Examination of Selected Provisional Payments on Contracts Administered by DCASR, Dallas

GAO reviewed regulations and supporting documentation pertinent to payments by the Dallas Defense Contract Administration Service on several contracts. GAO visited several contractors to examine supporting documentation for selected vouchers billed to the Government.

On a fixed-price contract, the review disclosed payments based on inadequate substantiating documents and for contractor-acquired or -manufactured parts which, at the time of payment, had been neither acquired nor manufactured. One contractor was billing the Government based on pro forma invoices or his own purchase order, but sometimes waiting long periods to make purchases. Thus, the Government was prematurely paying the contractor for materials to which neither the contractor nor the Government could claim titles. On another occasion, the contractor billed the Government for items they had not yet manufactured; the contractor had not even received several of the raw materials needed to manufacture the items. In addition to paying the contractor for materials neither purchased nor manufactured, the Government was also paying an across-the-board, 15-percent material handling charge on direct material purchases. On a cost-type contract, the contractor repeatedly billed and was reimbursed for direct materials which were actually purchases of consultant labor and equipment. Since the contract did not provide for using consultants or Government-furnished equipment, GAO believes charging these costs to direct materials obscurred the time nature of the total contract costs. GAO believes better controls over provisional payments should be of concern to all the Defense Contract Administration Services.