Countless watchdog reports have found that defense contractors overcharge the military for spare parts. Now, lawmakers are pushing a new bill that seeks to curb price gouging on sole-source contracts awarded without competitive bidding.
The legislation, dubbed the “Transparency in Contract Pricing Act of 2025,” requires contractors to notify the Defense Department if the cost of a product or service increases by more than 25% from the agreed contract bid or from what the government paid for the item in the previous calendar year.
In addition, contractors must notify the government if the price is 50% higher than what the government has paid for the same item in the last five years.
“As part of my war on waste, I am exposing all price-gouging attempts at the Pentagon. You cannot stop what you cannot see. With the additional clarity of knowing where the bloated contracts are, our armed forces will be able to identify and eliminate wasteful spending to increase efficiency and better equip our warfighters,” Sen. Joni Ernst (R-Iowa), one of the bill’s sponsors, said in a statement.
Last year, the Pentagon’s office of inspector general found that the Air Force “did not pay fair and reasonable prices for about 26% of the spare parts reviewed, valued at $4.3 million.” The watchdog concluded during that review that the service paid more than 80 times the commercially available cost for a lavatory soap dispenser — a 7,943% markup. The inspector general could not determine whether the Air Force paid fair prices for more than 54% of spare parts valued at $22 million because the Air Force did not maintain historical cost data.
“My oversight has shown that wasteful spending is alive and well at the Pentagon. We need to step up our efforts to end the Defense Department’s misuse of taxpayer dollars, and our legislation is an important next step. By requiring a notification for certain price increases, we can ensure our military continues protecting our nation while efficiently and wisely spending the American people’s money,” Chuck Grassley (R-Iowa), the bill’s sponsor, said in a statement.
When the report came out, Boeing said the document “appears to be based on an inapt comparison of the prices paid for parts that meet aircraft and contract specifications and designs versus basic commercial items that would not be qualified or approved for use on the C-17.”
The Senate’s version of the fiscal 2026 defense policy bill already includes the Transparency in Contract Pricing Act’s exact language.
“Oftentimes they will do this in advance of the conferencing process or at any other point in the process of passing the [National Defense Authorization Act] either to simply demonstrate broad support so that it reduces the chances of it being dropped in the conferencing process, or to otherwise set themselves up to make sure that that language is eventually passed in one form or another, even if it’s dropped,” Greg Williams, director of the Center for Defense Information at the Project On Government Oversight, told Federal News Network.
If passed, defense contractors would notify the Defense Department about price increases within 30 days of becoming aware of the rising costs. The bill also requires the Defense Contract Audit Agency to report any contractors that fail to comply with the price notification requirements.
“It will make it easier for both members of Congress and for the defense contract audit agency to see when prices are increasing. There are countless reports on how the prices of various items that the government buys have increased over time, and I can tell you that, looking back over the course of 30 years, it’s not uncommon to see prices go from a few dollars to thousands of dollars for some parts,” Williams said.
Both the House and Senate versions of the 2026 defense policy bill include sweeping acquisition reforms aimed at changing the way the Pentagon does business. Williams said it may be “problematic” that lawmakers want to repeal around 80 regulations or laws that govern military procurement, but the bill provides funding for reverse engineering and other measures to increase competition in the spare market.
“I think much more generally, we’ve seen less and less competition in this field, and I think that’s bad for the government and bad for prices. I would like to see more open competition, and I would like to see less of the technical data about these items hidden from the public’s view by contractors indicating that it’s controlled unclassified information,” he added.
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