Contract Pricing:

Estimating Deficiencies Resolved Slowly, but Recent DOD Actions Should Help

NSIAD-92-187: Published: May 28, 1992. Publicly Released: Jun 4, 1992.

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Pursuant to a congressional request, GAO reviewed whether Department of Defense (DOD) administrative contracting officers have taken sufficient actions to resolve subcontract estimating deficiencies in a timely manner.

GAO found that: (1) DOD has taken substantive efforts to correct about 70 percent of the estimating system deficiencies reported by the Defense Contract Audit Agency (DCAA) for the 11 contractors reviewed; (2) while DOD took corrective action on most of the deficiencies, the actions tended to be concentrated at 6 of the 11 contractors; (3) some corrective actions resulted from contractors' initiatives, and, in other cases, contracting officers took active roles in ensuring that contractors corrected estimating deficiencies; (4) over half of the corrective actions were not timely; (5) delays were due, in part, to an absence of aggressive and proactive measures by contracting officers, including failure to follow regulatory guidance on the resolution of estimating system deficiencies; (6) for two contractors, corrective actions on six estimating deficiencies were delayed because DOD did not promptly evaluate the contractors' corrective action plans; (7) uncorrected estimating deficiencies can result in millions of dollars in overpricing; and (8) DOD has taken steps to help reduce the time required to correct estimating deficiencies and strengthen its oversight, including directing local managers to become personally involved in the resolution process, establishing monitoring systems to track deficiencies until they are corrected, and revising selected procedures that contribute to delays in resolving deficiencies.

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