Contract Pricing: Competitive Subcontract Price Estimates Often Overstated
NSIAD-91-149
Published: Mar 20, 1991. Publicly Released: May 22, 1991.
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Highlights
Pursuant to a congressional request, GAO analyzed the subcontract costs negotiated in four Department of Defense (DOD) contracts awarded to a single firm.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should ensure that contracting officers determine whether contractors have a practice of providing competitive subcontractor prices for the purpose of negotiating the prime contract and subsequently obtaining lower prices for the purpose of buying the material. Where this practice exists, contracting officers should be required to obtain historical data on purchases from vendors. When that information shows substantially lower subcontract prices than what were proposed, contracting officers should take appropriate actions to negotiate reductions to proposed prices. |
The DOD Director of Defense Procurement issued guidance stating that DCAA auditors are required to provide historic vendor data to contracting officers and inform them when that data pertains to competitive quotes so that they can take appropriate action to negotiate reductions to proposed prices. Issuing guidance is the first step to ensuring that improvements will be achieved.
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Topics
Competitive procurementContract costsContract negotiationsDefense procurementDepartment of Defense contractorsIrregular procurementPrime contractorsQuestionable procurement chargesRisk managementSubcontractors