Inflation isn’t a threat – defense firms are doing fine

Ultimately, increasing military contract prices expands opportunities for contractors to abuse the FFP contract designation, especially without preserving guardrails that prevent price gouging. Contractors knew what they signed up for when they agreed to FFP contracts, but now they expect an industry-wide bailout from Congress without pursuing relief through proper channels. As noted above, the Pentagon has maintained a restrained view on inflation relief, calling for more information from the defense industry to illustrate need. Pentagon acquisition chief LaPlante has underscored the importance of data-informed contract adjustments, stating in September, “I need data about companies that are either potentially going under or not bidding that are affected by inflation. Because we need to inform the Congress, we need to inform the Pentagon. I’m convinced there’s real-world examples of people being hurt … But we need to show the data.” Warren echoed LaPlante’s data requests in her letter to his office, asking several process-oriented and oversight questions regarding any potential inflation-related adjustments to Pentagon contracts. Still, there is no public evidence of businesses requesting inflation relief from the Pentagon. LaPlante’s office has said they will respond to Warren’s letter directly, and the Center for Defense Information (CDI) is keen to discover what information the Pentagon may have shared with her office. CDI has submitted a Freedom of Information Act (FOIA) request for all records and communications from LaPlante’s office regarding Warren’s letter, with the hope that such documents will unveil industry data and analysis to justify inflation-related contract adjustments. CDI has not yet received a substantive response to our FOIA request, but will update this piece if and when we receive documentation of DOD’s response to Warren’s letter. Until then, we have no reason to believe there’s an actual justification for increasing military contract prices due to inflation. The Pentagon, a member of Congress, and CDI have called on the defense industry to explicitly demonstrate the need for inflation relief on a company level — to no avail.