Leading military contractors jacked up the price of several everyday products after receiving non-competitive contracts, costing taxpayers more than $1.3 million in apparently unnecessary markups, according to Pentagon contracting data acquired by Responsible Statecraft.
Until 2010, Boeing charged an average of $300 for a trash container used in the E-3 Sentry, a surveillance and radar plane based on the 707 civilian airliner. When the 707 fell out of use in the United States, the trash can was no longer a “commercial” item, meaning that Boeing was not obligated to keep its price at previous levels, according to a weapons industry source who spoke to RS.
In 2020, the Pentagon paid Boeing over $200,000 for four of the trash cans, translating to roughly $51,606 per unit. In a 2021 contract, the company charged $36,640 each for 11 trash containers, resulting in a total cost of more than $400,000. The apparent overcharge cost taxpayers an extra $600,000 between the two contracts.
In another case, Lockheed Martin hiked the price of an electrical conduit for the P-3 plane as much as 14 fold, costing the Pentagon an additional $133,000 between 2008 and 2015.
Jamaica Bearings — a company that distributes parts manufactured by other firms — sold the Department of Defense 13 radio filters that had once cost $350 each for nearly $49,000 per unit in 2022. The apparent markup cost taxpayers more than $600,000 in extra fees.
The examples revealed here represent only a small portion of what experts say is a pattern of contractors overcharging DoD for a wide range of parts and weapons systems, a practice that reduces military readiness and drives up spending. A recent investigation by 60 Minutes highlighted rampant price gouging in the arms industry, including one case in which Boeing overcharged taxpayers by more than half a billion dollars for missiles used in the Patriot missile defense system.
The investigation also revealed that Raytheon Technologies had raised the price of Stinger missiles from $25,000 to more than $400,000 per unit. “Even accounting for inflation and some improvements, that's a seven-fold increase,” Shay Assad, a former Pentagon acquisitions official, told 60 Minutes.
In a letter sparked by the investigation, a bipartisan group of senators called on the Pentagon to investigate allegations of widespread price gouging by contractors.
“These companies have abused the trust [the] government has placed in them, exploiting their position as sole suppliers for certain items to increase prices far above inflation or any reasonable profit margin,” wrote Sens. Bernie Sanders (D-Vt.), Elizabeth Warren (D-Mass.), Ron Wyden (D-Ore.), Chuck Grassley (R-Iowa), and Mike Braun (R-Ind.).
“The DOD can no longer expect Congress or the American taxpayer to underwrite record military spending while simultaneously failing to account for the hundreds of billions it hands out every year to spectacularly profitable private corporations,” they added.
Boeing declined to comment on its alleged price gouging. Jamaica Bearings did not respond to questions about the price hikes or how much it paid to procure the radio filters before selling them to the Pentagon.
Lockheed Martin did not respond to a request for comment from RS, but it told 60 Minutes that it negotiates with the Pentagon “in good faith” and said its sales to the government are “in compliance with Federal Acquisition Regulations and all other applicable laws.”
The revelations come as major arms manufacturers boast record revenues. Lockheed Martin, General Dynamics, and Raytheon Technologies have each reported all-time highs in demand following Russia’s invasion of Ukraine, allowing the companies to give shareholders nearly $20 billion last year through stock buybacks and dividends. And the CEOs of the top five weapons makers each make between $18 million and $23 million per year.
About half of the Biden administration’s $842 billion Pentagon budget request goes to contractors. In 2022, roughly 30 percent of military spending went to the “big five” weapons makers, which include Raytheon, Boeing, Lockheed Martin, General Dynamics, and Northrop Grumman.
Experts say much of that contractor price gouging has worsened over the past few decades as the military sector has experienced dramatic consolidation. In the 1990s, there were more than 50 “prime” DoD contractors capable of competing for major contracts. Now, there are only five.
In practice, this means that many contracts receive only one bid, leaving little reason for companies to offer a fair price. Opportunities for gouging are particularly widespread when it comes to smaller contracts since contractors are not required to share their costs for any deals valued at less than $2 million, as the Intercept noted last year.
