Government Contracting:

A Proposal for a Program To Study the Profitability of Government Contractors

NSIAD-87-46: Published: Nov 28, 1986. Publicly Released: Nov 28, 1986.

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GAO drafted the Profit Reporting Program (PRP) to correct weaknesses noted in Department of Defense contractors' profitability report studies that would require: (1) a consistent and appropriate analytical methodology to evaluate profitability; (2) a means to verify contractor-furnished data; and (3) mandatory contractor participation. GAO also proposed legislation to require major government contractors to make annual financial reports to an independent government unit.

GAO found that contractors, industry associations, federal agencies, and private-sector analysts raised questions about: (1) the need for the program; (2) the cost to implement and support the program; and (3) the risk of improper disclosure and use of proprietary and individual company data. GAO noted that its proposal would: (1) attempt to contain costs by limiting the companies that would participate and the amount of data they would be required to report; (2) require that only those contractors with more than $50 million in negotiated prime contracts, about 131 companies, report their profits; (3) provide the PRP administrator with the authority to adjust the reporting threshold, as long as he included a fixed percentage of total federal procurements; (4) allow the PRP Administrator and the Comptroller General access to sensitive contractor data; and (5) impose criminal penalties for the improper release of sensitive contractor data.

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