Contract Pricing: Economy and Efficiency Audits Can Help Reduce Overhead Costs
NSIAD-92-16
Published: Oct 30, 1991. Publicly Released: Oct 30, 1991.
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Highlights
GAO reviewed the Department of Defense's (DOD) use of overhead should-cost reviews, cost monitoring reviews, and operations audits to reduce overhead costs, focusing on the extent to which DOD evaluated the economy and efficiency of contractors' overhead costs.
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | The Secretary of Defense should revise DOD procurement regulations to provide guidance for the use of overhead should-cost reviews. The regulations should include guidance similar to that currently provided for contract should-cost reviews, including criteria to select review sites. |
On June 17, 1994, DOD issued a proposed rule to the DOD FAR Supplement containing criteria and guidance for performing overhead should-cost reviews (Defense FARS case 92-D010).
|
| Department of Defense | The Secretary of Defense should direct the Directors of the Defense Logistics Agency and the Defense Contract Audit Agency to increase the priority of significant cost reduction measures, such as overhead should-cost reviews, cost monitoring reviews, and operations audits. |
By memorandum dated March 31, 1992, DOD directed the Defense Contract Management Command (DCMC) carry out overhead should-cost reviews. In May 1993, DCMC established an agencywide program to analyze, evaluate, assess, and negotiate contractor overhead costs. This effort included overhead should-cost reviews as well as increased emphasis in the areas of cost monitoring plans and forward pricing rate agreements. These actions should satisfy the recommendations.
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Topics
Audit oversightAuditing proceduresContract administrationContract oversightCost analysisDefense auditsDefense cost controlOverhead costsReductions in forceContract management