Government Contracting:

Proposed Regulation Would Limit DOD's Ability to Review IR&D/B&P Program

NSIAD-92-265: Published: Sep 24, 1992. Publicly Released: Sep 24, 1992.

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Pursuant to a congressional request, GAO examined the effect of recent legislation regarding the Department of Defense's (DOD) reimbursement of contractors for their independent research and development and bid and proposal (IR&D/B&P) projects, focusing on whether: (1) DOD had adequate financial and technical data to assess the legislation's impact; and (2) the legislation would reduce administrative costs.

GAO found that: (1) DOD has historically negotiated a ceiling for contractors' IR&D/B&P costs and conducted extensive technical reviews of their programs, and the Defense Contract Audit Agency (DCAA) prepared an annual financial report; (2) recent legislation provides for gradually removing those limitations, and DCAA informed DOD that it no longer plans to prepare the financial report; (3) to implement the legislation, DOD proposed regulations for an annual DOD-wide report on the IR&D/B&P program and for contractors to provide brief technical descriptions of their IR&D/B&P projects; (4) the proposed regulations are vague as to statistical information requirements, and without the DCAA annual report, DOD managers will not have sufficient data to monitor ceilings, assess the budgetary impact of removing ceilings, identify overall expenditure increases, or compare contractors' IR&D and B&P expenditures; (5) the recent legislation is not likely to meet its intentions to reduce administrative costs since the government must still determine the reasonableness of IR&D/B&P costs and since contractors must still provide the government with technical information to monitor the defense industrial base; and (6) although DOD maintains a database to reflect information on contractors' IR&D projects, the military services did not consider the database sufficient or timely and created their own databases.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: In response to the recommendation, DOD has instructed DCAA to resume preparation of an annual Independent Research and Development Bid and Proposal Statistical Report.

    Recommendation: The Secretary of Defense should direct DCAA to resume preparing the annual financial report on contractor IR&D/B&P expenditures and reimbursements.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: DOD has taken action that will eliminate the root causes of database duplication.

    Recommendation: The Secretary of Defense should ensure that duplicate technical databases are eliminated.

    Agency Affected: Department of Defense


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