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Audit Finds Military Contractor Made 9,400 Percent Profit on Single Metal Pin

Chris Gaetano
Published Date:
May 15, 2019
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A Pentagon inspector general audit has expressed concern that a military contractor has been grossly overcharging the U.S. military, noting that, in one instance, the Defense Logistics Agency paid $4,361 for a drive pin that should have just cost $46, according to Fortune. The contractor, TransDigm, was also found to have charged $803 for a retainer bearing that should have cost $32, $4,835 for a "ring" that normally costs $71, $67 for a lug for an F-15 jet that should have cost $3, and $8,819 for a valve assembly check oil pump that should have cost $369. The report estimated that, overall, the company made $91 million in profits on parts valued collectively at $28 million, with excess profits per part ranging from 95 percent to 9,380 percent. 

The inspector general report said that when the military asked for data that could possibly justify these kinds of markups, TransDigm generally refused. The report recommended legislation that would require contractors to provide pricing data when requested by the military. 

An internal audit of the Defense Logistics Agency in early 2018 found that the Pentagon had no way to confirm roughly $800 million worth of construction projects. The Department of Defense's first full audit ended last November with auditors saying they were unable to obtain sufficient and appropriate evidence to provide a basis for an opinion due to an abundance of material weaknesses in the financial statements. Such financial practices could explain why the Iraq inspector general said in 2010 that the military could not account for 95 percent of the $9.1 billion that was to be used for reconstruction efforts in Iraq. 

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