[Congressional Record Volume 165, Number 81 (Wednesday, May 15, 2019)]
[Senate]
[Pages S2845-S2854]
EXECUTIVE SESSION
[...]
Pentagon Oversight
Mr. GRASSLEY. Mr. President, I come to the floor today to shed light
on yet another really dark cloud that is hanging over our Department of
Defense. In fact, for decades, a dark cloud of fiscal mismanagement has
loomed large over the Pentagon. During my very first term here in the
Senate, I began my quest to bring fiscal accountability to the
Pentagon. Four decades later, I am still keeping tabs on the money
trail. That money trail is sometimes difficult to follow. Back then, it
was a bit like David taking on Goliath.
We all know that the United States of America has the strongest and
mightiest military in the world. I am thankful for that because a
strong military is not meant to fight a war; it is meant to maintain
the peace. We haven't had a world war III since we have had a strong
military.
Our brave men and women who serve in the U.S. Armed Forces protect
our shores at home and abroad to keep us safe and to protect the
blessings of liberty for our children and grandchildren. That is
exactly why it is so very important to keep check on the Pentagon's
ledgers, to help make sure that every tax dollar assigned to the
Nation's defense is actually spent effectively and not squandered on
waste, fraud, and abuse.
With the help of brave whistleblowers who stuck their necks out to
``commit truth,'' I stuck my neck out during the Reagan administration.
That is when I learned about the Pentagon's little shop of price
horrors.
Of course, ripping off the taxpayers started during the Revolutionary
War, when contractors sold rotten meat to the Continental Army, and it
continued during the Civil War, when profiteers sold ammunition filled
with sawdust and shoddy shoes and horses to the Union Army. It looks
like it continues to this day.
Back in 1985, Americans will recall, the Defense Department was
shelling out vast amounts of taxpayer dollars for spare parts. Remember
back then the $450 hammers and the $640 toilet seats? That sounds like
a real bargain compared to the more recent wasteful spending at the
Pentagon, such as the $1,280 coffee mug and the $14,000 toilet seat
lid. Obviously, the cost of waste is getting a whole lot more expensive
for our taxpayers.
Back in the 1980s, I fought to win a spending freeze on unchecked
spending sprees. Misspending and overspending were riddling the defense
budget at the expense of the American taxpayer.
Military readiness drives the spending decisions that Members of
Congress make when we cast our votes on the defense budget. Our
constituents expect their elected representatives to make sure that the
moms and dads, sons and daughters, brothers and sisters who are serving
our country in uniform are well equipped with the best resources money
can buy. But they also expect their elected representatives to make
sure their hard-earned dollars that are withheld from every paycheck--
their tax dollars--aren't being ripped off by greedy corporations, like
TransDigm Group, Inc., which I will speak about in a moment.
That is why I conduct robust oversight of defense spending. As a
taxpayer watchdog--and all of us are supposed to be watchdogs, and all
of us would claim to be watchdogs--it is our
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responsibility and my responsibility to make sure every defense dollar
is spent as effectively and as efficiently as possible. Every dollar
lost to waste, fraud, and abuse harms military readiness, and it also
lines the pockets of somebody else at taxpayers' expense.
Trimming the fat in a bloated bureaucracy won't happen in the
shadows. There is no magic wand to wave either. If there is one thing I
have learned in my years of oversight, transparency matters.
Transparency brings accountability.
Every time I come to the floor to talk about the fiscal mess at the
Pentagon, I get a bit of deja vu. Earlier, I said my fraud-fighting
efforts in the 1980s could be compared to David v. Goliath. Now let's
fast-forward to this year, 2019. I am still here working as hard as
ever to do away with wrongdoing and extract fiscal accountability at
the Pentagon. Today, some might say that job is like the one performed
by the famous character in Greek mythology who was destined to roll
that heavy stone up the hill and to do it from then until eternity.
Congressional oversight can be extremely tedious, and it can be time-
consuming, but, as I like to remind each of the other 534 Members of
Congress, it is essential to our country that we exercise this system
of checks and balances. Without it, the dark fiscal cloud looming over
the Pentagon would swell bigger and bigger and bigger.
