Procurement

In response to a congressional request, GAO analyzed the seven multiyear procurement candidates proposed in the Department of Defense's (DOD) fiscal year 1987 budget request and two candidates proposed by the Army in 1985, to determine if they met the established criteria to ensure a reasonable balance of benefits and risks.

GAO found that, although DOD projections of annual and multi-year contract costs are normally budgetary quality estimates, for several years the program office assumed a desirable cost level for multiyear contracting and deducted that amount from the programs' baseline cost estimates. Since DOD made no attempt to determine the extent to which multiyear contracting could have reduced costs, GAO believes that these estimates could be inaccurate. All of the current multiyear candidates were relatively mature production programs with stable requirements and high military priorities and, with most of the planned test and evaluations completed, there were no outstanding testing issues. While only a small amount in additional obligational authority would be required, the total authority DOD requested represented an increase of about $1.5 billion over the amounts appropriated for the same programs in 1986, and was due to planned increases in production. GAO believes that strict adherence to the two-step congressional approval process, where authorizations and appropriations are tentative and contract approvals are reserved until negotiated prices are analyzed and proposed savings are validated, is an appropriate way to ensure the integrity of the process.