Army Procurement:

Defense Logistics Agency's Administration of Contracts for Canteen Cups

NSIAD-88-16: Published: Nov 27, 1987. Publicly Released: Nov 27, 1987.

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In response to a congressional request, GAO reviewed the Defense Logistics Agency's (DLA) practices and procedures for awarding and administering two contracts for canteen cups, to determine the contractor's: (1) capability to perform the contracts; and (2) compliance with the contract terms and conditions.

GAO found that: (1) the preaward survey showed that, although the contractor did not have all the equipment needed to perform the contract, it could acquire the necessary production capability through a subcontractor; (2) DLA was careless in administering the contract, since it failed to timely begin production surveillance; (3) because DLA did not revise the delivery schedule or send a cure notice requiring the contractor to explain the failure to make progress, the government was unable to terminate the contract for default; (4) DLA modified the first contract to extend the delivery date and required the contractor to pay $1,969 for the extension; (5) because another firm filed suit in U.S. District Court to seek relief, the court issued an injunction to halt further work on the second contract until after the investigation; and (6) because the contractor failed to deliver any cups, DLA had to solicit suppliers to satisfy an emergency procurement of the cups, which cost about 34 percent more than the average unit price under the two contracts.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: New delivery schedules were established for both contracts. A cure notice was issued on February 3, 1988. The first contract was terminated for default on July 8, 1988. The second contract was terminated for default on July 19, 1988.

    Recommendation: The Director, DLA, should take action to protect the government's interest against further delays by S. Hanany Metal Craft. If Hanany cannot begin to comply with the delivery requirements of the contracts, DLA should terminate the contracts.

    Agency Affected: Department of Defense: Defense Logistics Agency


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