As the Government Accountability Office recently reported, nearly 20,000 small businesses have bowed out of military contracting in the past decade, creating further opportunities for price hikes.
Connor Echols is a reporter for Responsible Statecraft. He was previously an associate editor at the Nonzero Foundation, where he co-wrote a weekly foreign policy newsletter. Echols received his bachelor’s degree from Northwestern University, where he studied journalism and Middle East and North African Studies.
A screenshot (right) showing a Pentagon contract for four trash cans at a cost of $51,606 per unit.
Ukraine would consider inviting Russian officials to a peace summit to discuss Kyiv’s proposal for a negotiated end to the war, according to Andriy Yermak, the Ukrainian president’s chief of staff.
“There can be a situation in which we together invite representatives of the Russian Federation, where they will be presented with the plan in case whoever is representing the aggressor country at that time will want to genuinely end this war and return to a just peace,” Yermak said over the weekend, noting that one more round of talks without Russia will first be held in Switzerland.
The comment represents a subtle shift in Ukrainian messaging about talks. Kyiv has long argued that it would never negotiate with Russian President Vladimir Putin, yet there is no reason to believe Putin will leave power any time soon. That realization — along with Ukraine’s increasingly perilous position on the battlefield — may have helped force Kyiv to reconsider its hard line on talking with the widely reviled Russian leader.
Zelensky hinted at a potential mediator for talks following a visit this week to Saudi Arabia. The leader “noted in particular Saudi Arabia’s strivings to help in restoring a just peace in Ukraine,” according to a statement from Ukrainian officials. “Saudi Arabia’s leadership can help find a just solution.”
Russia, for its part, has signaled that it is open to peace talks of some sort, though both Kyiv and Moscow insist that any negotiations would have to be conducted on their terms. The gaps between the negotiating positions of the two countries remain substantial, with each laying claim to roughly 18% of the territory that made up pre-2014 Ukraine.
Ukraine’s shift is a sign of just how dire the situation is becoming for its armed forces, which recently made a hasty retreat from Avdiivka, a small but strategically important town near Donetsk. After months of wrangling, the U.S. Congress has still not approved new military aid for Ukraine, and Kyiv now says its troops are having to ration ammunition as their stockpiles dwindle.
Zelensky said Sunday that he expects Russia to mount a new offensive as soon as late May. It’s unclear whether Ukrainian troops are prepared to stop such a move.
Even the Black Sea corridor — a narrow strip of the waterway through which Ukraine exports much of its grain — could be under threat. “I think the route will be closed...because to defend it, it's also about some ammunition, some air defense, and some other systems” that are now in short supply, said Zelensky.
As storm clouds gather, it’s time to push for peace talks before Russia regains the upper hand, argue Anatol Lieven and George Beebe of the Quincy Institute, which publishes Responsible Statecraft.
“Complete victory for Ukraine is now an obvious impossibility,” Lieven and Beebe wrote this week. “Any end to the fighting will therefore end in some form of compromise, and the longer we wait, the worse the terms of that compromise will be for Ukraine, and the greater the dangers will be for our countries and the world.”
In other diplomatic news related to the war in Ukraine:
— Hungary finally signed off on Sweden’s bid to join NATO after the Swedish prime minister met with Hungarian Prime Minister Viktor Orban in Budapest, according to Deutsche Welle. What did Orban get for all the foot dragging? Apparently just four Swedish fighter jets of the same model that it has been purchasing for years. The prime minister blamed his party for the slow-rolling, saying in a radio interview prior to the parliamentary vote that he had persuaded his partisans to drop their opposition to Sweden’s accession.
— French President Emmanuel Macron sent allies scrambling Tuesday when he floated the idea of sending NATO troops to Ukraine, according to the BBC. Leaders from Germany, the United Kingdom, Italy, Poland, and other NATO states quickly swatted down the idea that the alliance (or any individual members thereof) would consider joining the war directly. Russia said direct conflict with NATO would be an “inevitability” if the bloc sent troops into Ukraine.
