Lawmakers Take Aim at Alleged Contractor Price Gouging

Lawmakers Take Aim at Alleged Contractor Price Gouging

Frustrated over three years of Congressional inaction on the issue, Sen. Elizabeth Warren (D-MA) and Rep. John Garamendi (D-CA) plan to introduce the Stop Price Gouging the Military Act.

 

In February 2019, the Pentagon’s inspector general revealed that contractor TransDigm Group overcharged the military by at least $16 million, with margins up to 4,451%, for various aircraft parts over a two-year period. A second investigation released in December 2021 showed that the same company cheated the government out of another $21 million by pricing items at up to 3,850% more than the reasonable cost. The Stop Price Gouging the Military Act is timed to coincide with talks on the annual defense policy bill, which is currently undergoing markup in the Armed Services committees. Both Warren and Garamendi are committee members.

 

“For far too long, military contractors have been price gouging the Pentagon to make fatter profits, and American taxpayers shouldn’t have to foot the bill,” Sen. Warren said in a statement. “The end result is a military budget that is way too large. We need some basic rules on the road to prevent military contractors from price gouging.”

 

Contractors and Money Matters

 

Price gouging is a very subjective concept. Our landlord plans to raise our rent into the stratosphere. To us, that move is price gouging. To our landlord, it is a matter of supply and demand.

 

The vast amount of money the DoD spends on private military contractors is a similar example. Contractors often earn three times what regular servicemembers earn to perform basically the same jobs. To many people, that is a prime example of government waste. But this observation is short-sighted.

 

Many independent contractors find out the hard way that employers do not provide benefits. If private military contractors, or any other independent contractors, need health insurance or want to save for retirement, they are on their own. Private purchase health insurance with a few hundred members is a lot more expensive than a group health plan with tens of thousands of members. 

 

Higher contractor compensation somewhat offsets these additional costs. Other additional costs include the dreaded and feared self-employment tax that contractors must pay. The tax laws are complex in this area because some of the money overseas contractors earned is usually exempt from taxation. Fortunately, we are not tax lawyers. Instead, we focus on obtaining fair compensation for injured overseas contractors.

 

Additionally, regular servicemembers are usually entitled to lifetime health, retirement, and other benefits. So, over the long haul, regular servicemembers are much more expensive than private contractors. In other words, contractors are a welcome cost-effective alternative, given the enormous expenses associated with modern wars.

 

On a related note, contractors are much more flexible than regular servicemembers. New combat formations must spend months training for deployment in places like Afghanistan, Syria, and Iraq. In contrast, a few hours after a field commander places a call, private military contractors are boots on the ground. Then, when the immediate need ends, the DoD’s financial commitment ends as well.

 

Where Contractors Serve

 

Because of these cost and other advantages, private military contractors currently serve, and have recently served, in lots of places throughout the world, such as:

 

  • Iraq: Flexibility is the key word here. Initially, private military contractors supported the successful efforts to overthrow Saddam Hussein. Then, they supported the successful efforts to cripple Al Qeada in Iraq and other terrorist/insurgenct militants. Now, they support the (hopefully) successful efforts to protect Iraqis from neighborhood bullies like Iran and China.
  • Afghanistan: Flexibility was one of the key words here as well. At one point, the DoD seriously considered privatizing the war and handing it over entirely to private military contractors. Then, as the U.S. combat mission wound down, contractors helped Afghan security forces fend off Taliban fighters for as long as possible.
  • Syria: Like the wars in Afghanistan and Iraq, the ongoing Syrian Civil War seems endless. As peace negotiations creep closer, contractors help ensure that U.S.-backed anti-Assad rebels have a strong voice at the negotiating table and can help reshape their country’s future.
  • Guam: Speaking of China, if ongoing conflicts in the South China Sea, Taiwan, and Korea escalate into full-scale war, Guam will be a key firebase. Since many of the military installations on this island date back to the Vietnam War, they must be significantly updated and expanded. Contractors, usually construction contractors, are at the forefront of these efforts.

 

The Defense Base Act provides the financial benefits that injured contractors in all these places, and others around the world, need and deserve.

 

Injury Compensation Available

 

When these contractors are injured overseas, whether they are carrying machine guns or clipboards, they must deal with sky-high medical bills. These expenses include:

 

  • Emergency care,
  • Hospitalization,
  • Follow-up medical care,
  • Physical and/or occupational therapy, and
  • Ancillary expenses, like transportation, medical devices, and prescription drugs.

 

The Defense Base Act covers all these expenses, as long as they are reasonably necessary. That “reasonably necessary” requirement gives insurance company lawyers a chance to refute these charges.

 

PTSD treatments are a good example. This brain injury is extremely common. Trauma, like a car crash or a firefight, alters brain chemistry. Since PTSD is a chemical injury, it has a chemical solution. However, many insurance company adjusters only approve physical therapy. Therapy is important, but it cannot do the job alone.

 

PTSD chemical treatments are cutting edge and therefore very expensive. Attorneys advocate for victims in these situations, so they get the help they need, instead of the help an adjuster is willing to pay for.

 

To learn more about the DBA process, contact Barnett, Lerner, Karsen, Frankel & Castro, P.A.