Contract Pricing:

Defense Contract Audit Agency's Estimating Reports Can Be Improved

NSIAD-91-241: Published: Aug 1, 1991. Publicly Released: Aug 1, 1991.

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Pursuant to a congressional request, GAO evaluated 101 Defense Contract Audit Agency (DCAA) reports reviewing defense contractors' cost-estimating systems.

GAO found that: (1) DCAA has a key role in assessing the adequacy of contractor estimating systems and correcting significant and widespread estimating deficiencies; (2) the DCAA estimating-system reports that identified subcontract-estimating deficiencies did not always demonstrate and emphasize to administrative contracting officers and contractors the need to correct such deficiencies; (3) many DCAA reports did not illustrate the potential cost impact of the identified deficiencies or include the required recommendations for disapproving inadequate systems; (4) as a result of GAO efforts, DCAA increased emphasis on ensuring that it included appropriate recommendations in estimating-system reports when it identified significant deficiencies; and (5) DCAA officials began monitoring all estimating survey and follow-up reports after February 12, 1991, to ensure compliance with the DCAA audit manual.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The agency's corrective action plan will be submitted within the 60-day timeframe. On December 30, 1991, DCAA issued guidance requiring audit reports to cite specific cost impact of deficiencies. On September 13, 1991, DCAA issued guidance requiring estimating survey reports to measure actual cost impact from either examples or total activity in a particular area.

    Recommendation: So that DCAA audit reports adequately reflect the need to correct estimating deficiencies, the Director, DCAA, should emphasize to DCAA field audit offices the importance of providing examples of cost impact to demonstrate the significance of the deficiencies cited.

    Agency Affected: Department of Defense: Defense Contract Audit Agency

  2. Status: Closed - Implemented

    Comments: The agency's corrective action plan will be submitted within the 60-day timeframe. On June 5, 1991, DCAA issued guidance emphasizing the requirement to recommend disapproval of estimating systems with significant deficiencies. The guidance also requires auditors to recommend ACOs require cost or pricing data at the $100,000 level, and that subsequent audit reports note uncorrected deficiencies.

    Recommendation: The Director, DCAA, should monitor estimating-system survey and follow-up reports until improvements are noted in field audit offices' compliance with regulatory requirements for recommending disapproval of contractor systems containing significant estimating deficiencies.

    Agency Affected: Department of Defense: Defense Contract Audit Agency

 

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