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Highlights

GAO reviewed the Department of Defense's (DOD) use of major weapon system warranties, focusing on whether these warranties: (1) provide expected benefits to the government; and (2) are compatible with the weapon systems acquisition process.

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Recommendations

Matter for Congressional Consideration

Matter Status Comments
Since DOD continues to have problems administering weapon system warranties and the warranties provide minimal benefits for the costs incurred, Congress should repeal 10 U.S.C. 2403. Were the warranty requirement repealed, DOD and the services would still have management flexibility to obtain warranties for major weapon systems only when deemed appropriate. As was done prior to the warranty law, DOD and the services would rely on the Federal Acquisition Regulations and their own policies to determine when it is appropriate to obtain a weapon system warranty. The decision should be documented as part of the system acquisition strategy.
Closed - Implemented
The fiscal year 1998 Defense Authorization Act repealed 10 U.S.C. 2403.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 1. The Secretary of Defense should establish an expedited waiver process that limits the disincentives inherent in the current process.
Closed - Implemented
DOD's Director of Defense Procurement issued a memorandum to the military departments emphasizing the need to use waivers when appropriate. In addition, the military departments were asked to review their waiver process to ensure that it is efficient.
Department of Defense 2. The Secretary of Defense should revise DOD acquisition policies to adequately manage those warranties that the military services determine should be obtained. Consideration should be given to requiring that all weapon system warranties be separately priced in order to allow meaningful cost-benefit analyses.
Closed - Implemented
DOD does not agree with the necessity for separately pricing warranties.
Department of Defense 3. The Secretary of Defense should revise DOD acquisition policies to adequately manage those warranties that the military services determine should be obtained. Consideration should be given to improving cost-benefit analyses through more realistically reflecting the likelihood of claim submission, performing present value analyses, and including the government's administrative costs.
Closed - Implemented
DOD's Director of Defense Procurement issued a memorandum to the military departments emphasizing the need to perform proper cost-benefit analyses on warranties.
Department of Defense 4. The Secretary of Defense should revise DOD acquisition policies to adequately manage those warranties that the military services determine should be obtained. Consideration should be given to ensuring that the services enforce the regulations requiring post-award assessments of weapon system warranties so that the services will know why these warranties were or were not beneficial to the government.
Closed - Implemented
DOD's Director of Defense Procurement issued a memorandum to the military departments emphasizing the need for in-process and post-assessments of warranties.
Department of Defense 5. The Secretary of Defense should direct the Secretaries of the Air Force and the Navy to revise their regulations to require a final payoff assessment for weapon system warranties as the basis for purchasing more beneficial follow-on warranties and building industrial knowledge for procuring and administering effective warranties.
Closed - Implemented
DOD does not plan to require the military departments to revise their regulations. DOD believes that the current regulations are adequate. However, DOD will emphasize the importance of post-award assessments in its planned memorandum to the military departments.

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