Summary: Pursuant to a congressional request, GAO evaluated the Defense Contract Audit Agency's (DCAA) assessments of contractor estimating systems, focusing on: (1) subcontractor cost estimates; (2) corrections to subcontract estimating deficiencies; and (3) Department of Defense (DOD) administrative contracting officers' enforcement against contractors that did not comply with the revised cost-estimating regulation. GAO also conducted a case study on DOD vulnerability to excessive costs due to subcontract estimating problems.
GAO found that: (1) 83 of 101 contractors that DCAA assessed had subcontract estimating deficiencies that required corrective action; (2) prime contractors failed to adequately conduct or disclose subcontract evaluations, and their bids did not consider likely vendor reductions; (3) 64 of the 83 contractors failed to correct previously identified deficiencies in a timely manner; (4) DOD lacked adequate controls to ensure compliance with regulations on subcontract pricing; (5) DOD administrative contracting officers used sanctions infrequently; and (6) its case study showed overpricing that was equivalent to 75 percent of the amount negotiated in the prime contract.
