Are we overpaying for military equipment?

The Indicator from Planet Money

NPR

Business

4.7 • 9.5K Ratings

🗓️ 29 January 2024

⏱️ 11 minutes

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Summary

If the proposed defense budget is passed, it will account for roughly 3.5 % of U.S. GDP. The military buys everything from pens and paper clips to fighter jets and submarines. But the market for military equipment is very different from the commercial market. And sometimes the system results in the Pentagon, and taxpayers, overpaying. This week, we're bringing you a three-part series on the defense industry.

Today, we unpack how defense costs are getting so high and why it's happening.

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Transcript

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0:00.0	NPR.
0:03.0	So there's
0:05.0	So there's
0:10.0	So there's this
0:15.9	so there's this company called TransDime. It's in the business of selling spare parts for helicopters and planes and one of the parts they sell is this half inch
0:21.4	piece of metal called a drive pin.
0:24.0	Several years ago the military needed some of these drive pins and it contracted with
0:27.7	Transdime to buy some.
0:29.6	But then in 2019, Pentagon officials reviewed the deal and found Transdine would charge $4,361 for this
0:38.1	one little drive pin that the Pentagon says should have cost only $46.
0:44.3	We reached out to Transheim for comment,
0:45.9	and they dispute the Pentagon's math.
0:48.5	They said the price they quoted at the time
0:50.0	was fair for this relatively specialized part.
0:53.2	Still, for a half inch piece of metal,
0:55.8	some might say that's kind of steep.
0:57.8	It doesn't seem right, doesn't.
0:59.7	So I guess the real question is, how do you get from $46 to $4,300, right?
1:07.0	That by the way was Phil McMahonis.
1:08.6	He wasn't involved in the Transdime deal, but he does know a thing or two about military spending because he used to work for the
1:14.8	Defense Department negotiating deals with defense contractors.
1:19.0	Phil says this drive-pin story is a particularly extreme example of the government overpaying for military
	...

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