Government Contracting:

Selected Review of Defense Contractor Profitability

NSIAD-87-195BR: Published: Sep 2, 1987. Publicly Released: Sep 23, 1987.

Additional Materials:


Office of Public Affairs
(202) 512-4800

In response to a congressional request, GAO: (1) provided data on the profitability of specific product categories within the defense industry; (2) assessed the Department of Defense's (DOD) interim profit policy; and (3) assessed the proposed Profitability Reporting Program.

GAO found that: (1) DOD profit calculation and asset valuation were inconsistent with conventional accounting and finance methods; (2) this inconsistency resulted in the underestimation of defense contractors' profits; and (3) the DOD interim profit policy to reduce overall profit by 1 percent would not achieve the goal of approaching comparability with durable goods. GAO also found that: (1) the improper DOD accounting and finance methodology would actually defeat its objective of reducing contract profits; and (2) profit margins on defense contracts in 1985 jumped to 13 percent of costs rather than the intended 11.3 percent. GAO noted that its proposal for a Profitability Reporting Program would: (1) provide reliable data to monitor contractor projects and investments; (2) provide a basis for comparative studies; and (3) establish a reliable basis for modifying profit policy.

Nov 24, 2020

Nov 23, 2020

Nov 18, 2020

Nov 16, 2020

Oct 7, 2020

Sep 25, 2020

Sep 23, 2020

Sep 10, 2020

Looking for more? Browse all our products here