— On Wednesday, Zelensky attended a summit in Albania aimed at bolstering Balkan support for Ukraine’s fight against Russia, according to AP News. The Ukrainian leader said all states in the region are “worthy” of becoming members of NATO and the European Union, which “have provided Europe with the longest and most reliable era of security and economic development.”
— Western officials were in talks with the Kremlin for a prisoner swap involving Russian dissident Alexei Navalny prior to his death in a Russian prison camp in February, though no formal offer had yet been made, according to Politico. This account contrasts with the one given by Navalny’s allies, who claimed that Putin had killed the opposition leader in order to sabotage discussions that were nearing a deal. Navalny’s sudden death has led to speculation about whether Russian officials may have assassinated him, though no proof has yet surfaced to back up this claim. There is, however, little doubt that the broader deterioration of the dissident’s health was related to the harsh conditions he was held under.
U.S. State Department news:
In a Tuesday press conference, State Department spokesperson Matthew Miller said the situation on the frontlines in Ukraine is “extremely serious.” “We have seen Ukrainian frontline troops who don’t have the ammo they need to repel Russian aggression. They’re still fighting bravely. They’re still fighting courageously,” Miller said. “They still have armor and weapons and ammunition they can use, but they’re having to ration it now because the United States Congress has failed to act.”
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Janet Yellen, United States Secretary of the Treasury. (Reuters)
On Tuesday, U.S. Treasury Secretary Janet Yellen strongly endorsed efforts to tap frozen Russian central bank assets in order to continue to fund Ukraine.
“There is a strong international law, economic and moral case for moving forward,” with giving the assets, which were frozen by international sanctions following Russia’s 2022 invasion of Ukraine, to Kyiv, she said to reporters before a G7 meeting in San Paulo.
Furthermore on Wednesday, White House national security communications adviser John Kirby urged the use of these assets to assist the Ukrainian military.
This adds momentum to increasing efforts on Capitol Hill to monetize the frozen assets to assist the beleaguered country, including through the “REPO Act,” a U.S. Senate bill which was criticized by Senator Rand Paul (R-Ky.) in a recent article here in Responsible Statecraft. As Paul pointed out, spending these assets would violate international law and norms by the outright seizure of sovereign Russian assets.
In the long term, this will do even more to undermine global faith in the U.S.-led and Western-centric international financial system. Doubts about the system and pressures to find an alternative are already heightened due to the freezing of Russian overseas financial holdings in the first place, as well as the frequent use of unilateral sanctions by the U.S. to impose its will and values on other countries.
The amount of money involved here is considerable. Over $300 billion in Russian assets was frozen, mostly held in European banks. For comparison, that’s about the same amount as the entirety of Western aid committed from all sources to Ukraine since the beginning of the war in 2022 — around $310 billion, including the recent $54 billion in 4-year assistance just approved by the EU.
Thus, converting all of the Russian assets to assistance for Ukraine could in theory fully finance a continuing war in Ukraine for years to come. As political support for open-ended Ukraine aid wanes in both the U.S. and Europe, large-scale use of this financing method also holds the promise of an administrative end-run around the political system.
But there are also considerable potential downsides, particularly in Europe. European financial institutions hold the overwhelming majority of frozen Russian assets, and any form of confiscation could be a major blow to confidence in these entities. In addition, European corporations have significant assets stranded in Russia which Moscow could seize in retaliation for the confiscation of its foreign assets.
Another major issue is that using assets to finance an ongoing conflict will forfeit their use as leverage in any peace settlement, and the rebuilding of Ukraine. The World Bank now estimates post-war rebuilding costs for Ukraine of nearly $500 billion. If the West can offer a compromise to Russia in which frozen assets are used to pay part of these costs, rather than demanding new Russian financing for massive reparations, this could be an important incentive for negotiations.
