Defense Contracting: Use of Undefinitized Contract Actions
Understated and Definitization Time Frames Often Not Met
(19-JUN-07, GAO-07-559).
To meet urgent needs, the Department of Defense (DOD) can issue
undefinitized contract actions (UCA), which authorize contractors
to begin work before reaching a final agreement on contract
terms. The contractor has little incentive to control costs
during this period, creating a potential for wasted taxpayer
dollars. Pursuant to the House of Representatives report on the
National Defense Authorization Act for Fiscal Year 2007, we
assessed (1) the level of insight DOD has into its use of UCAs,
(2) how and when DOD is using UCAs, (3) whether DOD is
definitizing UCAs in a timely fashion, and (4) whether
contracting officers are documenting the basis for negotiated
profit or fee. GAO reviewed 77 randomly-selected contracts at
seven locations and interviewed DOD officials.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-07-559
ACCNO: A70985
TITLE: Defense Contracting: Use of Undefinitized Contract
Actions Understated and Definitization Time Frames Often Not Met
DATE: 06/19/2007
SUBJECT: Contract administration
Contract modifications
Contract negotiations
Contracts
Data integrity
Defense cost control
Defense procurement
Department of Defense contractors
Federal procurement policy
Federal regulations
Schedule slippages
GSA Federal Procurement Data System-Next
Generation
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GAO-07-559
* [1]Results in Brief
* [2]Background
* [3]DOD Does Not Know the Full Extent of Its UCA Usage
* [4]Data on UCAs Are Incomplete
* [5]DOD Lacks Centralized Oversight of UCAs
* [6]UCAs Used to Quickly Fill Needs in a Variety of Circumstance
* [7]UCAs Are Awarded for a Variety of Goods and Services
* [8]Local Command Policies Generally Focus on Limiting UCAs
* [9]DOD is Often Not Meeting Definitization Time Frame Requireme
* [10]Most UCAs Were Not Definitized within Required Time Frames
* [11]Delays in Definitization Occur for a Variety of Reasons
* [12]UCAs Are Usually Awarded with Maximum Obligations Allowed
* [13]Requirement to Definitize Before 40 Percent of Work Is Compl
* [14]Little Insight into Whether Reduced Risk Is Taken into Accou
* [15]Conclusions
* [16]Recommendations for Executive Action
* [17]Agency Comments and Our Evaluation
* [18]GAO's Mission
* [19]Obtaining Copies of GAO Reports and Testimony
* [20]Order by Mail or Phone
* [21]To Report Fraud, Waste, and Abuse in Federal Programs
* [22]Congressional Relations
* [23]Public Affairs
GAO
June 2007
United States Government Accountability Office
Report to Congressional Committees
DEFENSE CONTRACTING
Use of Undefinitized Contract Actions Understated and Definitization Time
Frames Often Not Met
GAO-07-559
Contents
Letter 1
Results in Brief 3
Background 5
DOD Does Not Know the Full Extent of Its UCA Usage 6
UCAs Used to Quickly Fill Needs in a Variety of Circumstances 10
DOD is Often Not Meeting Definitization Time Frame Requirements 12
Little Insight into Whether Reduced Risk Is Taken into Account when
Negotiating Profit or Fee 17
Conclusions 19
Recommendations for Executive Action 19
Agency Comments and Our Evaluation 20
Appendix I Scope and Methodology 22
Appendix II Undefinitized Contract Actions Reviewed 25
Appendix III Comments from the Department of Defense 30
Tables
Table 1: Obligations on Undefinitized Task and Delivery Orders during
Fiscal Years 2004-2005 at Locations Visited 9
Table 2: Reasons Cited for Issuance on UCAs Reviewed 11
Table 3: Elapsed Days before Definitization on UCAs Reviewed 13
Table 4: Definitization Delays Cited for UCAs Reviewed 15
Table 5: Range of Negotiated Profit or Fee Rates for UCAs Reviewed 18
Figures
Figure 1: DOD Reported Obligations on Letter Contracts for Fiscal Years
2001-2005 7
Figure 2: DOD Obligations on Task and Delivery Orders for Fiscal Years
2001-2005 8
Figure 3: Average Time Frame for Definitization of UCAs 14
Abbreviations
DFARS Defense Federal Acquisition Regulation Supplement
DOD Department of Defense
FAR Federal Acquisition Regulation
FPDS-NG Federal Procurement Data System--Next Generation
