DOD Warranties:

Improvements Needed in Implementation of Warranty Legislation

NSIAD-87-122: Published: Jul 21, 1987. Publicly Released: Jul 21, 1987.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) implementation of a statutory requirement that it obtain warranties on weapon systems.

GAO found that: (1) the 1985 DOD authorizing legislation required it to obtain guarantees that procured items would conform to contract requirements and be free from defects; (2) DOD significantly increased its use of warranties in response to the legislative requirement; (3) the military services requested few warranty waivers; (4) most warranties contained performance guarantees; and (5) the DOD procurement activities that it visited paid about $244 million for 61 warranties that had specific prices. GAO also found that: (1) the services had prepared cost-effectiveness analyses for only 9 of the 97 warranties that it reviewed, despite a DOD regulation requiring such analyses; (2) warranties could be more specific regarding performance requirements, performance assessment, and potential corrective actions; (3) DOD could better define warranty duration periods; and (4) only 23 of the 97 warranties included provisions requiring physical markings of warranted items.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The DAR Council will finalize and incorporate changes in the DFARS. Interim guidance was issued.

    Recommendation: The Secretary of Defense should direct that warranties specifically state whether redesign is or is not a possible remedy under the warranty.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Office of the Assistant Secretary of Defense (P&L) believes that ongoing service procedures, a Defense Contract Audit Agency (DCAA) audit and guidance, and a proposed Army audit are a reasonable alternative.

    Recommendation: The Secretary of Defense should direct the military services to review a representative number of recent and future warranties to ensure that procuring activities are routinely: (1) doing cost-effectiveness analyses of proposed warranties; (2) delineating essential performance requirements and identifying how and when performance will be assessed; (3) considering storage time, coverage of repaired or replaced parts, and coordination of government-furnished components and related end items in establishing warranty duration periods; and (4) directing that warranted items be appropriately marked.

    Agency Affected: Department of Defense

 

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