Contract Pricing:

Reasons for the Decline in Reported Defective Pricing

NSIAD-94-144BR: Published: Apr 11, 1994. Publicly Released: May 11, 1994.

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Pursuant to a congressional request, GAO reviewed the Department of Defense's (DOD) detection of defective contract pricing, focusing on the reason for the decline in defective pricing between fiscal years 1990 and 1992.

GAO found that: (1) the Defense Contract Audit Agency (DCAA) reported that defective contract pricing declined from $919.3 million in fiscal year (FY) 1990 to $273.4 million in FY 1992; (2) there was a decline in reported defective pricing because the number of contracts available for DCAA to audit declined, new or revised DCAA audit procedures reduced the dollar amounts reported as defective pricing, and improved cost-estimating systems enabled DOD contractors to provide more accurate estimating information; (3) the improved contractor cost-estimating systems reduced the risk of defective pricing; and (4) DCAA believes that the decline in defective pricing was due more to the low volume of DOD contracting and audit activity rather than contractors' improvements.

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