IG Inspector General
OFPP Office of Federal Procurement Policy
UCA Undefinitized Contract Action
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United States Government Accountability Office
Washington, DC 20548
June 19, 2007
The Honorable Carl Levin
Chairman
The Honorable John McCain
Ranking Member
Committee on Armed Services
United States Senate
The Honorable Ike Skelton
Chairman
The Honorable Duncan Hunter
Ranking Member
Committee on Armed Services
House of Representatives
To meet urgent needs, the Department of Defense (DOD) can authorize
contractors to begin work and incur costs before reaching a final
agreement on contract terms and conditions, including price. Such
agreements are called undefinitized contract actions (UCA). The terms and
conditions of UCAs are generally required to be definitized within 180
days, before more than 50 percent of the estimated contract price is
obligated, or before more than 40 percent of the work is completed,
whichever occurs first.^1 Although UCAs may be necessary to support urgent
needs, these actions are not a desirable form of contracting. The
government bears the majority of the cost and risk during the
undefinitized period. The government risks paying increased costs during
this period because the contractor has little incentive to control costs,
creating a potential for wasted taxpayer dollars. Therefore, DOD needs to
ensure that it is using UCAs only when necessary and that these contract
actions are then negotiated as quickly as possible.
The House of Representatives report on the National Defense Authorization
Act for Fiscal Year 2007 required us to review whether DOD is properly
using UCAs and negotiating them on time.^2 Accordingly, we assessed (1)
the level of insight DOD has into its use of UCAs, (2) how and when DOD is
using UCAs, (3) whether DOD is definitizing UCAs in a timely fashion, and
(4) whether contracting officers are documenting the basis for negotiated
profit or fee.
^1The 40 percent requirement as set forth in Federal Acquisition
Regulation (FAR) 16.603-2 (c) (3) applies to letter contracts, one type of
UCA.
^2H.R. Report No. 109-452, p. 353, May 5, 2006.
For the purposes of this report, we define UCAs as including letter
contracts, undefinitized task and delivery orders,^3 and undefinitized
contract modifications (that is, modifications that significantly expand
or otherwise change the scope of the work). To determine the level of
insight DOD has into its use of UCAs, we analyzed information from the DOD
DD350 procurement database and interviewed senior-level acquisition
officials. We also met with officials from the Office of Management and
Budget's Office of Federal Procurement Policy (OFPP) to discuss the data
available for oversight of UCAs. OFPP is responsible for collecting,
developing, and disseminating government procurement data. The most
significant governmentwide data collection tool is the Federal Procurement
Data System-Next Generation (FPDS-NG).^4 To identify how and when DOD is
using UCAs and whether DOD is definitizing these actions in a timely
manner, we reviewed a randomly selected sample of 77 UCAs from the six
military locations that awarded the majority of dollars for letter
contracts during fiscal years 2004 and 2005 and one non military defense
agency that issued several UCAs during that time period. The specific
locations selected for our review were
o Air Force: Aeronautical Systems Center and Warner Robins Air
Logistics Center,
o Army: Aviation and Missile Command and TACOM Life Cycle
Management Command,
o Navy: Naval Air Systems Command and Naval Sea Systems Command,
and
o National Geospatial-Intelligence Agency.
For purposes of this report, we refer to these seven locations as the
local commands.
^3Task and delivery orders are placed against a preexisting contract for
supplies or services that does not procure or specify a firm quantity
(other than a minimum or a maximum quantity) and that provides for the
issuance of orders for the delivery of supplies or performance of tasks
during the period of the contract. FAR 16.501-1.
