Contract Pricing

Defense Subcontract Cost-Estimating Problems Are Chronic and Widespread Gao ID: NSIAD-91-157 March 28, 1991

Pursuant to a congressional request, GAO evaluated the Defense Contract Audit Agency's (DCAA) assessments of contractor estimating systems, focusing on: (1) subcontractor cost estimates; (2) corrections to subcontract estimating deficiencies; and (3) Department of Defense (DOD) administrative contracting officers' enforcement against contractors that did not comply with the revised cost-estimating regulation. GAO also conducted a case study on DOD vulnerability to excessive costs due to subcontract estimating problems.

GAO found that: (1) 83 of 101 contractors that DCAA assessed had subcontract estimating deficiencies that required corrective action; (2) prime contractors failed to adequately conduct or disclose subcontract evaluations, and their bids did not consider likely vendor reductions; (3) 64 of the 83 contractors failed to correct previously identified deficiencies in a timely manner; (4) DOD lacked adequate controls to ensure compliance with regulations on subcontract pricing; (5) DOD administrative contracting officers used sanctions infrequently; and (6) its case study showed overpricing that was equivalent to 75 percent of the amount negotiated in the prime contract.

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.

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