Need to Prevent Department of Defense from Paying Some Costs for Aircraft Engines That Contractors Should Pay

PSAD-77-57: Published: Feb 28, 1977. Publicly Released: Feb 28, 1977.

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The Department of Defense (DOD) needs to tighten its controls over the allowability on government contracts of certain technical costs incurred by aircraft manufacturers. Four manufacturers of aircraft or engines were investigated to determine whether the government was paying more than its appropriate share of such costs.

Some contractors are using independent research and development (IR&D) funds for questionable purposes. Technical work known as production support to bring products in use up to specifications has been charged to IR&D. GAO believes such costs should be paid by the company. Because of the difficulty in obtaining records and the questionable adequacy of records provided by the contractors, DOD will have to modify its planned questionnaire to allow government access to commercial records to verify the certified data and obtain other data not covered in the questionnaire.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: DOD should monitor the revision of the Armed Services Procurement Regulation (ASPR) to ensure that contractors and government employees have a clear definition of IR&D that excludes commercial product support, and technical work implicitly required to fulfill a purchaser's contract requirement. The questionnaire project should be monitored to ensure that government reviewers will be able to verify the allowability of costs. Otherwise, ASPR should require that advance IR&D agreements permit government review of commercial records. Contractors should be required to keep records in enough detail to allow evaluators to determine whether IR&D charges are allowable.

    Agency Affected:


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