Military contract price gouging: Defense contractors overcharge Pentagon | 60 Minutes 

As a former employee at a large Defense contractor, I can firmly say these companies are leeches on the national security of our country. So many of my coworkers added zero value to our contracts, other than keeping seats warm.

This is real journalism, something sorely missed in the modern age.

I worked as a defense contractor for roughly seven years. The amount of waste is incredible. The sad part is that most of these contractors are former military gouging their own. So much for patriotism and supporting our troops.

Im prior Air Force and even as a low level airman I saw the prices we paid for things. Its INSANE what we paid these companies for things.

They should run this story every month.

I worked in the defense industry for about 6 or 7 years and I had to get out of it, the whole thing seemed geared towards racking up billable hours to the government, nobody was there to protect the country, and the involvement of the top Military brass was atrocious. Top military officials recieved all kinds of kickbacks, mostly in the form of high level jobs with the military contractors they were supposedly there to oversee. The whole defense industry is a mess.

give this guy a bronze star medal.. by simply being uncorrupt able is amazing nowadays. He isn't afraid of intimidation, death threats and etc

Wow, absolutely disgraceful! Profit over the security of our country and troops on the battlefield. Great reporting by 60 Minutes as always.

My father was both a USAF officer and electrical engineer for defense contractors for decades... this stuff drove him nuts. A project he worked on needed a tape recorder with certain requirements. They were going to spend hundreds of thousands of dollars on designing a custom unit and, because the would need relatively few, the manufacturing was going to be thousands for each. He simply found a quality off-the-shelf unit and proved it met all the required specs. Saved hundreds of thousands on design and hundreds of thousands on manufacturing.

Price gouging should be considered an act of treason.

As someone who oversees military contracts......I live and breath this nightmare daily

Price gouging by national defense contractors should be seen and treated as a grave threat to national security

The Government needs as a national priority to open up a investigation for price gouging.

As an Air Force veteran that delt with supply and logistics in areas of my 20 year career, these contractors gouge TF out of their parts and supplies. We, the taxpayers, are being sold down the road to improve a defense contractors' bottom line.

You know how many times they said about the price gouging, for decades this has been going on and nothing gets done about it.

As a shareholder, I'm okay with this. Thanks for your contribution

As a former federal employee, this has been a decades old problem. In my opinion, it seems like severe corruption with defense contract awarding. Lemme give ya another example. When I was in the Air Force, my technical orders demanded that I only use a specific permanent marker to write something on the interior of the airframe. The marker cost $1000.

This has been going on for years!! Politicians own stock in these companies! Pathetic!

we have the exact same issue in the UK MOD. Contractors will work incredibly slowly, overcharging for every single possible item along the way. Even our camp maintenance contractors are appalling, worst experience I had was with Amey where a circuit breaker tripped, the entire building of 60 - 70 residents losing electricity, and it took them 5 days to get a technician out to flip the breaker back. We pay through the nose for everything ,and the worst of it is there is very little sign of change. At least the US DOD has this guy pushing for reform, as far as im aware the UK MOD has no such drive ongoing.

Wow! Thank you 60 Minutes. I have to think this piece is going to upaet some of your advertisers. That shows courage in this day and age. Kudos!

When I was active duty, asking questions about why our section was buying crap we didn’t need-they said that it’s just the way we had to do ‘it’. When I pushed and looked farther into it I found out about the ‘buckets’; each type of work or squadron had its own ‘bucket’ of money from the budget to achieve its mission. If the particular fiscal year actually cost less than was allocated, they were encouraged to spend the balance to zero. The rule was that if we didn’t spend it then we didn’t need it-and that money wouldn’t be there the next year. So when the next year actually cost more to operate and accomplish the mission, there wouldn’t be enough money in our ‘bucket’. Every job required to accomplish the collective missions has years where more is needed to safely, and successfully do our jobs. The lesson that had been hard wired in the military was that if we didn’t use it, we lose it. Really stupid. The things we contract out for, everything from jets to coffee pots, prices are set by those companies out there. They want the best prices they can get for the contracts they fulfill. There are no actual watchdogs. Self-reporting or monitoring can’t work; why would anyone let go of funding now to save money when it is known that down the line the funds will be needed and no longer allocated? It’s harder to get funded than it is to hold on to funding already authorized.

