Environmental Cleanup:

Observations on Consistency of Reimbursements to DOD Contractors

NSIAD-93-77: Published: Oct 22, 1992. Publicly Released: Oct 28, 1992.

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Peter F. Guerrero
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Pursuant to a congressional request, GAO provided information on the Department of Defense's (DOD) reimbursement of defense contractors' environmental clean-up costs.

GAO found that: (1) DOD reimbursed contractors through overhead amounts in prime contracts, subcontracts, and a negotiated settlement; (2) decisions on reimbursement varied from complete denial to reimbursement in proportion to the government's share of a company's business; (3) contracting officers varied widely in the extent of investigations into possible wrongdoing by contractors; (4) federal acquisition laws, regulations, and policies do not provide specific guidance to decisionmakers on how to treat environmental clean-up costs; and (5) the varied types of reimbursements made in the cases examined may not be enough to prevent continued inconsistent reimbursement decisions.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: DOD agreed that the draft environmental cost principle should be published as a proposed rule when the moratorium on issuing regulations is lifted. DOD believed, however, that the policy questions raised by GAO would be adequately addressed by the new cost principle, working in combination with existing procurement regulations. In late 1994, DOD stated that no action could be taken pending completion of congressional decision on proposed legislation. As of August 1995, DOD had not taken further action toward establishing the environmental cost principle. Although GAO closed this recommendation, ongoing audits continue to address environmental cleanup and cost issues.

    Recommendation: The Secretary of Defense should direct the Under Secretary of Defense for Acquisition to expand the guidance currently being considered by DOD to include the varied types of reimbursements encountered in the claims from its contractors.

    Agency Affected: Department of Defense


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