Review of In-House Versus Contract Costs for Activities at the Naval Weapons Center, China Lake, CA

GAO discussed the results of work it performed concerning the procedures used by the Naval Materiel Command (NMC) appeals team in reversing an earlier decision made by the Naval Weapons Center (NWC) to perform various activities at an NWC facility in-house rather than by contract. The original decision was appealed by the contractor submitting the low bid and, in the appeals process, it was reversed by NMC, because it was determined that contracting for services would have been the least costly method. GAO focused primarily on areas involving large cost adjustments, such as one-time conversion costs, escalation costs, and general and administrative expenses. It found that, in several instances, NMC improperly discounted and corrected NWC judgmental decisions and interpretations. NMC also did not always consult with expert personnel in making its determinations. Further, GAO found that, although NMC followed appeals procedures, several of its administrative practices were questionable. GAO concluded that the NWC position was reasonable.