^4Beginning with fiscal year 2007, DOD's procurement data are fed directly
into the FPDS-NG; the DD350 database is no longer separately maintained.
At each location, we reviewed contract files and interviewed officials
from the local acquisition office as well as the contracting officers
responsible for the UCAs we reviewed and selected program office
officials. We also reviewed relevant federal and defense acquisition
regulations regarding the appropriate use of and definitization
requirements for UCAs. In addition, we interviewed representatives from
four companies who entered into UCAs with either military services or the
National Geospatial-Intelligence Agency. Appendix I provides details on
our scope and methodology and Appendix II lists the contracts and orders
we reviewed. We conducted our work from August 2006 through April 2007 in
accordance with generally accepted government auditing standards.
Results in Brief
DOD faces a potentially large gap in its data and thus does not know the
extent to which it is using UCAs. DOD's reported obligations for UCAs
increased from $5.98 billion in fiscal year 2001 to $6.53 billion in
fiscal year 2005. However, the government's procurement system does not
identify undefinitized task or delivery orders or undefinitized contract
modifications. In light of DOD's reported increase in its use of task and
delivery orders in recent years, the data gap could be large. For example,
one location we visited had 91 undefinitized orders with $525 million in
obligations during fiscal years 2004 and 2005. Given the manner in which
the data are recorded, these orders would not be identified, at award, as
UCAs in the procurement system. Because DOD's oversight of its UCAs is
decentralized, the department would have to manually obtain data from each
of its local commands in order to obtain a complete picture. The local
commands we visited performed oversight of their UCAs to varying degrees.
DOD is generally using UCAs to rapidly fill urgent needs, as permitted, in
a variety of circumstances at the locations we visited. The local
managements' message to the contracting community is to not use a UCA
unless absolutely necessary. However, this message seems to have resonated
to different degrees with the frontline acquisition staff who requested
and awarded the UCAs we reviewed. The UCAs we reviewed ranged from
providing supplies or services directly to warfighters to procuring long
lead items for larger programs.^5 In fact, about half of the 77 UCAs we
reviewed were for direct or indirect support of ongoing war efforts. The
remaining UCAs were generally awarded to maintain program schedules. In
addition, 10 of the UCAs we reviewed were attributable to inadequate
planning. For example, one UCA for the continuation of ongoing services
was awarded the day after the previous contract expired.
^5For purposes of this report, long lead items are defined as those
components of a system or piece of equipment for which the times to design
and fabricate are the longest, and therefore, to which an early commitment
of funds may be desirable in order to meet the earliest possible date of
system completion.
DOD did not meet the definitization time frame requirement of 180 days
after award on 60 percent of the UCAs we reviewed. On average, the
military services took an additional 2 months, and the National
Geospatial-Intelligence Agency took about 3 1/2 extra months to definitize
its UCAs. Sixteen of the UCAs we reviewed had remained undefinitized for a
year or more. Contracting officers cited many reasons for the delays, but
the most common were untimely receipt of an adequate proposal from the
contractor, acquisition workforce shortfalls, and changing requirements.
Delayed definitization of UCAs transfers additional cost and performance
risk to the government, since contractors are normally reimbursed for all
allowable costs incurred before definitization. We also found that DOD
tends to obligate the maximum amount of funding permitted--up to 50
percent of the not-to-exceed amount--immediately at award of UCAs. As a
result, contractors may have little incentive to quickly submit proposals,
and agencies have little incentive to demand their prompt submission,
since funds are available to proceed with the work. In addition, since DOD
does not track whether it meets the Federal Acquisition Regulation (FAR)
requirement to definitize letter contracts before 40 percent of the work
is complete, we were unable to assess compliance with this requirement.
Contracting officers are not documenting, as required by federal
regulations, the basis for the profit or fee prenegotiation objective and
the profit or fee negotiated. Specifically, they are not generally
documenting, when applicable, whether profit or fee is adjusted for work
performed by the contractor at a lower level of risk during the
undefinitized period. In the absence of such documentation, it is unclear
whether the costs incurred prior to definitization are considered when
computing the profit rates or fee amounts. For the 40 fixed-price
contracts we reviewed, profit ranged from 3 to 17 percent, and for the 37
cost-type contracts in our sample, fees ranged from 4 to 15 percent.
