High-Risk Series:

Defense Contract Management

HR-97-4: Published: Feb 1, 1997. Publicly Released: Feb 1, 1997.

Additional Materials:


Louis J. Rodrigues
(202) 512-4841


Office of Public Affairs
(202) 512-4800

GAO reviewed the high risks in contract management that the Department of Defense (DOD) continues to face despite improvements in selected areas.

GAO found that: (1) improvement and simplification of DOD's contract payment system is imperative; (2) if DOD does not achieve effective control over its payment process, DOD's Defense Finance and Accounting Service will continue to risk overpaying contractors millions of dollars; (3) further, failure to reform the payment system perpetuates other financial management and accounting control problems and increases the administrative burden of identifying and correcting erroneous payments and their associated costs; (4) DOD is aware of the seriousness of its payment problems and is taking steps to address them; (5) with improved contractor cost-estimating systems, DOD could reduce the risk of overpricing and manage contracts more efficiently; (6) contractors' cost-estimating systems are a critical control for ensuring sound price proposals, which reduce the risk that the government will pay excessive prices, and permit less government oversight and management attention; (7) DOD has improved its oversight of contractors' cost-estimating systems, and some improvement in contractor systems is indicated; (8) nevertheless, poor cost-estimating systems remain an area of concern at some contractors' locations and require continued attention by contractors and government contracting officials; (9) maintaining public support for defense programs requires that potential fraud involving defense contractors be identified and dealt with swiftly; (10) DOD has established a voluntary disclosure program to encourage defense contractors to report potential civil or criminal procurement fraud to the government; (11) however, contractors' participation in the program has been relatively small and the dollar recoveries modest; (12) efforts to improve the administration of the program, including coordination between DOD and the Department of Justice, may encourage program participation and improve dollar recoveries; (13) as is the case with many other elements of defense, contract administration and audit resources have been reduced, and further reductions are planned; (14) at the same time, DOD continues to look to additional outsourcing opportunities, and it plans to increase its procurement budgets significantly in the coming years; (15) both these actions may increase contracting actions and the need for effective contract administration and audits; and (16) as DOD seeks to reengineer and streamline its contracting and acquisition processes, including contract administration and audit, new business process techniques will be key to accomplishing effective and efficient oversight in the future.

Below are the reports in this series:

High-Risk Series: An Overview HR-97-1, Feb 1, 1997

High-Risk Series: Quick Reference Guide HR-97-2, Feb 1, 1997

High-Risk Series: Defense Financial Management HR-97-3, Feb 1, 1997

High-Risk Series: Defense Contract Management HR-97-4, Feb 1, 1997

High-Risk Series: Defense Inventory Management HR-97-5, Feb 1, 1997

High-Risk Series: Defense Weapon Systems Acquisition HR-97-6, Feb 1, 1997

High-Risk Series: Defense Infrastructure HR-97-7, Feb 1, 1997

High-Risk Series: IRS Management HR-97-8, Feb 1, 1997

High-Risk Series: Information Management and Technology HR-97-9, Feb 1, 1997

High-Risk Series: Medicare HR-97-10, Feb 1, 1997

High-Risk Series: Student Financial Aid HR-97-11, Feb 1, 1997

High-Risk Series: Department of Housing and Urban Development HR-97-12, Feb 1, 1997

High-Risk Series: Department of Energy Contract Management HR-97-13, Feb 1, 1997

High-Risk Series: Superfund Program Management HR-97-14, Feb 1, 1997

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