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Defense Contractor Cost Estimating Systems

NSIAD-87-140: Published: Jun 3, 1987. Publicly Released: Jun 3, 1987.

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GAO reviewed defense contractors' estimating systems to determine whether they produced accurate and reliable materiel cost estimates.

GAO found that: (1) contractors were not providing Department of Defense (DOD) contracting officers with reliable materiel cost estimates; (2) contracting officers rely extensively on contractor estimates in awarding noncompetitive contracts; (3) current procurement regulations do not require contractors to maintain adequate estimating systems; and (4) the Air Force and the Defense Contract Audit Agency proposed amendments to the Federal Acquisition Regulation that would allow contracting officers to disapprove contractor estimating systems and require them to decrease contract prices in the event of estimation errors.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD regulations on contractor cost-estimating systems were revised on March 18, 1988, to clearly define an acceptable system and provide authority and guidance for resolving deficient systems.

    Recommendation: The Secretary of Defense should direct DOD personnel to assemble and refine standards which clearly define what constitutes an acceptable estimating system.

    Agency Affected: Department of Defense


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