Follow us on social

2022-02-15t161546z_618836700_mt1sipa000ltfpvk_rtrmadp_3_sipa-usa-scaled

So what about military price gouging?

A DoD report says there are 90 percent fewer prime defense contractors today. Senator Warren says this is why we're getting rooked.

Analysis | Military Industrial Complex

Defense reform guru Mandy Smithberger left the Project on Government Oversight (POGO) to work in Elizabeth Warren’s office in February, and if this recent exchange between the Massachusetts senator and the defense secretary is any indication, Mandy is already having a positive effect.

“Now, there's no question that inflation is raising costs across the country, but we've also seen big companies take advantage of inflation to jack up prices and to pad their profit margins. That is a particular problem in industries with lots of consolidation,” she said to Secretary Lloyd Austin in a Senate Armed Service Committee hearing last week.

She continued:

"Price gouging by defense contractors has been a big problem for a long time," Warren said. 

"And CEOs are already bragging to their investors that profits will be even higher this year. That kind of profiteering wastes taxpayer dollars and it hurts military readiness."

The author of the article citing Warren’s comments, Lauren C. Williams of NextGov, noted that Warren’s comments came on the heels of a Pentagon report that found that the pool of prime defense and aerospace contractors has shrunk from 51 down to five (90 percent) since the 1990s due to consolidation. From the report, “State of Competition within the Defense Industrial Base”:

As a result, DoD is increasingly reliant on a small number of contractors for critical defense capabilities. Consolidations that reduce required capability and capacity and the depth of competition would have serious consequences for national security. Over approximately the last three decades, the number of suppliers in major weapons system categories has declined substantially: tactical missile suppliers have declined from 13 to 3, fixed-wing aircraft suppliers declined from 8 to 3, and satellite suppliers have halved from 8 to 4. Today, 90% of missiles come from 3 sources.  

This comes as no surprise but it is worth reminding that the five remaining “primes” — Lockheed Martin, Northrop Grumman, General Dynamics, Boeing and Raytheon — get more than 50 percent of their revenue from the government (in Lockheed’s case, 96 percent). In total, as of 2020, the companies received upwards of $200 billion in revenues through defense contracts.

"The Big Five contractors get over one out of three dollars the Pentagon hands out in contracts every year, and they also run some of the biggest cost overruns on their weapons programs," says my colleague William Hartung. They also represent the top companies engaging in mergers and acquisitions in order to dominate verticals and horizontals and squeeze out all competition. 

But there is some good news. The Federal Trade Commission, in its “first outright challenge to a defense merger in decades,” filed a suit against Lockheed’s pending $4.4 billion sale of Aerojet Rocketdyne in February because it said it would give the defense giant a monopoly on jet engines, and “the ability to cut off other defense contractors from the critical components they need to build competing missiles,” according to FTC Bureau of Competition Director Holly Vedova in a statement.

 “Without competitive pressure, Lockheed can jack up the price the U.S. government has to pay, while delivering lower quality and less innovation. We cannot afford to allow further concentration in markets critical to our national security and defense.” 

Lockheed has since dropped the sale.

Matt Stoller in an extraordinary report for The American Conservative in 2019, warned that consolidation and monopolization has led to a complete erosion of the defense industrial base with critical parts and technology now offshored, leaving the military with few choices, super-high prices, and national security at risk because the Pentagon is now at the mercy of price gougers and foreign companies for sensitive military fulfillment.

A prime example of this is TransDigm, the subject of several DoD investigations for price manipulation, including a current case in which a Pentagon audit in 2021 determined that TransDigm owes the military an excess of $20 million in overcharges. According to Stoller in 2019:

(Transdigm) achieves (“private equity-like”) returns for its shareholders by buying up companies that are sole or single-source suppliers of obscure airplane parts that the government needs, and then increasing prices by as much as eight times the original amount. If the government balks at paying, TransDigm has no qualms daring the military to risk its mission and its crew by not buying the parts. The military, held hostage, often pays the ransom. TransDigm’s gross profit margins using this model to gouge the U.S. government are a robust 54.5 percent. To put that into perspective, Boeing and Lockheed’s profit margins are listed at 13.6 percent and 10.91 percent. In many ways, TransDigm is like the pharmaceutical company run by Martin Shkreli, which bought rare treatments and then price gouged those who could not do without the product. 

