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Government Contractors: Criteria Needed for Allowable Employee Health Care Costs

HRD-88-27 Published: May 12, 1988. Publicly Released: May 12, 1988.
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Highlights

GAO evaluated government efforts to ensure that contractors' health care costs under negotiated contracts were reasonable, focusing on: (1) health care costs of selected government contractors compared to those of other manufacturing industries and the government work force; (2) the primary reasons for cost differences; and (3) the adequacy of federal internal controls over allowable compensation costs.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Office of Management and Budget The Director of the Office of Management and Budget (OMB), through the Administrator of the Office of Federal Procurement Policy, should work with the Department of Defense, National Aeronautics and Space Administration and the General Services Administration to develop, and publish in FAR, quantitative criteria for determining the reasonableness of the government's reimbursement of contractor health insurance costs. The Director should develop similar criteria for assessing the reasonableness of other elements of compensation and contractors' total compensation costs.
Closed – Implemented
DLA incorporated quantitative criteria in its audit manual and has begun challenging health care costs that exceed these criteria.

Full Report

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Topics

Comparative analysisContract costsContractor personnelEmployee medical benefitsHealth care cost controlHealth care costsHealth insuranceInternal controlsProcurement regulationsPrivate sector