OMB Circular A-76:

Expected Savings Are Not Being Realized in Ft. Sill's Logistics Contract

GGD-91-33: Published: Feb 11, 1991. Publicly Released: Feb 15, 1991.

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Pursuant to a congressional request, GAO reviewed an Army contract for logistics support services at Fort Sill, Oklahoma, focusing on: (1) whether the Army realized the estimated savings from contracting its requirements; and (2) contractor performance.

GAO found that: (1) the Army initially estimated a $2.7-million savings over 5 years based on estimated contract costs of $53.2 million; (2) a more recent estimate of at least $68 million indicated that contract costs would be higher than estimated in-house costs; (3) although in-house costs would also have risen, they would have remained significantly lower than the adjusted contract costs; (4) it would be difficult to offset the cost increases, since little time remained in the contract and the major cost component, labor, was not easily adjustable; (5) the decline in productivity from in-house levels resulted in approximately $1.8 million in excess direct labor costs and affected equipment readiness; (6) the estimated $14.8 million in increased contract costs could increase if productivity failed to improve; (7) contrary to Army instructions, Fort Sill paid the contractor the entire available award fee for meeting minimum performance standards; (8) in two of the three logistics contract components, the level of contractor performance fell below the standard set by the in-house staff; (9) the contractor's internal controls over supply inventory recordkeeping and inventory management were inadequate; and (10) the Army failed to provide adequate contract oversight.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In a letter of March 1991, the Assistant Secretary of the Army for Research, Development, and Acquisition instructed the Commander, TRADOC, to ensure that the Ft. Sill contracting officer does not pay award fees for minimum or below minimum performance.

    Recommendation: In order that the Army gets the service it contracted for and at an advantageous cost, the Secretary of the Army should direct the Commander, U.S. Army Training and Doctrine Command (TRADOC), to ensure that Fort Sill's contracting officer stops using the current contract administration approach of paying award fees for minimum and below minimum performance.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: In April 1991, TRADOC directed Ft. Sill's Director of Contracting to take action necessary to ensure that the contracting officer exercises all contractual remedies available to ensure contractor compliance with the performance requirements of the Northrop contract.

    Recommendation: In order that the Army gets the service it contracted for and at an advantageous cost, the Secretary of the Army should direct the Commander, TRADOC, to ensure that Fort Sill's contracting officer requires the contractor to provide, within a specific time frame, a plan that will demonstrate how it proposes to meet minimum performance standards.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: In a March 1991 letter, the Assistant Secretary of the Army for Research, Development, and Acquisition advised TRADOC to intensify oversight of Ft. Sill's logistics contract and ensure that fee contracts are properly administered.

    Recommendation: In order that the Army gets the service it contracted for and at an advantageous cost, the Secretary of the Army should direct the Commander, TRADOC, to establish oversight of Fort Sill's logistics contract and ensure that the award fee provisions of other TRADOC cost-plus-award-fee contracts are being properly administered.

    Agency Affected: Department of Defense: Department of the Army

 

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