In contrast, monetizing the assets outside of a peace process could signal that the West intends to continue the conflict indefinitely.
In combination with aggressive new U.S. sanctions announced last week on Russia and on third party countries that continue to deal with Russia, the new push for confiscation of Russian assets is more evidence that the U.S. and EU intend to intensify the conflict with Moscow using administrative mechanisms that won’t rely on support from the political system or the people within them.
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Activist Layla Elabed speaks during an uncommitted vote election night gathering as Democrats and Republicans hold their Michigan presidential primary election, in Dearborn, Michigan, U.S. February 27, 2024. REUTERS/Rebecca Cook
A protest vote in Michigan against President Joe Biden’s handling of the war in Gaza dramatically exceeded expectations Tuesday, highlighting the possibility that his stance on the conflict could cost him the presidency in November.
More than 100,000 Michiganders voted “uncommitted” in yesterday’s presidential primary, earning 13.3% of the tally with most votes counted and blasting past organizers’ goal of 10,000 protest votes. Biden won the primary handily with 81% of the total tally.
The results suggest that Biden could lose Michigan in this year’s election if he continues to back Israel’s campaign to the hilt. In 2020, he won the state by 150,000 votes while polls predicted he would win by a much larger margin. This year, early polls show a slight lead for Trump in the battleground state, which he won in 2016 by fewer than 11,000 votes.
“The war on Gaza is a deep moral issue and the lack of attention and empathy for this perspective from the administration is breaking apart the fragile coalition we built to elect Joe Biden in 2020,” said Rep. Pramila Jayapal (D-Wash.), a progressive leader who has called for a ceasefire in Gaza, as votes came in last night.
Biden still has “a little bit of time to change this dynamic,” Jayapal told CNN, but “it has to be a dramatic policy and rhetorical shift from the president on this issue and a new strategy to rebuild a real partnership with progressives in multiple communities who are absolutely key to winning the election.”
Rep. Ro Khanna, a prominent Biden ally, told Semafor the vote is a “wake-up call” for the White House on Gaza.
The “uncommitted” option won outright in Dearborn, a Detroit suburb with a famously large Arab American population. The protest vote also gained notable traction in college towns, signaling Biden’s weakness among young voters across the country. “Uncommitted” received at least 8% of votes in every county in Michigan with more than 95% of votes tallied.
The uncommitted campaign drew backing from prominent Democrats in Michigan, including Rep. Rashida Tlaib (D-Mich.) and state Rep. Abraham Aiyash, who is the majority leader in the Michigan House. Former Reps. Andy Levin and Beto O’Rourke, who served as a representative from Texas, also lent their support to the effort.
“Our movement emerged victorious tonight and massively surpassed our expectations,” said Listen to Michigan, the organization behind the campaign, in a statement last night. “Tens of thousands of Michigan Democrats, many of whom [...] voted for Biden in 2020, are uncommitted to his re-election due to the war in Gaza.”
Biden did not make reference to the uncommitted movement in his victory speech, but reports indicate that his campaign is spooked by the effort. Prior to Tuesday’s vote, White House officials met with Arab and Muslim leaders in Michigan to try to assuage their concerns about the war, which has left about 30,000 Palestinians dead and many more injured. (More than 1,100 Israelis died during Hamas’s Oct. 7 attacks last year.)
The president argues that his support for Israel has made it possible for him to guide the direction of the war to the extent possible, though his critics note that, despite some symbolic and rhetorical moves, he has stopped far short of holding back U.S. weapons or supporting multilateral efforts to demand a ceasefire.
Campaigners now hope the “uncommitted” effort will spread to other states. Minnesota, which will hold its primaries next week, is an early target.
“If you think this will stop with Michigan you are either the president or paid to flatter him,” said Alex Sammon, a politics writer at Slate.
Meanwhile in the Republican primary, former President Donald Trump fended off a challenge from former South Carolina governor Nikki Haley. With 94% of votes in, Trump came away with 68% of the vote, while Haley scored around 27%.