Defense Procurement:

DOD Should Assess Cost Impact of Contractor Teaming Arrangements

NSIAD-92-15: Published: Apr 2, 1992. Publicly Released: Apr 21, 1992.

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Pursuant to a congressional request, GAO reviewed teaming arrangements among defense contractors for four major weapons systems, the Army's Light Helicopter (LH) and Advanced Antitank Weapon System-Medium (AAWS-M), and the Navy's Advanced Tactical Aircraft (A-12) and Tilt Rotor Aircraft (V-22), focusing on whether those teaming arrangements resulted in: (1) two equally qualified sources for competing for future production contracts; and (2) written agreements that might adversely affect future production contract costs.

GAO found that: (1) despite initial plans for dual-source competition, LH and V-22 Program plans were changed to a joint production arrangement because planned production quantities were insufficient to justify the increased costs associated with dual production lines; (2) changes were made later to the LH Program so that team members could jointly manufacture the production aircraft instead of each member independently manufacturing the complete, identical production aircraft in direct competition with its former team member; (3) joint production was considered for the A-12 Program, but would not have been economically justified for the expected number of production aircraft before the program was terminated in January 1991; (4) only the AAWS-M Program remained structured to establish dual-source competition between the team members for a share of the production contracts, but the written agreement for the AAWS-M Program includes a provision that could have adverse effects on future production contract costs; and (5) if the government had pursued a dual-source contracting strategy for the production of the LH, V-22, and A-12, provisions in the written agreements between team members would also have had an adverse effect on future production contract costs.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The Director of Defense Procurement will emphasize the need to review contractor teaming arrangements before contract award at the next Interdepartmental Staff meeting and prepare a policy memorandum on the subject within the next 60 days.

    Recommendation: The Secretary of Defense should direct that contracting officers review the language in the written agreements involved in teaming arrangements to determine whether those agreements may adversely impact future production costs.

    Agency Affected: Department of Defense

 

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