It seems the Pentagon is (still) overspending on toilet seats. Then again, the federal government’s largest agency overspends on just about everything else, too.
According to a recent news report, a Department of Defense contractor told the Air Force that each new toilet seat cover for the C-17 cargo plane will cost $10,000. Will Roper, the Air Force’s chief acquisition official, rather than pooh-poohing the cost, defended it by claiming the company would have to switch production from other products to make a limited number of toilet covers, thus driving up the expense. Roper added that the Air Force could 3D-print the toilet seat covers for $300 a piece, but would likely have to pay “some kind of profit margin or royalty” to the company.
Back in 1985, the Project on Government Oversight led the way in exposing contractors who were charging the Pentagon $640 per toilet seat cover. Adjusted for inflation, that would be about $1,512 today. So why are taxpayers now on the hook for nearly seven times that amount, or having to pay contractors if the government produces the seats itself? Without access to cost or pricing information, the government can’t challenge the company’s ask, even after it was found to have exceeded anything else in the commercial marketplace.
The Department of Defense and Congress have totally abdicated their responsibilities when it comes to making sure taxpayers pay a fair price. Failing to secure upfront government ownership of intellectual property rights for systems it paid to research and develop is one of the main drivers of costs and a major source of contractor profits when it comes to operations and maintenance. It works well for the contractors. By owning the intellectual property rights, the prime contractor makes itself the only outfit capable of providing the necessary items. Moreover, that monopoly prevents other companies from providing maintenance support to the patented item. In many cases, contractors argue that the costs of these products shouldn’t be questioned because they are “commercial items,” supposedly available for sale and with prices set by the market. In cases like this, though, it’s clear the government is the only customer and pays accordingly high prices.
But there might be an out—if the Pentagon wants to use it. Back in 1980, the Bayh-Dole Act was passed, and subsequently expanded by President Reagan. That law provides the government with the right to produce a patented item for its benefit or to exercise “march-in rights” that allow others to commercialize patented technologies and potentially control unreasonable prices—including those for so-called “commercial items.” The law protects taxpayers, “ensuring that U.S. citizens enjoy the benefits of public R&D funding.”
As of August 2016, however, “[n]o federal agency has ever exercised its power to march in and license patent rights to others,” according to the Congressional Research Service, and Congress hasn’t taken up any legislation to settle debates about when the government can use its march-in rights. In most cases, government officials seem to buy the corporate line that when companies “hold patents” to parts being sold to the government, “others are not allowed to make them.”
Beyond the patent issue, not being able to question the price tag for spare parts also adds up. Recent audits have shown repeatedly that the Defense Department continues to spend too much for spare parts. In 2011, it was Boeing charging $644.75 for a gear smaller than a dime that sells for $12.51—more than a 5,100 percent markup. In 2014, it was Bell Helicopter charging $492.17 for a $36.08 straight-headed pin. In most of these cases, we only learned the specifics because audit reports were leaked. The versions released by the government redacted the prices as “business sensitive” information.
The Defense Department has to convince Congress that it needs accurate pricing information to determine whether contractor bids are reasonable. In 2012, POGO supported a Defense proposal to improve access to contractor cost and pricing information for so-called “commercial” items, which is a contract designation that often results in bad deals for taxpayers. Not only did the defense industry’s boosters on the armed services committees reject the department’s proposal, they actually expanded the definition of commercial items to allow for even more abuse in the future. Without the information it needs to assess prices, the department is playing a game of pin the tail on the donkey. If Congress has its way in this year’s defense authorization bill, ripping off taxpayers will only become more common.
The government needs to restrict its definition of commercial items to those actually sold in the commercial marketplace. Unfortunately, many government commercial item purchases have been awash in wasteful spending based on the elasticity of the current definition. Items with little or no market availability were easily labeled as commercial, and were purchased on a sole-source basis (i.e. non-competitive contracting) with no objections from government acquisition staff or reviews by auditors. The “commercial item” definition was developed by industry and enacted into law in the 1990s (as part of so-called “acquisition reform”) precisely in order to prevent the contracting agencies from obtaining cost or pricing data when adequate price competition—which exists in real markets—is not there. The law should more accurately have been referred to as the “Sole Source Contracting Without Cost or Pricing Data Act.”
The Pentagon needs to take patent and pricing issues seriously and protect taxpayers. Improved contract negotiations and access to cost or pricing information are a must. Bad deals must be redone. Until those solutions occur, the Defense Department should explore its rights to obtain these items at a cheaper price. It’s about time the Pentagon placed taxpayers first and stopped this three-decades-long spare-parts horror story. No one needs a $10,000 toilet seat cover. It just plain stinks.
Dan Grazier is the Jack Shanahan Military Fellow at the Project on Government Oversight. He is a former Marine Corps captain who served tours of duty in Iraq and Afghanistan during the war on terror. His various assignments in uniform included tours with 2nd Tank Battalion in Camp Lejeune, North Carolina, and 1st Tank Battalion in Twentynine Palms, California.