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Contractor Overhead Costs: Money Saving Reviews Are Not Being Done As Directed

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Report Type Reports and Testimonies
Report Date Aug. 3, 1994
Report No. NSIAD-94-205
Subject
Summary:

Should-cost reviews are a special form of cost analysis used to evaluate the economy and efficiency of a contractor's overhead operations. Since being told in 1992 to conduct more should-cost reviews, the Defense Department has only done four of them. Furthermore, all four were done by the Air Force rather than the Defense Contract Management Command, the organization primarily responsible for conducting the reviews. Since 1992, the Command has acknowledged the importance of reviews but has not begun any because of the time involved in developing regulations and an approach for performing those reviews. In June 1993, it asked its customers to identify potential candidates for should-cost reviews; they listed 17 candidates. The Command plans to begin one should-cost review in July 1994 and another one after a contractor completes a restructuring action. The Command did not consider the other 15 good candidates for should-cost reviews because of steps these contractors have taken to cut overhead costs.

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