US aircraft parts maker TransDigm Group received USD20.8 million in excess profit under contracts it had with the US Department of Defense (DoD) from 2017 to 2019, according to a new report by the DoD's Office of Inspector General (IG).
The IG said it calculated the overcharge after reviewing cost data that TransDigm did not provide to DoD contracting officers. The auditing agency recommended that the DoD's Defense Logistics Agency (DLA) ask TransDigm to voluntarily refund the excess profit. The DLA said it agrees with the recommendation.
Asked whether TransDigm would issue a refund, the company released a statement saying it is reviewing the IG's findings. “What is immediately clear from the report is that TransDigm acted consistent with all laws and regulations, and in many other areas, the report contains flawed analysis such as reporting costs as profit and other misleading conclusions,” the statement says.
Leaders of the House Committee on Oversight and Reform, which requested the report, said the panel “will take further action” if TransDigm does not issue a refund. The lawmakers also said they will try to pass legislation to prevent such “price gouging” in the future.
According to the IG, the DoD generally buys spare parts from TransDigm operating units in small quantities, resulting in low dollar value contracts. For such contracts, companies are not required to share their cost data with DoD contracting officers, even when they have no competitors. When TransDigm, which specialises in making sole-sourced parts, does not share its cost data, the DoD struggles to identify excessive pricing, the IG said.
The new report, released on 13 December, follows a 2019 IG report that said TransDigm received USD16.1 million in excess profit on contracts from 2015 to 2017. TransDigm refunded the amount.
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