Oversight work may feel like an uphill climb, but oversight is not
futile in the end. That is why I keep my shoulder to the wheel--to hold
people at the Pentagon accountable, to protect taxpayers, and most
importantly, when it comes to a defense dollar, to make sure we have
our military readiness.
Right now, I am here today to share some new details about the broken
record of fiscal mismanagement at the Department of Defense.
No matter how high I turn up the volume, the overdogs at the Pentagon
remain tone deaf to fiscal integrity. Consider the recent report by the
Department of Defense Office of Inspector General. It is called
``Review of Parts Purchased From TransDigm Group Inc.''
First, I want to compliment Senator Warren and two Representatives,
Ro Khanna and Tim Ryan, for getting the ball rolling with their request
asking the inspector general to look into the contract--this
contractor's pricing structure. We need all hands on deck in Congress
to conduct oversight, so I thank these other Members of Congress just
named.
After digging into the details, I can only conclude that the Pentagon
is still, after all these years, stuck on autopilot. No one on board in
the Pentagon's mother ship seems to bother to steer its ``fiscal ship''
into shape. Fiscal integrity somehow got lost in the spare parts horror
story I am about to tell. In fact, I was more than dismayed with the
response from the internal watchdogs at the DOD IG office. Their team
wrote the report, and yet the inspector general leadership team seemed
to show no urgency whatsoever to fix the problem they described.
This tells me I also need to keep a tight leash on the internal
watchdogs leading the Department of Defense inspector general's office.
Their February report exposes a galactic price gouging, colossal
ripple, and out-of-this-world waste. It reads like a sequel to the same
financial shenanigans that have turned the Pentagon into a taxpayer
money pit. Change out the name of the contractor, inflate the charges,
submit the invoice and voila--the American taxpayer is on the hook for
another fixed-price, sole source contract.
For this report, the inspector general examined one contractor,
TransDigm Group. In total, the inspector general analyzed 113 contracts
between January 2015 and January 2017. They reviewed 47 spare parts the
Department of Defense purchased from this contractor. In just those 2
years, the inspector general found TransDigm overcharged the Pentagon
by $16-1/10th million out of a total of $29-7/10th million in
contracts.
The reasonable profit threshold is considered by the Department of
Defense to be 15 percent or below. The IG found that TransDigm earned
excess profits on 46 of the 47 parts sold to the Defense Department.
On 17 of those parts, TransDigm earned more than a 1,000-percent
profit. Remarkably, the highest profit percentage was 4,436 percent.
It is obvious to our taxpayers that that is a fleecing of the
American taxpayer. Pulling the wool over the eyes of Congress and the
taxpayers will only stop with transparency--which transparency will
bring accountability.
So that is why I am here today. Just think for a minute about the big
picture. This report is just one snapshot of a much larger problem. It
is kind of a spit in the ocean when you consider the enormous $716
billion defense budget. Just imagine the boatloads of bloat elsewhere
in the bureaucracy. The Department of Defense is obligated under
Federal law and under regulations to uphold basic measures of fiscal
integrity.
So where do we go from here? The inspector general made just a few
paltry recommendations. For starters, it directed contracting officers
to request voluntary refunds for excess profits. Guess the chances of
getting voluntary refunds. Let me suggest that I would not advise
taxpayers to hold their breath on a voluntary refund. The inspector's
general recommendations, then, have no teeth. Their recommendations are
insufficient. What is worse, the inspector general leadership team
claims no single Department of Defense official is responsible for this
price gouging that goes on.
So let me repeat: The inspector general leadership team, the internal
watchdog for fiscal integrity and compliance at the Department of
Defense, is effectively saying something like this: No one person at
the Department of Defense can be held accountable for waste, fraud, and
abuse of taxpayers' money. Obviously, to the taxpayers listening or
anybody else, this illustrates a cavalier attitude toward taxpayer
money that former Secretary of Defense James Mattis sought to
extinguish. By the way, I wrote him a note, complimenting him on some
statements he made about taking care of some of these problems.
The decades-long odyssey of misspending at the Pentagon keeps going
around and around and around. That is why--the way I see it--the
Department of Defense has a fundamental responsibility to uphold fiscal
integrity. After reviewing the IG report and meeting with its auditing
team and the Department of Defense pricing czar, I have reached three
conclusions. No. 1, fiscal control at the Department of Defense is
AWOL. The Pentagon will never clean up its books if it cannot properly
track the money trail and connect the dots.
