Contract Pricing

Defective pricing is a persistent problem that has caused the prices of defense contracts to be overstated by billions of dollars. The Defense Contract Audit Agency (DCAA) audited contracts totaling $443 billion in fiscal years 1987-91 and reported $3.67 billion in defective pricing. GAO's analysis of the DCAA data shows that defective pricing is concentrated among a small pool of contractors. For the five-year period, about six percent of the contractors audited accounted for 80 percent of the defective pricing. For fiscal years 1990-91, GAO's analysis shows that about seven percent of the contractors audited accounted for 86 percent of the defective pricing.

GAO found that: (1) defective contract pricing continues to be a persistent problem and causes defense contract prices to be overstated by billions of dollars; (2) between 1987 and 1991, DCAA audited 8,566 prime contracts and 1,053 subcontracts and found defective pricing totalling $3.67 billion; (3) defective pricing costs decreased from $896.6 million in 1990 to $730.7 million in 1991; (4) between 1987 and 1991, 6 percent of defense contractors were responsible for 80 percent of the $3.67 billion total in defective pricing; and (5) for fiscal years 1990 and 1991, 7 percent of the contractors were responsible for 86 percent of the defective pricing reported by DCAA.