Contract Management:

DOD Begins New Effort to Improve Reporting of Contract Service Costs

NSIAD-00-29: Published: Oct 13, 1999. Publicly Released: Oct 13, 1999.

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Louis J. Rodrigues
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Pursuant to a congressional request, GAO provided information on the actions taken by the Department of Defense (DOD) to improve the accuracy of its cost reporting for contract services.

GAO noted that: (1) DOD has taken a number of steps intended to improve the accuracy of costs reported for contract services but recognizes more needs to be done; (2) in an effort to achieve greater accuracy and consistency in reporting costs Department-wide, in November 1998 it provided guidance to the military services and Defense agencies on identifying and reporting contract service costs; (3) this guidance included specific examples of the types of services that DOD had determined were being erroneously included in the miscellaneous service category, along with direction on the correct category in which to report those services; (4) for example, it stated that environmental restoration and pollution prevention costs were not to be reported in the miscellaneous category but rather in the land and structure category; (5) following this guidance, DOD reported that the military services and Defense agencies realigned about $30 billion of the fiscal year 1998 costs that had been incorrectly reported in the miscellaneous service category to other categories they determined were more appropriate; (6) despite these efforts, DOD officials stated that they could not ensure the accuracy of the classification of contract service costs reported for advisory and assistance services because of inconsistencies in reporting by the military services; (7) in its 1999 report to Congress, the Department also expressed concern about the difficulty in distinguishing between advisory and assistance services and other contract service costs and recommended revising the way contract service costs are reported; (8) DOD recommended that they identify what the contract service supports rather than identifying the type of service provided such as advisory and assistance services; (9) DOD's recommendation, as presented in its report, would represent a major change in how contract service costs are reported; and (10) the change may not provide the visibility Congress desires over contract services, if all contract service costs are classified according to what they support rather than the type of service provided, DOD, however, has not provided specific details regarding this recommendation, and according to officials in the Office of the Secretary of Defense, the Department does not expect to provide such details until the spring or summer of 2000.

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