Earlier this year, TransDigm recently bought the remaining supplier of chaff and one of two suppliers of flares, products identified in the Defense Department’s supply chain fragility report.

TransDigm was caught manipulating the parts market by the Department of Defense Inspector General in 2006, again in 2008, and finally again this year. It is currently facing yet another investigation by the Government Accountability Office

Yet, TransDigm’s stock price thrives because Wall Street loves monopolies, regardless of who they are taking advantage of.

On Tuesday the government announced that inflation is up 8 percent. While most Americans will focus on the impact this has on their gas, food, and other daily spending, remember that the defense consolidation has resulted in an inflation all its own, eating away at federal buying power. While companies like Transdigm will profit, the costs rolls downhill. According to the DoD’s own report, it puts our military more at risk, with little accountability. So good on Warren for keeping the pressure on, and the FTC too.


February 15, 2022 - Washington, DC, United States: U.S. Senator Elizabeth Warren (D-MA) speaking at a Senate Armed Services Committee Hearing. (Photo by Michael Brochstein/Sipa USA)No Use Germany.
Analysis | Military Industrial Complex
Carlos Trujillo
Top image credit: Continental Strategy LLC founder and president Carlos Trujillo being sworn-in as U.S. Ambassador to the Organization of American States on April 5, 2018. IMAGO/piemags via Reuters Connect

Ex-Trump officials cashing in on Latin American tariff fears

Latin America

Top officials from the first Trump administration are cashing in on Latin American countries' hopes and fears about the president’s trade and tariffs policies, recent filings with the Department of Justice's Foreign Agents Registration Unit reveal.

In August, Continental Strategy, LLC — a government relations firm founded by Carlos Trujillo, Trump's former ambassador to the Organization of American States (OAS), and managed by Alberto Martinez, Secretary of State Marco Rubio's former chief of staff in the Senate — took on two new government clients in the region, Peru and the Dominican Republic's Industry and Trade ministry, for $390,000 and $330,000, respectively.

keep readingShow less
Starmer Macron
Top image credit: British Prime Minister Keir Starmer and French President Emmanuel Macron stand in front of screens during a joint military visit to the MARCOM centre, maritime command centre in Northwood, on July 10, 2025 in London, England. Leon Neal/Pool via REUTERS

France plans risky military deployment while govt is in tatters

Europe

The choice of Paris as the venue for a summit of the European “coalition of the willing” to discuss a “reassurance force” for Ukraine this week has turned out to be deeply unfortunate; for five days after the summit, France may well not have a government. Then again, it’s not clear that any other European capital would have made for a better choice.

France has been plunged into a renewed political crisis by the decision of the prime minister, Francois Bayrou, to hold a parliamentary vote of confidence on September 8 over his plans for steep cuts in public spending in order to reduce France’s public debt while greatly increasing its military spending. French trades unions have promised a general strike on September 18 to block these moves.

keep readingShow less
Daniel Noboa, Xi Jinping
Top photo credit: Beijing, China.- In the photos, Chinese President Xi Jinping (right) and his Ecuadorian counterpart, Daniel Noboa (left), during a meeting in the Great Hall of the People, the venue for the main protocol events of the Chinese government on June 26, 2025 (Isaac Castillo/Pool / Latin America News Agency via Reuters Connect)

Why Ecuador went straight to China for relief

Latin America

Marco Rubio is visiting Mexico and Ecuador this week, his third visit as Secretary of State to Latin America.

While his sojourn in Mexico is likely to grab the most headlines given all the attention the Trump administration has devoted to immigration and Mexican drug cartels, the one to Ecuador is primarily designed to “counter malign extra continental actors,” according to a State Department press release.The reference appears to be China, an increasingly important trading and investment partner for Ecuador.

keep readingShow less

LATEST

QIOSK

Newsletter

Subscribe now to our weekly round-up and don't miss a beat with your favorite RS contributors and reporters, as well as staff analysis, opinion, and news promoting a positive, non-partisan vision of U.S. foreign policy.