Contract Pricing: Defense Subcontract Cost-Estimating Problems Are Chronic and Widespread
NSIAD-91-157
Published: Mar 28, 1991. Publicly Released: May 22, 1991.
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Highlights
Pursuant to a congressional request, GAO evaluated the Defense Contract Audit Agency's (DCAA) assessments of contractor estimating systems, focusing on: (1) subcontractor cost estimates; (2) corrections to subcontract estimating deficiencies; and (3) Department of Defense (DOD) administrative contracting officers' enforcement against contractors that did not comply with the revised cost-estimating regulation. GAO also conducted a case study on DOD vulnerability to excessive costs due to subcontract estimating problems.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should designate subcontract pricing as a material internal management control weakness in accordance with the Federal Managers' Financial Integrity Act of 1982 (FMFIA). This designation would increase the public accountability of DOD managers and motivate them to establish or strengthen controls in an area where significant overpayments have occurred. |
Closed – Implemented
Based on its evaluation of the 42 contractors with inadequate estimating systems, DOD has taken a number of actions to ensure that those systems will provide accurate, complete, and timely information. DOD does not believe this problem supports designating subcontract pricing as a material internal control weakness.
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| Department of Defense | The Secretary of Defense should encourage stronger use of all existing regulatory sanctions to bring about improvements in contractor estimating systems and protect against fraud, waste, and mismanagement. |
Closed – Implemented
The Defense Logistics Agency issued directives to the commanders of the Defense Contract Management districts highlighting the problems pointed out in the GAO reports and requiring the commanders to become personally involved in ensuring that DOD regulations are followed and that contractors take action to correct deficiencies and inform higher-level management if corrections are not made.
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Topics
Contract administrationContract costsDefense cost controlDefense procurementDepartment of Defense contractorsIrregular procurementNoncomplianceProcurement regulationsRisk managementSubcontractors