Presidential Power Over Defense Contracts: How an Existing Statute Authorizes the Executive Branch to Recoup Profits from Defense Contractors

The United States pays half-a-trillion dollars to defense contractors every year. Although the U.S. military could not operate without profitable contractors, excessively profitable contracts reduce manufacturing output and can imperil soldier safety. Stretching back to the founding, there is a long history of the executive branch compelling ex post modifications of military contracts to a lower price than the parties agreed to at signing. Sometimes authorized by Congress (but not always), this executive practice of “downward revisions” has fallen into disuse. Nevertheless, at least one statute might authorize this practice today: Public Law 85-804. Commonly understood to provide higher payments to defense contractors, this Note argues that Public Law 85-804 should be interpreted in light of its text and history to authorize downward revisions to excessively profitable defense contracts. Such an interpretation could save soldiers’ lives and lower defense costs during today’s challenging fiscal and geopolitical times.