services Committee…to see a company profiting like this off our military and our men and women in uniform [who are] dependent on some of [the contractor’s] equipment. It’s appalling; it’s the worst kind of offense a company can commit.. .”

They are taking advantage of the government’s lousy bookkeeping practices, in this that of DOD. And I certainly support our military —

but it’s the US tax payer who is being taken advantage of here.

No offense to anyone in uniform, but the above comment sounded a tad like electioneering pander.

#3 Comment By polistra On June 12, 2019 @ 2:17 am

Counterproductive.

Lowering the price of weapons systems means government can buy more weapons.

Deepstate LOVES to have us focused on “waste fraud and abuse” because we’re helping Deepstate to do its job more efficiently.

We should be focusing on the basic questions. Do we need war, regardless of cost? Do we need Deepstate, regardless of cost?

#4 Comment By Doggrotter On June 12, 2019 @ 3:01 am

Epic, congratulations to Ro Khanna. With a track record like that I think he should run for President.

#5 Comment By Christopher Cook On June 12, 2019 @ 6:39 am

I had to run a Google search for Khanna’s party affiliation because you didn’t mention it in the article. I figured that meant he is a Democrat, and it turns out I was right. That’s bush league reporting on the part of TAC to leave his party out of the piece. You can do better than that.

#6 Comment By Whine Merchant On June 12, 2019 @ 7:43 am

How long before the lobbyists convince the GOP that this type of contractor bullying is unpatriotic? Socialism for the arms industry keeps us safe from Houthi rebels invading ‘Murica.

#7 Comment By Roy Fassel On June 12, 2019 @ 8:48 am

One would not know it from glancing at the article

…..but Khanna is a liberal (progressive!) Democrat representing the Silicon Valley out in California.

Republicans are not going to step up to the plate to offend the defense industry/military complex Eisenhower warned everyone about in 1960.

Military spending has become quite wasteful in recent times. It is the best form of “socialism” in America.

#8 Comment By Johnt On June 12, 2019 @ 8:52 am

Excellent work! When our nation honors the lives of the Audie Murphys more than it does that of the George Pattons we may begin to see more thugs finding their rightful place in our prisons. And, perhaps we will stop creating so many generations of terrorists by bombing their communities into oblivion just because it so damn profitable.

#9 Comment By Nelson On June 12, 2019 @ 10:07 am

Lowering the price of weapons systems means government can buy more weapons.

What makes you think budgets are fixed size? If anything, higher profit margins mean more campaign contributions for pro-“military industrial complex” legislators and greasing the wheals of politics in general. This means ever increasing budgets.

If there were almost no profits, there wouldn’t be enough money to fill campaign coffers. Deficit hawks (or a least politicians who want to spend the money on something other than defense contracts) might win the election, thus making the DoD budget smaller and forcing the military to not overbuy.

#10 Comment By Sid Finster On June 12, 2019 @ 10:29 am

How much is the Pentagon budget these days? $700 billion a year, more or less?

We can argue later whether cost savings for the Department of Defense are a good thing or not, but at only $16M a pop, Congressman Khanna is going to need a much bigger boat.

#11 Comment By Alex On June 12, 2019 @ 10:57 am

to Christopher Cook

The party affiliation of the Congressman was mentioned at the very first paragraph of the article.

“In a Congress dominated by dysfunction and partisan bickering, Congressman Ro Khanna may have found a model for success. In a resounding victory for what congressional oversight can achieve, the California Democrat recently got defense contractor TransDigm to refund $16.1 million in egregious price-gouging overcharges.”

#12 Comment By SteveM On June 12, 2019 @ 11:06 am

Re: “My sense is we have to be more vigilant in looking out for contractors who are abusing the system…”

That’s rich. Khanna and his pals have massive Big Contractor boondoggles staring them right in the face.

In real-time, the F-35, Littoral Combat Ship (LCS), Zumwalt Class Destroyer. All financial catastrophes for the taxpayers.

But no matter how much the Top 6 Merchants of Death screw-up, they are always invited back to the Pentagon trough to screw-up some more.

And OBTW, the hubris of the sanctified Generals who wail in front of Congress about the “hollowed out force structure” is amazing. When the original acquisition program plans that they themselves oversaw were to deliver plenty of platforms at a notionally affordable cost.

With that woe-is-us schtick begging to Congress, those War-Monger Clowns remind me of the kid who kills his parents and then throws himself at the mercy of the court because he’s an orphan.

I’ll start paying attention to Khanna when Khanna starts paying attention to Lockheed Martin, Raytheon, General Dynamics, Northrup and Boeing.

P.S. Fat chance with Boeing, given that it’s planted Shanahan in the SecDef seat.

#13 Comment By marku52 On June 12, 2019 @ 11:42 am

Obviously, TRansDigm didn’t spend enough on lobbying (purchasing) senators, or else they would have gotten this buried.

Look at all the investigation of Wall Street after it blew up the world’s financial markets.

Oh wait, there wasn’t any? What a surprise.

#14 Comment By K Squared On June 12, 2019 @ 12:00 pm

to Roy Fassel and Christopher Cook earlier:

Yes, Khanna’s party affiliation (D) should have been highlighted in the article but it was listed in the photo caption.

#15 Comment By wmwa On June 12, 2019 @ 12:30 pm

Wow. Finally. Keep it up and PLEASE DO MORE!!!

The American people have woken up to the fact that this type of thing goes on in so many areas of government. It would be cathartic and refreshing if Congress did more work like this (i.e. their jobs;).

#16 Comment By TG On June 12, 2019 @ 12:30 pm

This is rubbish. It’s a one-time cheap-shot publicity stunt, with no prospect of it ever going further, no basis for becoming systematic. Like Trump jawboning a defense contractor to reduce the price of a weapon system by 0.01% – maybe. Before it turns around and increases it by 20%.

Meanwhile we are being invaded by the third world, and our government is perfectly happy with that, helping out by giving the invaders food and free medical care (how come US citizens don’t get free medical care?) and helpfully shipping them all over the country so local communities can help pay for their upkeep, while they are all soon to get work permits so they can flood the labor market and drive wage down.

#17 Comment By balconesfault On June 12, 2019 @ 2:32 pm

” would force agencies to explain why they have ignored recommendations from either the IG or GAO starting in 2021.”

What was the purpose of delaying implementation until 2021 … except perhaps to give the Trump Administration more time to proceed without oversight, which was likely necessary in order to garner Trump’s signature?

#18 Comment By Caramel Sundae On June 12, 2019 @ 7:35 pm

“cost to the taxpayers” is a canard. The war budget can increase by tens or even hundreds of billions and there’s little to none “how do we pay for it”. The money is simply created/transferred.

That doesn’t mean that budget doesn’t affect other things; but those other things are framed with “how do we pay for it”, something that isn’t used to seriously criticize the outrageous war budget.

Maybe a better way to frame it would be “cost to roads”, “costs to social services”, “cost to health care”, since every $billion increase to the war budget could/should be to better things that actually help Americans instead. Or at least not justified as gutting those things even if they aren’t increased.

#19 Comment By Tomonthebeach On June 15, 2019 @ 11:50 am

I find it curious, and satisfying, that most of the current Congress who are actually pushing for and achieving change are, for the most part, quite new to Governing, and often of minority heritage. Now if we can just do something about our fascism…