Contract Pricing

As part of the overall military downsizing, the Defense Contract Audit Agency's (DCAA) staffing has been cut significantly--from a peak of about 7,000 positions in fiscal year 1990 to 5,650 positions in fiscal year 1993. For fiscal year 1994, the President has proposed an increase of about 70 positions at the agency. DCAA must have adequate resources to protect the government from overpriced contracts. GAO believes that the debate over DCAA staffing levels must take into account the following: (1) ensuring adequate review of subcontractors for defective pricing, (2) ensuring that the government is protected from unnecessary contractor overhead costs, (3) reducing the huge backlog of audits of contractor incurred costs, and (4) ensuring adequate levels of transaction testing--tracing expenditures back to supporting documentation and evaluating their allowability--to spot unallowable contractor cost submissions.

GAO found that: (1) between 1990 and 1993, DCAA has reduced its staffing levels from 7,030 work years to 5,650 work years; (2) the President's 1994 proposed funding level would increase DCAA staffing by 70 work years; (3) although the decline in Department of Defense contracts over $25,000 has reduced the need for some types of DCAA audits, DCAA needs sufficient staff to protect the government from contract overpricing; and (4) several areas of contract risk that DCAA needs to address include reviewing subcontractors' defective pricing, reviewing contractor overhead costs, reducing the audit backlog of contractor-incurred costs, and ensuring adequate levels of transaction testing to detect unallowable contractor cost submissions.