Summary: GAO discussed H.R. 3020, the War Profiteering Prohibition Act of 1985, a bill to revise and reinstate the Renegotiation Act of 1951. GAO noted that the net value of Department of Defense (DOD) contracts had risen to $131 billion in 1985, raising concerns about the fairness and equitableness of contractor profits since they have a significant effect on the defense industrial base. GAO stated that, rather than reinstating the Renegotiation Act, Congress should enact legislation requiring periodic studies of contractor profit through a mandatory reporting system in order to: (1) provide contractors with an appropriate profit level; and (2) use the data for a prospective approach to adjusting contractor profit. The fundamental areas to be addressed in these studies would be: (1) the actual profits earned and the level of investment under defense contracts; (2) comparison of the defense contractors' profitability and investment behavior with the private sector; and (3) whether variations between the profitability of defense contracts and other industries are justified. GAO believes that this would enable DOD to monitor profits on a continuing and timely basis and make the the policy adjustments necessary to ensure that profits remain at reasonable levels.
