Boeing refused to give cost data for nearly 11,000 replacement parts, Pentagon says
Bloomberg May 25, 2023
Boeing refused to give the Pentagon cost data for almost 11,000 replacement parts over a year, according to a congressionally mandated report intended to shine a light on some military contractors' opaque pricing data.
The data denials for 10,659 items under a single contract accounted for 97% of such refusals by contractors during negotiations from October 2020 through September 2021, according to a previously undisclosed Pentagon assessment submitted to House and Senate defense committees.
Boeing's "refusal to provide basic transparency on cost and pricing information represents a breach of the company's duty to government, taxpayers and our service members," Senator Elizabeth Warren and Representative John Garamendi, Democratic members of the Senate and House Armed Services committees, wrote in a letter to Boeing Chief Executive Officer David Calhoun dated Wednesday.
Boeing, one of the Pentagon's top contractors, said in a statement that "while we have yet to see the Defense of Department report, we take very seriously our responsibility to support the warfighter and our commitments to the U.S. government and taxpayer."
But the lawmakers described Boeing as a "particularly bad actor," saying it gave "absurd and unacceptable" reasons for not providing the data. Warren and Garamendi demanded that Boeing provide answers about its policies by June 12.
"All 10,659 items reported by the Air Force were associated with Boeing Defense Space and Security and Boeing Global Services, under a single contract action," according to the report. The contract in question wasn't identified.
Until now, the debate over refusals to provide cost data focused on a much smaller company that specializes in providing spare parts to the military, TransDigm Group. It accounted for the other 3% of such refusals in the new report. A long-running dispute over TransDigm's resistance to providing data prompted the request for the report ordered by Congress.
The lawmakers also wrote a similar letter to TransDigm Chief Executive Officer Kevin Stein, citing his company's failure to provide data on 275 items. "We look forward to meeting with Sen. Warren to address her questions," TransDigm said in a statement.
The Pentagon is under pressure to demonstrate it's a good steward of tax dollars because its fiscal 2024 budget request, adjusted for inflation, is the largest in decades. The procurement request is also the largest ever.
The Warren-Garamendi letters and the Pentagon report raises questions about the military's ability to get the best prices for parts, especially when faced with sole-source suppliers like Boeing and TransDigm that refuse to provide pricing data for a number of reasons. Senior military contracting officers approved the contracts despite the denial of data because the parts were considered vital.
The legislators also wrote Defense Secretary Lloyd Austin asking for information about what steps his department is taking to prevent "price-gouging when companies refuse to provide requested cost or pricing data." Boeing's denial of data make it impossible for the Pentagon to make sure it's "not being ripped off," they wrote. A Pentagon spokesperson didn't have an immediate comment.
The Pentagon report said that officials believe "the problem in obtaining substantiating information from contractors to support fair and reasonable price determinations may be more prevalent than what is represented in this report." Acquisition officials have "stressed to the military departments and defense agencies the importance of reporting data denials," it said.