ADP Systems:

Concerns About DOD's Composite Health Care System Development Contracts

IMTEC-87-25: Published: Jun 8, 1987. Publicly Released: Jun 8, 1987.

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GAO reviewed the Department of Defense's (DOD) award of initial systems development contracts for the acquisition and implementation of the Composite Health Care System (CHCS).

GAO found that: (1) DOD received six proposals for CHCS system development contracts, but it failed to conduct required discussions with offerers, which caused a 3-month program delay and increased costs; (2) DOD did not attempt to resolve certain apparent uncertainties and suspected mistakes in unacceptable proposals because it believed that the proposals could not be made acceptable through further discussions; (3) DOD failed to document discussions with offerers for revised proposals or any agreements reached in contract negotiations; (4) DOD did not consider all relevant cost factors as a result of adding a fourth proposal to the competitive range; (5) changes in the DOD acquisition strategy increased contract costs to $7 million; (6) DOD expected to reduce individual system development costs through cost-sharing arrangements, but did not have a reasonable basis to negotiate a fair cost-sharing agreement because it failed to verify proposed contributions; and (7) greater participation and documentation of discussions with contractors is necessary to achieve full compliance with federal acquisition regulations.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: Although DOD did not finalize the draft procedures it developed, it implemented the procedures correctly during its recent evaluation of competing contractors' proposals and performance. With the completion of its recent evaluation, DOD selected a single contractor to further test and deploy CHCS. Thus, CHCS competition is over and this recommendation is no longer applicable.

    Recommendation: To help ensure that the CHCS acquisition schedule does not outweigh compliance with the Federal Acquisition Regulation in the future, the Secretary of Defense should take affirmative steps to ensure that meaningful discussions are adequately conducted and documented for the balance of the procurement.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: DOD initiated corrective action by requesting a Defense Contract Audit Agency evaluation to determine the value of the cost-sharing arrangements. Corrective action, if any, will be taken as part of contract termination procedures because the vendors whose cost-sharing arrangements were of concern to GAO were unsuccessful in their bid to continue further testing and deployment of CHCS.

    Recommendation: The Secretary of Defense should, with assistance from the Defense Contract Audit Agency, determine the value of cost-sharing arrangements to ascertain whether the government received reasonable value for relinquishing its technical data and computer software rights, and, if necessary, renegotiate these arrangements.

    Agency Affected: Department of Defense


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