DOD's Industrial Modernization Incentives Program:

An Evolving Program Needing Policy and Management Improvement

NSIAD-85-131: Published: Sep 6, 1985. Publicly Released: Sep 6, 1985.

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GAO reviewed the adequacy of the Department of Defense's (DOD) Industrial Modernization Incentives Program (IMIP) test and resulting draft guidance. Through IMIP, DOD provides contractors incentives to invest in capital equipment and manufacturing processes in order to lower costs of weapons systems and improve the industrial base. The Deputy Secretary of Defense established a steering group to direct and monitor a test of IMIP and develop program policy and guidance based on an assessment of the services' experience.

GAO found that: (1) although IMIP has demonstrated the potential for reducing acquisition costs and providing other benefits, visibility and accountability will continue to be hampered unless there is a uniform system for reporting actual and projected benefits and guidance is developed to incorporate projected benefits into budget and cost estimates; (2) although the steering group developed draft policy guidance, which adequately discussed management issues, additional clarification of the impact, results, and intent of various options will help to ensure that IMIP achieves the maximum benefit for the least cost; and (3) the development of programming and planning structures for identifying areas in the industrial base, where problems may arise in meeting future defense requirements, needs further development to ensure that IMIP achieves the maximum benefit for DOD.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Changes were made in IMIP policy documents to strengthen visibility and ensure consistency in reporting. Also, annual status reports will be structured in accordance with GAO recommendations.

    Recommendation: The Secretary of Defense should establish an IMIP reporting system that, at a minimum, collects data in both discounted and then-year dollars on gross benefits and government costs.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The IMIP guide contains guidance on how to track and measure cost savings.

    Recommendation: The Secretary of Defense should develop guidance specifying how and when IMIP benefit projections should be included in weapon system program cost estimates and budgets.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The IMIP steering group was retained to address issues identified in this report.

    Recommendation: The Secretary of Defense should direct the IMIP steering group to: (1) expand the review of experience gained during the test and, to the extent possible, clarify draft policy and guidance; and (2) monitor the continuing implementation of IMIP after the test and revise policy and guidance based on these evaluations.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: Annual service status reports, development of defense guidance, and greater industrial analysis have been implemented.

    Recommendation: The Secretary of Defense should review the IMIP planning and programming process in each service to ensure that the processes contain adequate structure to ensure IMIP efforts are directed toward those areas with the greatest potential benefits.

    Agency Affected: Department of Defense

 

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