Generally the rate was applied equally over the entire contract term,
including the undefinitized period.
This report contains recommendations to the Secretary of Defense and the
Administrator of the Office of Management and Budget's Office of Federal
Procurement Policy that are intended to improve DOD's oversight of its use
of UCAs, to help ensure UCAs are definitized on time, and to mitigate the
risks associated with delays in definitization. In written comments on a
draft of this report, DOD concurred with the recommendations and noted
actions underway that are directly responsive. Officials from the Office
of Federal Procurement Policy, in oral comments, agreed with the
recommendation to add a data field in FPDS-NG to identify undefinitized
orders and contract modifications. DOD's comments are included in appendix
III.
Background
DOD is increasingly relying on contractor services to accomplish its
missions. In fiscal year 2006, DOD awarded more than $294 billion in
contracts. Despite this huge investment in buying goods and services, our
work and the work of the DOD Inspector General (IG) has found that DOD's
spending sometimes is inefficient and not managed effectively. Too often,
requirements are not clearly defined; rigorous price analyses are not
performed, and contractors' performance is not sufficiently overseen. In
fact, we have identified overall DOD contract management as a high-risk
area for the past several years.
When a requirement needs to be met quickly and there is insufficient time
to use normal contracting vehicles, federal regulations permit the use of
a UCA. UCAs are binding commitments used when the government needs the
contractor to start work immediately and there is insufficient time to
negotiate all of the terms and conditions for a contract. UCAs can be
entered into via different contract vehicles, such as a letter contract (a
stand-alone contract), a task or delivery order issued against a
pre-established umbrella contract, or a modification to an already
established contract.
The FAR and the Defense Federal Acquisition Regulation Supplement (DFARS)
govern how and when UCAs can be used. The regulations also establish
requirements as to how quickly UCAs must be definitized. Although each
regulation contains two criteria, they are not the same. The FAR states
that a letter contract needs to be definitized within 180 days after the
award date or before 40 percent of the work is complete, whichever occurs
first. While the DFARS includes the 180-day time frame, it addresses all
UCAs (including undefinitized task and delivery orders and contract
modifications) and adds a requirement to definitize before more than 50
percent of funds are obligated. It does not mention the 40 percent of work
completed. Under FAR and DFARS respectively, a waiver of the 180-day
requirement can be granted for extreme circumstances or when the agency is
supporting a contingency or peacekeeping operation. The definitization
time frame can also be extended an additional 180 days when a qualifying
proposal is received from the contractor. The contractor does not receive
profit or fee during the undefinitized period, but can recoup it once the
contract is definitized.
Under UCAs, the government risks paying unnecessary costs. For example, in
a September 2006 report on contracts in support of Iraq reconstruction, we
found that the timeliness of definitization can affect the government's
costs.^6 We reported that DOD contracting officials were more likely to
adhere to the Defense Contract Audit Agency's advice regarding the
disposition of questioned and unsupported costs when negotiations were
timely and occurred before contractors had incurred substantial costs
under UCAs. On the other hand, contracting officials were less likely to
remove questioned costs from a contract proposal when the contractor had
already incurred these costs during the undefinitized period. Similarly,
the DOD IG found that untimely definitization of contracts transfers
additional cost and performance risk from the contractors to the
government.^7
Contractors should bear an equitable share of contract cost risk and
receive compensation for bearing additional risk based on the degree of
risk assumed. Costs that have already been incurred on an unpriced action,
such as a letter contract, have virtually no cost risk associated with
them. As such, when negotiating profit with the contractor, the government
may attribute a zero risk factor to the undefinitized period.^8
DOD Does Not Know the Full Extent of Its UCA Usage
DOD faces a potentially large gap in its data and thus does not know the
extent to which it is using UCAs. The federal procurement data system is
only able to identify UCAs that are awarded via letter contracts.
