The DOD Application of the Multiyear Contracting Authority Provided Under P.L. 97-86

The Department of Defense (DOD) application of multiyear contracting authority, as provided under P.L. 97-86, was discussed. In its previous testimony on the same subject, GAO supported careful and prudent use of multiyear contracting for major system acquisition. At that time GAO differentiated between multiyear contracts for supplies and services as opposed to major weapon systems. GAO stated that major weapon programs required comprehensive and sophisticated planning by DOD, its prime contractors, and their subcontractors. GAO remains convinced that multiyear contracting, where appropriate, offers substantial advantages over annual contracting. However, a cautious approach should be taken in applying it to major weapon systems. The criteria established in P.L. 97-86 to guide agency heads in selecting multiyear contract candidates, coupled with reporting requirements and expanded criteria set forth in the 1982 Defense Appropriations Act, addressed these concerns. GAO analyzed the DOD proposed fiscal year 1983 weapon system multiyear candidates for compliance with the prescribed criteria. GAO found that, while the criteria are sufficiently broad to allow discretion and judgment in their application, there are some questions that need to be clarified before sound judgments can be made on the proposed multiyear contract candidates for major weapon systems. A creditable estimate of savings to be achieved through multiyear contracting generally cannot be made without the benefit of firm proposal data from contractors on both a multiyear and an annual basis. DOD estimated savings for fiscal year 1983 were based primarily on budgetary data. Resolution of this problem will probably require authority to solicit proposals on both a multiyear and an annual contract basis, with the ultimate decision reserved until the firm proposal data are analyzed.