Procurement

Pursuant to a congressional request, GAO reviewed six systems that the Department of Defense (DOD) proposed for multiyear procurement in its fiscal year (FY) 1991 budget request to determine whether the systems met the legislative criteria for multiyear contracts.

GAO found that none of the six systems met all of the multiyear procurement criteria requiring: (1) realistic estimated contract costs and projected savings; (2) stable minimum requirements regarding quantity, production rate, and procurement rate; (3) reasonable expectation that DOD would request funding to carry out the contract; and (4) design stability. GAO also found that: (1) multiyear procurement presented such potential benefits as cost savings and improved contractor productivity; (2) multiyear procurement presented such disadvantages as increased costs in the case of changed or terminated requirements and decreased budget flexibility; (3) of the 68 multiyear procurements DOD proposed from FY 1986 through FY 1990, Congress approved 32; (4) for the 32 approved procurements, DOD awarded 24 contracts; and (5) DOD subsequently terminated two awarded multiyear contracts, with an estimated cancellation cost of $13 million.