Environmental Cleanup

Unresolved Issues in Reimbursements to DOD Contractors Gao ID: T-NSIAD-93-12 May 20, 1993

Fifteen of the Defense Department's (DOD) largest contractors estimate that their future environmental cleanup costs will total $2.1 billion. Much of this amount could apply to non-government business, but DOD's liability could still be substantial. Because DOD does not routinely collect information on its projected costs from these contractors, it cannot properly budget for future costs of contracts for goods and services. Although DOD has said that contractors do not receive profits on their reimbursements, in some cases DOD has included such profits. DOD is also starting to pay for contractors' cleanup costs directly. In one case, the Navy agreed to indemnify contractors for cleaning up hazardous material. The Army has similar clauses in other contracts, potentially creating additional cleanup cost liabilities.

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