Allegations of Contract Buy-In and Substantial Cost Increases in the Navy's Standard Automated Financial System

In response to a congressional request, GAO reviewed allegations made regarding the Navy's Standard Automated Financial System that: (1) the contractor "bought in" on the contract; (2) the Navy had decided to proceed with the project even though costs have substantially increased; and (3) project costs may increase to $200 million.

GAO did not find sufficient evidence to conclude that the contractor purposely made a low offer knowing that future modifications would be required and could be used to make up the understated amount. However, GAO found that project and contract costs have increased substantially because the original design concept was expanded, certain costs were not included in the original estimates, and the system's complexity was initially underestimated by both the contractor and the Navy. GAO also found that the Navy's decision to proceed with the project was based on mission needs, contractor commitments, and Navy project management improvements. The contracting officer felt that these factors outweighed concern over increased costs. Although GAO could not substantiate the allegation that project costs may rise to $200 million, GAO believes that the costs are susceptible to future increases because the Navy does not have specific cost containment plans.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: William S. Franklin Team: General Accounting Office: Information Management and Technology Division Phone: (202) 512-6234