Multiyear Procurement

In response to a congressional request, GAO analyzed the proposed fiscal year (FY) 1984 weapon system multiyear procurement candidates for compliance with the prescribed criteria and procedures. GAO stated that estimates of savings achievable from multiyear contracting have been disappointing. Multiyear contracting should result in significant avoidable costs. However, if a multiyear contract were awarded and changed significantly or terminated later, the ultimate cost of the effort could well be higher than it would have been under annual contracting. Other criteria, such as confidence in cost estimates, stability of requirements, stability of funding, and stability of design, focus on the risk of losing savings attributed to efficiencies of production and economic order quantity buying because the parts may no longer be needed or may become obsolete. For these reasons, each procurement must be judged on its own merits. All of the FY 1983 supplemental and FY 1984 candidates may not meet one or more of the legislated criteria for multiyear contracting, and GAO stated that the Department of Defense (DOD) should be more aggressive in screening out multiyear candidates which show only marginal savings based on budgetary estimates. DOD did not prioritize multiyear candidates or provide a complete picture of future-year commitments as Congress had requester, and compliance with direction concerning the solicitation of proposals for multiyear candidates was mixed. GAO does not believe that the Air Force has demonstrated that the B-1B program fully meets the specified criteria, because the cost figures used in the multiyear justification package for some aircraft components and the Air Force's savings estimates were questionable. Therefore, before any multiyear contracts are awarded, Congress should require the Air Force to make a detailed analysis of both multiyear and annual procurement based on a FY 1984 start and request a detailed assessment that demonstrates the extent to which the negotiated multiyear target costs compare with the budgeted program baseline.