Biological Warfare:

Role of Salk Institute in Army's Research Program

NSIAD-92-33: Published: Dec 19, 1991. Publicly Released: Feb 13, 1992.

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Pursuant to a congressional request, GAO reviewed an Army contract laboratory's development and production of vaccines to protect U.S. forces against biological warfare threats, focusing on whether the: (1) contractor developed and produced vaccines against biological agents recognized and validated as warfare threats; (2) contractor was the Army's only viable means of developing and producing such vaccines; and (3) contractor's fees for the use of its facilities complied with applicable federal regulations.

GAO found that: (1) the contractor spent 17 percent of the $17.7 million in Army payments on work clearly related to biological agents validated as warfare threats; (2) the contractor spent 33 percent of payments on work that applied to biological agents and diseases not related to warfare and 50 percent of payments on diseases not related to warfare; (3) commercial vaccine producers indicate that there are not viable alternatives to contracting since there is no commercial market for such vaccines in the United States and vaccine producers lack the facilities needed to produce them; (4) although the Army's current in-house capabilities are not sufficient to meet the demand for biological warfare vaccines, the Army could improve research and expand its research and development laboratories to meet vaccine production needs; and (5) the Army paid the contractor $5.5 million more in fees than applicable federal regulations permitted, by following cost principles for commercial organizations instead of those for nonprofit organizations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD indicates that the Army will attempt to obtain competition for the follow-on contract. The Army will also prepare an independent government cost estimate and any estimate of the cost of performing the work at government laboratories.

    Recommendation: The Secretary of the Army should direct the Commander, Medical Research and Development Command, to determine, prior to the negotiation of another contract with Salk, whether changed conditions, such as the discontinuation of work not related to validated threats, would materially change Salk's cost of performance. Specifically, in the absence of commercial competition, Salk's estimated cost of performance should be compared to the cost of performing the work at government laboratories.

    Agency Affected: Department of Defense: Department of the Army

  2. Status: Closed - Implemented

    Comments: GAO believes that the recommendation remains valid. GAO is discussing options for further action with the Office of General Counsel. GAO referred this issue to OMB for its follow-up.

    Recommendation: The Secretary of the Army should direct the Commander, Medical Research and Development Command, to ascertain whether there is a basis to recover from Salk past overpayments for the use of facilities and reduce any remaining facility use payments otherwise due under the 1988 contract to amounts allowed by Office of Management and Budget Circular A-122.

    Agency Affected: Department of Defense: Department of the Army

  3. Status: Closed - Implemented

    Comments: The Army completed a review of existing contracts with nonprofit organizations to determine which cost principles were applied. If nonprofit cost principles were not followed the file was further examined to determine the basis for the noncompliance.

    Recommendation: The Secretary of the Army should direct the Commander, Medical Research and Development Command, to determine whether the appropriate cost principles were followed in contracting with other nonprofit organizations and, if not, ascertain whether recovery action should be undertaken and what changes should be made to internal controls to ensure that the proper cost principles are followed in the future.

    Agency Affected: Department of Defense: Department of the Army

 

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