Contract Pricing:

Status of DOD Defective Pricing

NSIAD-91-33FS: Published: Jan 15, 1991. Publicly Released: Mar 7, 1991.

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Pursuant to a congressional request, GAO provided information about Department of Defense (DOD) activities' reporting of defective contract prices, due to contractors' failure to disclose accurate, complete, and current cost data, focusing on the: (1) extent to which the activities sustained Defense Contract Audit Agency (DCAA) recommendations to recover overpayments; and (2) DOD Inspector General (IG) role in overseeing the follow-up process.

GAO found that: (1) as of September 30, 1990, the DOD activities reported about $1.7 billion in outstanding defective pricing; (2) DOD sustained $762 million of $1.61 billion questioned in defective pricing reports between September 30, 1987 and September 30, 1990; (3) DOD closed 402 reports and sustained $138 million out of a total $289 million questioned in audit reports between April and September 1990, a 48-percent sustention rate; (4) DOD IG reviewed the activities' semiannual reports as part of its oversight responsibilities; and (5) reasons for activities not sustaining recovery recommendations included legal opinions advising against sustention, global settlement, and contracting officer disagreement with DCAA.

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