TransDigm: NDAA Conference Report Retains House Provisions on Cost Data, Requests Report on Sole Source Contracts

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On Monday, the House and Senate Armed Services Committees released a conference report that reconciled differences between the two chambers’ National Defense Authorization Act (NDAA) bills, clearing the way for a final vote on the must-pass legislation.

The conference report retained provisions in the House bill proposed by Representatives Ro Khanna (D-CA) and Jackie Speier (D-CA), two vocal critics of aerospace manufacturer TransDigm (TDG), which would grant greater authority for contracting officers to request cost data from companies. In proposing his amendment in June, Representative Khanna stated that the amendment was in “direct response to TransDigm fleecing American taxpayers.”

These provisions could affect how TransDigm contracts with the Department of Defense by drawing greater scrutiny to the prices of the parts it sells to the government. A February 2019 report by the DoD Office of Inspector General found that TransDigm received “excessive profits” on 99 percent of sampled contracts.

For example, the bill would grant contracting officers the right to render any contractor that denies “reasonable requests for data other than certified cost or pricing data” ineligible for award. The OIG report found that TransDigm had denied requests for cost data from the government 15 out of 16 times, only relinquishing it when it was statutorily required to under the Truth in Negotiations Act.

In addition to the powers granted to contracting officers, the bill directs the Under Secretary of Defense for Acquisition and Sustainment “to identify and report those offerors who denied multiple such requests [for cost data] and nonetheless received awards” and conduct additional analysis on the prices that the contractor has charged the government on those contracts. This provision would make official a policy change that the Acting Director of Defense Pricing and Contracting sent to heads of contracting activities for each branch of the military in the spring of 2019.

When making price reasonableness justifications, contracting officers would also be required not to base their findings on the reasonableness of a price solely on prices previously paid by the government.

The bill also directs the Comptroller General to conduct a report on “the efforts of the Department of Defense to obtain cost and pricing data for sole source contracts for spare parts.” That report would be due no later than March 21, 2021.