Pursuant to a congressional request, GAO reviewed the Department of
Defense's (DOD) efforts to ensure that high-risk contractors reduce
the government's vulnerability to contract overpricing, focusing on
the: (1) extent to which contractors are correcting significant
cost-estimating system deficiencies; (2) actions DOD contracting
officers are taking to encourage contractors to improve their
cost-estimating systems; and (3) adequacy of DOD controls to ensure
that deficiencies are timely corrected. GAO found that: (1)
contractors' performance in correcting their significant
cost-estimating system deficiencies has been mixed; (2) 11 of 30
high-risk DOD contractors have significant uncorrected deficiencies
that have been outstanding an average of 3.8 years; (3) the failure
to timely correct estimating deficiencies creates a variety of
problems for DOD, including increased costs and delays in contract
awards; (4) although DOD contracting officers take various actions
to encourage contractors to correct cost-estimating deficiencies,
contracting officers do not use the most stringent measures
available, such as reducing progress payments or recommending
nonaward of future contracts; (5) even when contractors have
long-standing estimating system deficiencies, the Defense Logistics
Agency (DLA) does not attempt to determine the reasons for delays
in correcting the deficiencies or ensure that contractors and DOD
contracting officers are taking all appropriate actions to correct
them; and (6) DLA oversight of contracting officers is important,
since they have considerable latitude in deciding how to obtain
corrective action and DOD does not specify criteria used to
determine timeliness of corrective actions.
General
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