Federally Funded R&D Centers

Use of Fee by the MITRE Corporation Gao ID: NSIAD-96-26 November 27, 1995

The Defense Department (DOD) spent $1.25 billion in 1995 for research, development, engineering, and analytical services from the 10 federally funded research and development centers it sponsors. The MITRE Corporation is one of the largest centers, with 1995 DOD funding of $374 million. Congress has raised concerns about whether government agencies effectively manage the centers they sponsor. Among the concerns is whether the contract fees provided to the centers--in addition to reimbursement of incurred costs--are adequately justified. This report reviews (1) the manner in which MITRE spends its DOD management fee, (2) the adequacy of federal guidance on how fees may be used, (3) opportunities to reduce management fees at MITRE, (4) ways to strengthen DOD management oversight of MITRE's use of fees, and (5) DOD's efforts to improve the fee management process for its centers.

GAO found that: (1) neither the Office of Management and Budget nor DOD has prepared sufficient guidance on negotiating FFRDC contract fees; (2) consequently, recurring questions are raised about Mitre's use of fees, as well as the use of fees by other DOD FFRDC; (3) the services have delayed providing contract funding at the start of a fiscal year; (4) consequently, Mitre has needed large amounts of fee to cover interest expenses; and (5) DOD oversight of contract fees has not ensured that fee awards to Mitre are reasonable and consistent.

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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