Consider why the Department of Defense contracting officers were
unable to even certify if a profit was ``fair and reasonable.'' Do you
know why? It was because they could not obtain critical cost data at
the company TransDigm. In the most egregious case--that case I
mentioned where there was a 4,436-percent profit margin for just one
spare part--the contracting officer--you will not believe this--
certified that the price was fair and reasonable. There is something
very, very wrong about that procedure. A whopping 4,000-percent profit
margin for a spare part doesn't square with our midwestern commonsense
standard.
No. 2, the leadership team at the IG office has exhibited an alarming
hands-off approach toward stopping waste, fraud, and abuse. The lack of
urgency and the failure to hold anyone accountable is very revealing.
It sends a signal throughout the chain of command: Just keep on signing
contracts; keep ordering spare parts; keep up business as usual.
Lastly, it shows that no one will be held accountable for price
gouging.
No. 3, the pattern of price gouging at TransDigm and its subsidiaries
has gone unimpeded for decades. It has amassed exclusive rights to sell
these spare parts to the Pentagon. In fact, the Defense Department
accounted for 34 percent of its sales in 2017. TransDigm exploited its
business model and took advantage of its sole source position to
leverage higher prices.
Now, as a former chairman of the Senate Judiciary Committee--and
still a member of that committee--I have examined anticompetitive
business practices over a long period of time, including those in
agriculture and the pharmaceutical sectors of our economy. It is very
concerning to me when
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contracting arrangements, like those between TransDigm and its 100
subsidiaries, are effectively a monopoly. It is like an octopus with
100 arms putting the squeeze on the Pentagon. Effectively, the Pentagon
is at the mercy of TransDigm--which owns the intellectual property--to
buy the spare parts it needs to build the Nation's critical weapon
systems. That leaves the American taxpayer on the hook for exorbitant
price gouging.
The inspector general report found that TransDigm's choke hold has
added up to tens of millions of dollars overcharging to the taxpayer.
This is a good time to refresh people's memories about my legislative
and oversight work with anticompetitive business practices. It is
pretty simple. Monopolies invite government regulation. If that is the
road TransDigm wants to continue following, I am here to deliver a
message. The jig is up on this cozy relationship. The buck stops here.
I have written a letter to Acting Secretary Shanahan about these
flawed contracts and failures to identify price gouging. I have asked
him to make measurable recommendations on how to restore accountability
and end this price gouging. One thing is crystal clear. Transparency
and competition are MIA--missing in action--when the Pentagon buys
spare parts from TransDigm and its subsidiaries. Now, thank God the
other body, the House of Representatives, its Committee on Oversight
and Reform, called an oversight hearing this week to examine TransDigm
and its price-gouging shenanigans.
Congress has a constitutional duty of oversight to keep check on
taxpayers' money and hold government accountable. As I said earlier, we
need all hands on deck to root out wasteful spending.
Once again, we are back to square one. The Pentagon has flunked a
fundamental benchmark of fiscal responsibility and stewardship. It is
one of Washington's worst kept secrets. Year after year, Congress
shovels more money into the Pentagon coffers to ensure we maintain the
best military in the world, and I express my support for the military.
I express my support that a strong department of national defense is
also a strong keeper of the peace because we might not be challenged,
and we are going to be able to help keep peace around the world, but
year after year, the Pentagon squanders hundreds of millions of
taxpayer dollars. Some people at the Pentagon seem to think that paying
$16 million in excess profits somehow seems to be small potatoes.
In my letter to the Acting Defense Secretary, I made it clear that I
am not one of those people. I have asked him to answer a direct
question. That question is this: What specific steps is he going to
take to stop the profiteers from pilfering taxpayer money?
Contracts like I have described today between TransDigm and the
Pentagon are shortchanging the troops, fleecing the taxpayers, and
tarnishing its reputation.
As Justice Brandeis said, ``sunshine is said to be the best of
disinfectants.'' So I am here today to pull back the curtains on the
TransDigm audit. The American people need the sun to shine in on price
gouging at the Pentagon so we can root out the wasteful spending here
and elsewhere.
Transparency is the best ammunition that we have to chase away the
dark fiscal crowd looming along the shores of the Potomac.
[...]
