An Assessment of the Army's Multiple Launch Rocket System Multiyear Contract

Gao ID: NSIAD-86-5 October 28, 1985

Pursuant to a congressional request, GAO reviewed the Army's Multiple Launch Rocket System's (MLRS) multiyear contract and the validation of the claimed savings and other benefits to the government.

GAO noted that the Army awarded a multiyear contract with options which extended over a 5-year period, covering fiscal years 1983 through 1987, and contained provisions to purchase materials in advance of annual requirements. GAO found that: (1) the Army improperly exercised the first option for advance material purchases because it resulted in its exceeding the 5-year statutory limit on multiyear contracts; (2) the Army justified its multiyear contract for the MLRS claiming that the contract, with options, would result in $200 million in savings; and (3) the projected savings was based on the difference between the estimated price of seven successive annual contracts and the negotiated value of the multiyear contract. GAO also found that: (1) the Army did not compare the estimated savings of a 5-year multiyear contract without options; (2) a large part of the Army's estimated savings was attributed to the fact that the contractor purchased certain raw materials and components earlier, and in more economical quantities, than it would have under an annual contract; (3) MLRS multiyear contract options reduced, rather than increased, savings because of the early expenditure of funds and the 5-year delay in realizing benefits; and (4) although the contract would likely benefit the government through monetary savings and possible industrial base enhancements, it was impossible to validate whether or to what extent the benefits would broaden the industrial base because the Army did not establish a baseline to measure improvements.

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: Paul F. Math Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 275-4587


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