• 1

  • 2

  • 3

  • 4

  • 5

DOD Inspector General Report on Excess Profits by TransDigm Group, Inc.

Date: 
Wednesday, May 15, 2019 - 10:00am
Location: 
2154 Rayburn House Office Building, Washington, DC 20515
DOD Inspector General Report on Excess Profits by TransDigm Group, Inc.

REP. RO KHANNA'S OPENING STATEMENT

PURPOSE

The hearing will address issues identified in the IG’s report and the IG’s recommendations for reform. The Committee has jurisdiction over federal acquisition policy and management. The hearing will examine whether TransDigm is appropriately earning excess profits with taxpayer funds and whether federal acquisition regulations adequately equip contracting officers to negotiate fair and reasonable prices for spare parts from sole source manufacturers.

BACKGROUND

TransDigm manufactures spare parts for aircraft used by the Air Force and Army, including the AH-64 Apache, C-17 Globemaster III, the FF-16 Fighting Falcon, and the CH-47 Chinook.  According to the IG, from April 2012 through January 2017, DOD issued 4,942 contracts valued at $471 million to TransDigm.

In response to a request from Representative Ro Khanna, the IG reviewed the prices for a sample of 47 parts purchased from TransDigm under contracts awarded by the Defense Logistics Agency (DLA) and the Army. 

The IG determined that “TransDigm earned $16.1 million in excess profit on 46 of the 47 parts it sold to the DLA and the Army for $26.2 million between January 2015 and January 2017,” with profit percentages ranging from 17 to 4,451% for the 46 parts. 

The IG identified 12 parts that previously had been sold to DOD by another contractor.  For each part, TransDigm’s prices were significantly higher than the price offered by the original manufacturer before it was acquired by TransDigm.

WITNESSES

The Honorable Kevin Fahey
Assistant Secretary of Defense for Acquisition
Department of Defense

The Honorable Glenn Fine
Acting Inspector General
Department of Defense

Nicholas Howley
Executive Chairman and Founder
TransDigm

Theresa Hull
Assistant Inspector General for Acquisition, Office of Inspector General
Department of Defense

Kevin Stein
Chief Executive Officer
TransDigm

116th Congress