Any single person that was in the military can agree with this. I was a Bradley systems maintainer and saw parts costs. It’s absolutely insane even what a single bolt costs. I have a feeling there is price kickbacks higher up the chain.

As a contributing citizen I believe it isn't just the case presented here, it's across the board in government positions and our representatives on all levels seem to want to keep spending our money without being accountable. The interworks aren't interested in transparency and it's becoming more important than ever to keep America on the map because it's more than obvious the corruption is malignant. Taxpayers are the surgeons.

This is a total outrage.

This has been an issue for such a long time. I remember seeing a 60 Minutes show 20 years ago about how the Pentagon paid $600 for single toilet seats. Looks like nothing's changed. And I'm sure it won't any time soon. I wish there were more shows that focus on what can be done to change the negative issue, not just on the negative issue itself.

This is a common practice for all government contractors, not just in the defense industry. The fault lies in how these contracts work, and because you’ll be given less money if you work within or under budget. You’re practically rewarded for going over budget.

Of course they are over charging, over half of Congress have stock in these companies

Thank you.

After nearly 40 years in the defense aerospace business, I saw a lot of the problems develop. As mentioned, the mergers and acquisitions that were encouraged and allowed to happen in the 1990's resulted in fewer major contractors and suppliers of critical parts. We have anti-trust laws for a reason and our government chose to ignore them to their own detriment. Some of these suppliers, like Transdigm, even brag in their annual reports to shareholders that the are the sole source for 70% of the items they sell and they can therefore demand high profits. Disgusting. (another cause of these high prices are the government's ridiculous specs, but that's a whole another story)

Five of the nation's biggest defense contractors -- Lockheed Martin, Boeing, Northrop Grumman, Raytheon Technologies, and General Dynamics -- spent a combined $60 million in 2020 to influence policy, according to a new report from the Center for Responsive Politics. The paper, "Capitalizing on Conflict: How defense contractors and foreign nations lobby for arms sales," details how a network of lobbyists and donors steered $285 million in campaign contributions and $2.5 billion in lobbying spending over the last two decades as well as hiring more than 200 lobbyists who previously worked in government. Source: Military At least 15 lawmakers who hold powerful positions on a pair of House and Senate committees that control US military policy have financial ties to prominent defense contractors that together were worth nearly $1 million in 2020, according to an Insider analysis of federal financial records. -Source: INSIDER

As a US airman currently stationed at a base with F-35s I can truly say contractors are ripping off the DOD. But military member who join the dark side are just smart! We see how unfair the pay is between us and contractors & we deserve better compensation.

Thank you 60 Minutes.

I was working in the VA and there was the same problem , but on the smaller scale- drug and medical equipment manufacturers also gauged the prices like there was no tomorrow. And then something unusual happened - one of the VA integrated service networks (VISN) was allowed to hire an independent contract negotiation team, which got paid on the contingency - I believe they got paid about 20% of the money they saved on the contract after negotiations. Well- maybe Pentagon needs to do the same. Hire an independent team which would scrutinize everything and have them find all the over-changing and price gouging since their fee would depend on the money saved for the DoD. With a lot of the DoD procurement personnel ending as the defense industry lobbyists and consultants , it could be one of the effective measures

"You don't actually think they spend $20,000 on a hammer, $30,000 on a toilet seat, do you?" -Julias Levinson

"BUT THE NATIONAL DEBT!!! We need to cut spending on the poor!" The fact that none of this ever enters the public debate over spending priorities is outrageous. The moment anyone says anything about cost controls, they get construed as "not supporting the troops".

Good reporting! Let’s see what comes of it

As an engineer working in the defense industry. The biggest lever the government can pull is remove the qualification regulations, it’s so easy to design and build competitive parts! But qualification of the simple components takes millions and years to get approved. It’s the exact same as drug development, too expensive to fund competitors

Ii worked for a company that is a contractor for Boeing. The particular Boeing site that we contracted with was caught selling used parts as new parts to the military. The top people were fired, and the used parts were replaced with new. Anyone who works in Aerospace knows about price gouging, so i dont understand why this hasnt been delt with a long time ago.

