More Effective Use of Audit Reports Needed To Reduce Contract Costs

NSIAD-83-54: Published: Oct 11, 1983. Publicly Released: Oct 11, 1983.

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GAO reviewed the M1 Tank Program Office's contract administration practices for the first 2 years' procurement of the M1 tank. Specifically, GAO commented on the M1 contracting officer's actions regarding Defense Contract Audit Agency (DCAA) audit reports on progress payment overcharges to contractors and misallocated contractor costs on M1 contracts.

GAO found that the contracting officer did not take prompt and effective action on 23 DCAA audit reports which questioned the allocation of about $32 million of contractor costs and excess progress payments totaling about $12 million. GAO believes that an immediate response to these reports would have prompted the contractor to resolve the findings as quickly as possible and would have avoided overpayments and lessened the Government's interest payments. GAO noted that contract administration problems may be attributable in part to the complex M1 procurement process and the pressures to meet schedules for the development, initial production, and fielding of the M1 tank.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commander, Army Materiel Development and Readiness Command, should closely monitor the M1 contracting officer's actions to ensure that the policies and procedures prescribed in Department of Defense Directive 7640.2 are followed, the findings in the DCAA audit reports are resolved as expeditiously as possible, and contractor overcharges resulting from accounting deficiencies cited in the DCAA reports are identified and recovered.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Development and Readiness Command

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commander, Army Materiel Development and Readiness Command, should instruct the M1 contracting officer to notify the contractor that interest penalties will be imposed on contract overcharges and interest assessed pursuant to the Defense Acquisition Regulation.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Development and Readiness Command

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Commander, Army Materiel Development and Readiness Command, should ensure that the decision to deviate from normal practice in having a procurement command handle the contracting tasks associated with weapon system purchases is adequately documented, reviewed, and approved.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Materiel Development and Readiness Command

 

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