Sole Source Spare Parts Excess Profit Register For Defense Contracts

PROBLEM: The Department of Defense Inspector General reported in February 2019 that TransDigm earned $16.1 million in excess profit on 46 of 47 sole-source spare parts reviewed, on contracts worth $29.7 million, with profit margins up to 4,451% against the IG's 15% reasonableness benchmark, and reported again in December 2021 that TransDigm made a further $20.8 million in excess profit on 105 spare parts. The IG noted the problem of excess profits on sole-source contracts where cost analysis was not used had recurred over 23 years.

SOLUTION: An IBM Cloud Ideas compliance register that records, for each sole-source spare-parts contract, the price charged, the cost or pricing data obtained, the profit margin against the applicable benchmark, and whether a cost analysis was performed, flagging contracts awarded without cost analysis for review before renewal.

EVIDENCE BASIS: DOCUMENTED — DoD Inspector General, February 2019 and December 2021: TransDigm $16.1 million excess profit on 46 of 47 parts (2015–2017) and $20.8 million excess profit on 105 parts (2017–2019 period); IG 15% profit benchmark.