To meet urgent needs, the Department of Defense (DOD) can issue undefinitized contract actions (UCA), which authorize contractors to begin work before reaching a final agreement on contract terms. The contractor has little incentive to control costs during this period, creating a potential for wasted taxpayer dollars. Pursuant to the House of Representatives report on the National Defense Authorization Act for Fiscal Year 2007, we assessed (1) the level of insight DOD has into its use of UCAs, (2) how and when DOD is using UCAs, (3) whether DOD is definitizing UCAs in a timely fashion, and (4) whether contracting officers are documenting the basis for negotiated profit or fee. GAO reviewed 77 randomly-selected contracts at seven locations and interviewed DOD officials.
Recommendations for Executive Action
|Office of Federal Procurement Policy||To improve oversight of UCAs, the Administrator of the Office of Management and Budget's Office of Federal Procurement Policy should assess whether the Federal Procurement Data System-Next Generation data fields need to be modified to require coding that will identify undefinitized task and delivery orders and undefinitized contract modifications.|
|Department of Defense||To improve oversight of UCAs, the Secretary of Defense should issue guidance to program and contracting officials on how to comply with the FAR requirement to definitize when 40 percent of the work is complete.|
|Department of Defense||To help ensure that UCAs are definitized in accordance with regulations, the Secretary of Defense should put in place a reporting channel to headquarters that includes information on UCAs in place for 180 days or more and that outlines plans and time frames for definitization.|
|Department of Defense||To help ensure that UCAs are definitized in accordance with regulations, the Secretary of Defense should supplement acquisition personnel on an as-needed basis to quickly definitize UCAs once they are awarded.|
|Department of Defense||To mitigate the risks of paying increased costs under UCAs, the Secretary of Defense should set forth supplemental guidance to direct contracting officers, where feasible, to obligate less than the maximum allowed at UCA award to incentivize contractors to expedite the definitization process.|
|Department of Defense||To mitigate the risks of paying increased costs under UCAs, the Secretary of Defense should set forth supplemental guidance to specify that the effect of contractor's reduced risk during the undefinitized period on profit or fee be documented in the price negotiation memorandum or its equivalent.|