This old chap should recieve a medal of honor and patriotism!!

Now this is journalism. More of this!

At one point in my career, I traveled to San Diego fairly regularly. On 3 occasions, I randomly met people who "work" in the military contractor world and they all bragged about how much money they make doing almost nothing in the military complex. There is major corruption going on in the military contractor world and it has been happening for decades - it's just now reached a point where mainstream is recognizing it. One of the guys owned his own contractor company and he told me he has become a millionaire in a short period of time.

This is simply outrageous. I’ve never would think that my own country would allow itself to be taken advantage of.

This man is a national hero 👏 for speaking out on this.

About time you do some good reporting

Happens in Australia as well. I needed a socket to do a brake adjustment for some equipment in a missile guided frigate and was told around $140. A dockyard worker overheard me talk about it and got it through his company for $35.

This is the perfect guy for the job. Kudos to him for being the most hated. He protects that our money the best he can and I bet you hear that accent outside your door in the pentagon hallways and it probably sends chills up generals backs. Good for him. This why civilian oversight is needed.

One of the newest technologies to be used on the 1st CVN78 Ford was deleted from the final design, because it was a sole sourced GFM item from a small firm that did not work. The USS Ford is now the only CVN with added permanent dead ballast located to compensate for impact on stability from the weight loss of not having the new tech system. Can't say what it was but it was a huge upgrade over Nimitz class.

Not surprised by any of this at all, sad. Really enjoy watching the in-depth journalism of 60 minutes.

A very similar thing happens at the VA, where the medical device companies rake in a ton of money. The VA is not allowed to negotiate prices and has to pay "list price." Whereas the non-government hospital I work for can and does negotiate prices and pays a fraction of what the government does. So sad.

This is a massive issue, if a candidate made this their primary concern, they'd have my vote forever.

I come home from work uncertain about the affairs of the world, but I sleep easier knowing THE TRUTH, and being more prepared for tomorrow, armed with information that’ll better my decision making. Thank you for what you do, from a fellow American in the California.

I remember hearing about this back in the 1990s.

The annual 60 minutes special on defense overspending. Nothing gets done because everyone's hand is in the till.

A HUGE waste of our tax dollars.

Been happening for a long time. Eisenhower warned us about it.

Hot take: This lies on the Government. I am a Contracts Manager, for years the Government would beg us to take certain hot jobs. We would DECLINE because most commercial companies would pay more for services (Ship Repair). The Government in 1993 “Guys, we are tired of the competition, our heads hurt. Please Monopolize.” 2019: “Guys, there isn’t enough competition, please split up and try again.” The Government enacted something called MACMO, which allows multiple companies to bud on repair of ships. Bit what did the GOV do?! Make it damn near impossible to be a bidder, limiting its own competition. Trust me here all, the GOVERNMENT throws this money at Contractors, then gets mad when they audit the books a year later

Being in the military many of us were shocked looking at how much things cost. Glad someone if finally pointing it out.

This has literally been going on for several decades. This could be avoided if our government wasn’t so obsessed with privatizing everything.

A much older problem in the Pentagon is the inability to cancel projects that are failing. Programs like the F35 and the earlier Osprey, are managed by officers who are evaluated for promotion based on the successful completion of their project. 50 years ago, when I was in the USAF, I learned the saying " nobody ever got promoted for killing a Pentagon project." I heard it again later when working in the electronics industry in Silicon Valley. On top of that, these officers are motivated to go soft on the contractors because the relationships developed there lead to jobs with those same contractors after retiring from the military.

It was insane seeing the prices we would pay for standard bolts, tools, and general maintenance material while I was in the Marines. Sometime several thousand dollars for plastic fittings wrapped in heat shrink.

This is treasonous by the contractors and those involved all need to be put in prison.

You can't just blame the contractors, you also have to blame our government officials for not caring and allowing this abuse (theft) at the tax payers expense!

Imagine just now finding this out

If they can sue and fine the U.S. Banks billions of dollars, then the U.S. Govt can sue and/or fine these companies billions of dollars as well for price gouging.

I go through this every day. Just went through contract negotiation with a major defense contractor. The standard answer from my superiors when I point these things out is: “they’re a sole-source OEM, what else can we do?” It makes me sick!

