DOD Guidance on the Combined Procurement Procedure Needs Provisions for Audit Verification

NSIAD-85-112: Published: Jul 8, 1985. Publicly Released: Jul 8, 1985.

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GAO reviewed existing and proposed Department of Defense (DOD) guidance, DOD and contractor audit reports, and Navy and contractor procurement records on the use of the combined procurement procedure to order spare parts and production components for weapon systems to determine whether DOD guidance was adequate to ensure that savings from the procedure were being realized.

GAO noted that DOD drafted an instruction on the procurement procedure which: (1) made it mandatory that the combined procurement procedure be considered in acquiring spare parts and production components; (2) expressed a preference for acquiring spare parts directly from subcontractors because of the expectation of prime contractor surcharges; and (3) required that prime contractors furnish DOD with information on the timing of its orders for production components. GAO found that: (1) the Navy did not have a systematic approach for verifying that the manufacturers actually were combining orders for pricing purposes; (2) the benefits of the combined procurement procedure would be enhanced if audit verification requirements were added to the proposed DOD instruction; and (3) DOD procurement offices must furnish the Defense Contract Audit Agency (DCAA) with information on the numbers, dates, and quantities of all the orders to be combined, rather than just information on the DOD order being audited.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: Revised DOD Instruction 4245.12 incorporates the recommendation. It has been approved and is scheduled for publication in January 1987.

    Recommendation: The Secretary of Defense should add provisions to the proposed DOD instruction or to other guidance on the combined procurement procedure that would require that whenever DCAA is requested to audit a proposal that it be provided the necessary information to verify that orders are combined for pricing purposes.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DCAA was requested to verify that the F/A-18 manufactures are combining, or not combining, orders for pricing purposes on July 1, 1985.

    Recommendation: The Secretary of Defense should direct the Secretary of the Navy to ask DCAA, as part of its normal audit work, to verify that the F/A-18 manufacturers are combining orders for pricing purposes.

    Agency Affected: Department of Defense


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