U.S. Senator Dick Durbin.

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WASHINGTON—U.S. Senator Dick Durbin (D-IL), Vice Chairman of the Appropriations Subcommittee on Defense, today sent a letter to Defense Secretary Ash Carter urging him to resist defense industry efforts to undermine critical Pentagon oversight that protects U.S. taxpayers from hundreds of millions of dollars in wasteful spending.  

“An April 8 article in Politico alleges that some defense companies under the guise of this reform are attempting to curtail the Director of Defense Pricing from performing critical oversight of commercial item contracts. I urge you to resist these efforts that undermine good stewardship of taxpayer’s dollars,” wrote Durbin. “I believe the Department’s increased focus on cost is showing positive results in several Major Defense Acquisition Programs.”     

 

Full text of Durbin’s letter:

April 15, 2016

The Honorable Ashton Carter

Secretary of Defense

The Pentagon

Washington, DC 20301

Dear Secretary Carter:

I have recently become aware of renewed proposals to broaden the definition of commercial items within the Department’s acquisition rules. Some of these proposals are well-intentioned and useful attempts at efficiency. However, an April 8 article in Politico alleges that some defense companies under the guise of this reform are attempting to curtail the Director of Defense Pricing from performing critical oversight of commercial item contracts. I urge you to resist these efforts that undermine good stewardship of taxpayer’s dollars.    

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Mr. Shay Assad, Director of Defense Pricing, has exercised his statutory authority to insist on certified pricing data to evaluate defense industry bids for Pentagon contacts. As the article details, this has led to substantial savings to a variety of acquisition programs. The article further asserts that as a result, unnamed defense contractors are pushing to expand the definition of commercial items so that they would not have to disclose a variety of information, such as subcontractor costs, before signing a contract with the Department.

Although the Politico article credits Mr. Assad with saving $500 million across several defense programs, this estimate is likely under-reporting the benefit to the taxpayer. In particular, the article does not mention his role in transitioning the F-35 Joint Strike Fighter on to fixed-price contracts, which has contributed to substantial improvements in the overall program.

The Department of Defense has experimented with broad definitions of commercial items before. In 1999, the Government Accountability Office (GAO) found that the Defense Logistics Agency bought wiring harnesses for C-130 cargo aircraft as commercial items for as much as $495, even though they had been bought earlier for just $91. The GAO concluded that comparisons to other commercial items failed to expose the unreasonable price increases. Later, in 2004, the Department of Defense Inspector General questioned the Air Force’s designation of the entire C-130J cargo aircraft as a commercial item, finding that under the commercial contract, the cost of a single aircraft rose from $33.9 million in 1995 to $49.7 million in 1998. In this time of fiscal constraint, we cannot afford to promote commercial contracts at the expense of increasing costs.

I believe the Department’s increased focus on cost is showing positive results in several Major Defense Acquisition Programs.  For example, it was recently estimated that the total procurement cost of the F-35 decreased by four percent, and the cost for the Joint Light Tactical Vehicle decreased by 19 percent.  While I remain concerned with other acquisition programs, I hope you can apply recent cost reduction strategies implemented on these programs on other weapons purchases.

I urge you to inform the Defense Subcommittee and the Armed Services Committee of any concerns you have about proposals to expand the definitions of commercial items, especially if the proposal’s main aim appears to be to undermine the oversight of taxpayer dollars.  As always, I stand ready to work with you, Under Secretary Frank Kendall, and Mr. Assad to maximize the value of all funding appropriated to the Department of Defense.

 

Sincerely,

Richard J. Durbin

Vice Chairman

Subcommittee on Defense

Cc:       The Honorable John McCain

            Senate Committee on Armed Services

Cc:       The Honorable Jack Reed

            Senate Committee on Armed Services

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