Corporations that do price gouging should be put in the spot light and be taken accountable

To the core

Same with the Navy's LCS, What a Charlie-Foxtrot

Easy fix; reverse engineer the parts for yourself and then hold the companies up in patent violation litigation for years until they drop the prices.

"War is just a racket. A racket is best described, I believe, as something that is not what it seems to the majority of people. Only a small inside group knows what it is about. It is conducted for the benefit of the very few at the expense of the masses." Smedley Butler

it's also staggering how much gets thrown into the skip bins, with the mentality that if we need it in the future we will just order it again ... I've seen buildings get re-purposed and there has been a complete tear-out of the contents, with no thought how all that machinery, stock and incidentals are to be managed once they are removed ... a lot goes into the skip bins.

Controlling price gouging by defense contractors involves implementing effective measures and regulations. Here are some potential solutions: 1. Competition and Transparency: Encourage competition among defense contractors by promoting transparency in the bidding and procurement process. This can help prevent monopolistic practices and foster fair pricing. 2. Strong Contract Management: Enhance oversight and monitoring of defense contracts to ensure compliance with agreed-upon terms and pricing structures. Regular audits and reviews can help identify and address any potential price gouging. 3. Cost Estimation and Benchmarking: Develop robust cost estimation methodologies to determine fair and reasonable pricing for defense contracts. Benchmarking against similar projects or industry standards can provide a reference point for evaluating prices. 4. Negotiation and Price Caps: Engage in effective negotiation strategies to obtain fair and reasonable prices. Implement price caps or price adjustment mechanisms to limit excessive price increases. 5. Long-Term Planning: Encourage long-term planning and stable funding for defense projects to reduce uncertainty and prevent last-minute rush orders that may be vulnerable to price gouging. 6. Collaboration with Industry: Foster collaboration and communication between government agencies and defense contractors to establish a shared understanding of pricing concerns. This can lead to mutually beneficial solutions and improved cost management. 7. Enhanced Oversight and Penalties: Strengthen regulatory oversight and enforcement mechanisms to deter price gouging. Implement penalties and consequences for contractors found engaging in unfair pricing practices. It's important to note that controlling price gouging is a complex task that requires a multi-faceted approach involving legislative measures, effective governance, and cooperation between the government and defense contractors.

I don't know what the current situation is but I had a good friend while living in England who owned a salvage/wreck yard which specialized in US vehicles back in the 1990's. He had a pass to enter practically any US base in Europe which he would regularly visit to purchase damaged military vehicles for pennies on the dollar. He stated because their vehicles had no insurance when they were damaged however lightly they would be parked up and replaced and sold to whoever like himself knew the right people to negotiate with (usually the base commanders) to acquire them with clean titles. Most he would drive back home vehicles with less than 10K miles with broken windshields and complete with all their medical equipment (like ambulances or fire trucks and buses) and sell them at huge profits or rented them once repaired to Hollywood production companies making movies in England.

This is great reporting

A recent video on the 60 Minutes channel (Military contract price gouging: Defense contractors overcharge Pentagon) drew attention to the rising and exorbitant costs of weapons and other items acquired by the Pentagon; - In 1991 a stinger missile cost $25,000. Now in Ukraine war costs 400,000; - Between the years of 2005 and 2020 the Pentagon consumed 14 trillion dollars and added 5 ships to the fleet. In the same period, China spent 3 trillion and added 117 vessels; - Another problem is the decrease in the number of inspectors at the Department of Defense, a fact that has left companies freer to exploit the taxpayer; - But these are not the only problems. Recently auditors discovered that more than 1 million parts of the F-35 jet have disappeared in the last 5 years; - US officials seem to turn a blind eye to these irregularities, as plane costs continue to rise and the Pentagon continues to overpay for them; - And there is one more additional cost to be remembered: in recent decades the United States has been involved in long, expensive and useless wars such as Iraq and Afghanistan, which also greatly worsened the country's image in the face of the so-called Global South: - As a result, the United States is lagging behind in the technology race, as the Russians and Chinese already have advanced hypersonic missile systems that America lacks, and Iran's growing drone and missile force threatens the American presence in the Middle East. ru-vid.commFS7IvYvv2o

This is what President Eisenhower warned us about in 1960 before Kennedy took his place, he said in his speech "In the councils of government, we must guard against the acquisition of unwarranted influence, whether sought or unsought, by the military-industrial complex. The potential for the disastrous rise of misplaced power exists, and will persist." he was right, these contractors are endangering our country.

