Magazine article National Defense

Kendall: Pentagon Struggles to Determine 'Fair' Prices for Commercial Products

Magazine article National Defense

Kendall: Pentagon Struggles to Determine 'Fair' Prices for Commercial Products

Article excerpt

* Defense procurement chief Frank Kendall is caught between a rock and a hard place. He faces pressures to ease contracting rules that discourage commercial tech firms from doing business with the Pentagon. At the same time, he must placate lawmakers' and regulators' concerns about contractor price gouging.

"We try to strike the right balance," Kendall said.

The challenge for Kendall is to ensure the government is being charged fair market prices for commercial products without necessarily subjecting vendors to intrusive audits and costly red tape. "Commercial practices and purchasing are a continuing subject of discussion," Kendall said.

The issue of how to balance the Pentagon's desire to attract innovative commercial suppliers against the need to exert proper oversight of contractors is a tough one for Kendall, he recognized. "The DoD inspector general expects me to ensure fair pricing," he said. Defense contractors, meanwhile, for years have complained to Pentagon officials and members of Congress that they are being asked to provide sensitive internal company data to the government to substantiate prices they charge for products that are sold commercially and for which price data already exists. Among the most disputed items have been aircraft spare parts.

"I get pulled by the Hill in both directions," said Kendall. "I get pulled internally in both directions."

For standard commercial items that are widely sold in the open market, determining a fair price is easy, he said. …

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