Summary: GAO reviewed the adequacy of the Department of Defense's (DOD) Industrial Modernization Incentives Program (IMIP) test and resulting draft guidance. Through IMIP, DOD provides contractors incentives to invest in capital equipment and manufacturing processes in order to lower costs of weapons systems and improve the industrial base. The Deputy Secretary of Defense established a steering group to direct and monitor a test of IMIP and develop program policy and guidance based on an assessment of the services' experience.
GAO found that: (1) although IMIP has demonstrated the potential for reducing acquisition costs and providing other benefits, visibility and accountability will continue to be hampered unless there is a uniform system for reporting actual and projected benefits and guidance is developed to incorporate projected benefits into budget and cost estimates; (2) although the steering group developed draft policy guidance, which adequately discussed management issues, additional clarification of the impact, results, and intent of various options will help to ensure that IMIP achieves the maximum benefit for the least cost; and (3) the development of programming and planning structures for identifying areas in the industrial base, where problems may arise in meeting future defense requirements, needs further development to ensure that IMIP achieves the maximum benefit for DOD.