1. This has been going on for decades. 2. Anyone who has ever been anywhere near government has always known this to be the case.

Pretty sure the politicians are involved with this. Send them all to jail!

I work with Government contracts on a daily basis and sadly we have no ownership of the property to include drawings.The vendors have the upper hand with Sole Source being utilized and that does away with the competitive aspect of how we obtain our spares (AMC code 1 or 2). You can thank those folks who are WAY high up on the Totem pole for allowing that to happen. Additionally, our Military doesn't make anything anymore. If we were able to do so we could produce things ourselves! Again, ALL of these things were done by folks in a MUCH higher pay grade than I am. 2.5 years away from retirement and it couldn't come soon enough.

Wait a damn minute…..does everyone have amnesia?! I’m 44 and I remember this being common knowledge that it happens with everything the Government buys. Not only in the defense side of things but literally with everything.

I'm glad this is getting picked up, when I was in the service this was one of my main concerns, I saw how much we paid for equipment and how little we used it, and how little we did know how to use it. It was like a giant junk hoarding scheme at the expense of the taxpayers. Kinda realized that I was contributing to a systemic issue that was hurting more people than it was supposed to help. I think we have a corruption issue going on between government and military contractors, and that we need to pay more attention to this.

Finally some good investigative journalism

It happens in the construction business as well, "it's a government contract job" so prices and wages for that job go way up..

A close friend was employed by the nation’s largest military contractor from 1961 until he retired in 1997. He started as a subcontracts analyst, then became a contract analyst, until he was promoted to being a contract negotiator. During his career he was constantly shuttling around between dozens of contractors in order to get the best prices on components. He was away from home and flying around the country for weeks at a time, always trying to get the best prices on the components they needed to procure, from any number of subcontractors who were also competing to sell their latest offerings. What he put together in the end meant the difference between winning a competitive bid or not! Anything that was tasked for design, development, and engineering by his employer was closely monitored by government auditors so the government knew exactly what they were paying, and what they were getting in return for their investment. Still, his employer was under constant scrutiny by the government’s auditors so that any cost overruns were accounted for absolutely, or else the contractor would not get paid more than what the govt auditors assessed as the fair price, allowing for the costs of engineering and development, plus a fixed profit margin of 10-15%. A healthy ROI!! Occasionally the govt needed something done in a hurry and was willing to waive some cost overruns in order to get those items as soon as possible, but the profit margin was still capped at its usual rate. And if the contractor could deliver the items needed before a certain date (tested and certified), the contractor received a bonus for their efforts. But the auditors were still there every step of the way, constantly evaluating every possible factor and making sure they only paid for the items contracted, and they scrutinised every financial transaction in order to ensure that contracted costs they budgeted for stayed inline. There was a lot of competition at the time, and companies rightfully needed to make a profit for their work. So the govt auditors had other contractor’s bids to compare costs… Which had to be broken down into every detail from design and engineering to testing and making any necessary modifications and improvements, to assembly and manufacturing, plus final tests for certification to mil-specs! Everything was very rigid since these were military components and couldn’t be lacking in quality and reliability because lives depended on these components i.e. Failure was not acceptable and could cause a contractor or subcontractor to lose their military certification!! I was always impressed by how well the government oversight kept a tight reign on costs and didn’t hesitate to drop a contract if cost overruns were repeatedly excessive, because the govt had a multitude of other contractors they could turn to if that ever became necessary! But that was during the late 1970’s. Currently, I don’t know why the government and our military would let the American taxpayers get cheated out of so much money, because they’re only shortchanging our military’s strength and effectiveness, and at the times where we need to be at our best, with 100% reliable readiness. Their greed is transparent to the rest of the world, which is probably to most disturbing aspect of our military. And contributes to our armed forces inability to attract quality people willing to serve! The fact that lobbyists and corruption has taken hold of our congress and military procurement officials is proof that these auditors need to be brought back with the order to fix the system or else resign, and we’ll hire the right people who are willing to get the job done!! If my friend was still alive- he would be appalled at the lack of oversight that has led to all this runaway spending. His solid integrity is what I admired most about him! There was a time our military or government could put up a certain item for bid and at least 4-5 contractors were there with their sealed bids, and all hoping to win that contract! Those days are gone due to Reagan’s downsizing and removal of the people responsible for rooting out these massive cost overruns… As if a for profit corporation isn’t going to do what’s in THEIR best interests, instead of making sure we have a continually healthy military budget, and the best equipped soldiers in the world. And now the GOP wants to slash our military budget (and veterans care). But nothing is said about rooting out the corruption that has led to price gouging and redundant spending!! Threats to defund the Ukraine war will only expose our NATO allies to a higher threat level, which in turn will immediately escalate our need to possibly become directly entangled in their war… at a time when we can still help them fight and succeed, yet maintain our readiness at 100% should the need arise to defend Taiwan and any other countries China would seek to exploit by our weakness and unpreparedness. During WWII, the Korean War, and into part of the Vietnam war, all heavy munitions were made at military weapons manufacturing depots… which have all been closed (except for most of our nuclear weapons facilities). The manufacturing of heavy munitions has been completely privatized, which has allowed for the astronomical procurement costs we’re now seeing! Plus failures of so called “smart weapons systems” has never been higher, which is evident of cutting corners on materials used, parts quality, plus a lack of testing for quality control and quality assurance. These failures cost lives!!! Many of these weapons manufacturing depots were on military bases, and most are still there… just sitting idle. So If we’re still paying for the design, development, and manufacture of these new weapons systems, get rid of these extravagant middlemen and take back our own munitions manufacturing once again. It’s time to make these budgets lean, but the only way is to cut out greedy profiteers and restore oversight both internally and externally to military contractors who started on their own from the ground up to build the larger aircraft and military weapons systems we now have because of their partnership with the US government and our military. But their cost overruns are inexcusable and this is what warrants the return of a new department of auditors and cost analysts, otherwise this excessive spending will continue to go on unchecked, while our military defense and preparedness suffers, and in full public view!!

