Acquisition Reform:

Contractors Can Use Technologies and Management Techniques to Reduce Costs

NSIAD-93-125: Published: Jul 15, 1993. Publicly Released: Jul 15, 1993.

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Pursuant to a congressional request, GAO assessed the potential for defense companies to reduce their work-in-process costs through the use of modern manufacturing technologies and innovative management techniques.

GAO found that: (1) the defense companies that significantly reduced work-in-process costs have instituted innovative management techniques that shorten cycle time and make efficient use of inventories; (2) the companies surveyed have adopted new manufacturing technologies and management techniques to protect or increase their market share and improve their long-term financial health; (3) competitive market forces may not be sufficient to motivate defense companies to reduce their costs; (4) defense companies maintain a relatively small financial investment in federal projects than companies that have to obtain private financing; and (5) the Department of Defense (DOD) has established policies and incentive programs to motivate defense companies to achieve cost reductions.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: Action has been taken that should help implement the recommendation. DOD established the Deputy Under Secretary of Defense (Acquisition Reform) to identify and implement ways to improve the acquisition process. In addition, Congress has recently proposed legislation to encourage the use of commercial buying practices that should help move DOD in the right direction.

    Recommendation: The Secretary of Defense should, as part of DOD efforts to reform the defense acquisition system, identify and eliminate to the extent possible the factors that result in defense contractors not incorporating appropriate technologies and management techniques to reduce costs.

    Agency Affected: Department of Defense


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