Better Management Needed in DOD To Prevent Fraudulent and Erroneous Contract Payments and To Reduce Real Property Maintenance Costs

PSAD-80-14: Published: Jan 9, 1980. Publicly Released: Jan 9, 1980.

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The Department of Defense (DOD) says it is providing the maximum maintenance, repair, and minor constuction of its real property possible with the resources available; about half of the work is accomplished through contracts. Valid maintenance requirements have been identified faster than funds become available. As a result, the backlog of work not done was due to a lack of resources.

At 10 Army, Navy, and Air Force installations, GAO found that some contractors had been substantially overpaid. Because the installations' inspection and payment verification procedures were inadequate, they paid for work not done, for inferior quality work, and for the same work more than once. Effective inspection procedures and internal control could have prevented or provided early detection of these overpayments. Most overpayments occurred on "unit price" contracts. Since these contracts often require physically measuring the quantity of work done, they are more difficult to administer and more susceptable to intentional or unintentional overcharges than lump-sum contracts which provide fixed prices for specific jobs. Military installations could further reduce maintenance and repair costs by improving their contracting methods and procedures.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Secretary of Defense should see that the Secretaries of the Army, Navy, and Air Force strengthen controls over the procurement of maintenance and repair services. Each service should: (1) encourage the use of lump-sum contracts whenever practicable and economically advantageous; (2) ensure that sufficient numbers of adequately trained personnel are assigned to the inspection and contract administration functions; (3) require that detailed inspection records, including measurements and calculations, be maintained in support of contract payments; (4) require routine, independent tests of each inspector's work; (5) ensure that proposed work is adequately planned before contract award; (6) strive to eliminate unbalanced bidding by improving requirements forecasts and/or by utilizing contracting methods or bid evaluation techniques which are not susceptible to unbalanced bidding; and (7) continue to devote a portion of internal audit effort to local procurement activities.

    Agency Affected:


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