Reminds me of that scene in Independence day when the President asks "where's does funding come for all this???!!!" and Julius says... "you don't really think they paid $20K for hammer or $30K for toilet seat... DO YOU?

Of course.

Fawk man, I need to start machining parts for the military and selling them at a reasonable price.

I worked in 2005 for Lockheed Martin in Ft. Polk, La. We rebuilt Humvees in my particular Motor pool. We received the parts in huge boxes brought to us on forklifted pallets. We had to inventory and account for every part, including down to single nuts, bolts, and washers. The price the Government paid for each was listed, and it was disturbingly disgusting. A single, tiny washer, was over $5.50 each. Edit: For context and comparison, a single washer of the same size will cost roughly a dime at Lowe's or Home Depot. A dime washer, Government paid over 5 dollars for. 🙄🤦

These companies should either be nationalized or the leadership should be locked up. We should be able to sue these companies into the ground until this stops.

Didn't we all realize a long time ago that they were consistently grossly over-charged for everything?

The name of that is, Stilling

We must hold our elected officials accountable.

Im surprised that they put this story out. It’s actual journalism for an actual problem

@12:51 - this man and woman hit the nail on the head when they said the word "monopoly." The U.S. Government has laws meant to be used to break up companies with a monopoly on certain goods and services. Why hasn't the government utilized these laws in order to break up these companies in order to secure better deals for the government.

We Need More Honorable Men Like This Defending & Saving our🇺🇲 Country🇺🇲👍

“You don’t actually think they spend $20,000 on a hammer, $30,000 on a toilet seat, do you?” Julius Levinson

My Father, as an engineer in the Navy Dept., used to be evaluate testing of aircraft survivability. At one time, he found some concerns that he wanted to comment on and was told: no, no you only get to give pass/fail evaluations; commentary is not allowed.

Surely we're not just figuring this out.

There's a fine line between being a free market capitalist and a traitor.

I’m all for an adequate defense budget, but when the military industrial complex is inflating their costs to also inflate their profits then something needs to change