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Overhead Costs: Defense Industry Initiatives to Control Overhead Rates

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Report Type Reports and Testimonies
Report Date May 3, 1995
Report No. NSIAD-95-115
Subject
Summary:

Senior Pentagon officials have expressed concern that contractor overhead rates may drive up procurement costs as a result of declines in Defense Department spending. Declining defense spending since the late 1980s has reduced sales by defense contractors and has reduced the business bases against which they charge overhead. This report reviews (1) initiatives taken by six individual business units of large defense contractors--General Dynamics, General Motors, Lockheed, Martin Marietta, McDonnell Douglas, and United Technologies--to reduce overhead costs and (2) the issue of whether the units' actions would avoid increases in overhead rates.

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