Undefinitized task or delivery orders, as well as contract modifications,
are not identified. DOD also lacks high-level oversight of its UCA
activity since UCA monitoring has been delegated to the local commands,
with upward reporting no longer required. At the local commands we
visited, monitoring of UCAs varied in both detail of information and
frequency of review.
^6GAO, Iraq Contract Costs: DOD Consideration of Defense Contract Audit
Agency's Findings, [24]GAO-06-1132 (Washington, D.C.: Sept. 25, 2006).
^7Department of Defense, Office of the Inspector General, Audit Report:
Undefinitized Contract Actions. Report Number D-2004-112, Arlington,
Virginia: Aug. 30, 2004.
^8In addition to contract cost risk, other factors are also considered
when determining profit, including the contractor's effort, use of federal
socioeconomic programs, capital investments, cost control and other past
accomplishments, and independent development.
Data on UCAs Are Incomplete
DOD understates its UCA usage due to a potentially significant gap in
data. Because the government's federal procurement data system--managed by
the Office of Federal Procurement Policy--only identifies letter contracts
as undefinitized at award and does not identify undefinitized task or
delivery orders or contract modifications, DOD does not know the extent of
its UCA activity.^9
As figure 1 shows, DOD's reported obligations for letter contracts have
increased from $5.98 billion in fiscal year 2001 to $6.53 billion in
fiscal year 2005. These obligations for letter contracts as a percentage
of DOD's total obligations remained 4 percent or less during this time
period.
Figure 1: DOD Reported Obligations on Letter Contracts for Fiscal Years
2001-2005
^9This same issue also pertains to other federal agencies. However, we are
limiting our discussion to DOD because that agency is the focus of this
report.
At the same time, DOD's task and delivery order obligations have increased
significantly, as shown in figure 2.
Figure 2: DOD Obligations on Task and Delivery Orders for Fiscal Years
2001-2005
A DOD senior acquisition official stated that if DOD wanted to know the
amount obligated under undefinitized task and delivery orders, it would
have to ask for the information from all of the local commands. According
to information maintained at the local commands we visited, most have
issued some undefinitized task or delivery orders. As table 1 illustrates,
one command obligated over $500 million in UCA orders during the 2-year
period we reviewed.
Table 1: Obligations on Undefinitized Task and Delivery Orders during
Fiscal Years 2004-2005 at Locations Visited
Obligations(dollars in Number of
Location millions) actions
Aeronautical Systems $524.7 91
Center
Aviation and Missile 81.0 12
Command
Naval Air Systems Command 8.0 5
Naval Sea Systems Command 49.3 1
Warner Robins Air 14.9 2
Logistics Center
Total $677.9 111
Source: GAO analysis of DOD data.
Note: The Army's TACOM Life Cycle Management Command reported no UCA
orders during this period. The National Geospatial-Intelligence Agency had
undefinitized orders during this period but does not track this
information for its DOD contracts.
DOD Lacks Centralized Oversight of UCAs
UCA oversight takes place at local commands, without any centralized
reporting at the DOD headquarters or military services levels. Although
UCA oversight was centralized in the past, a senior DOD acquisition
official told us that DOD does not believe that UCA usage is a significant
concern, given that letter contracts have represented no more than 4
percent of DOD's total obligations over the past several years. As such,
DOD relies on its local commands to oversee the use of UCAs and inform
upper management if any issues arise.
The Air Force is the only military service that has a reporting
requirement for UCA activity. A June 2002 policy requires commands to
report to the headquarters acquisition office on UCAs that have remained
undefinitized for more than 1 year. However, the acquisition office has
not received any reports on delinquent UCAs, despite the fact that we
found 9 UCAs that had remained undefinitized for over 1 year at the two
Air Force commands we visited. An official from one of the commands told
us it reported one of its delinquent UCAs, but, according to an Air Force
headquarters acquisition official, it was never received. Since the
reporting of delinquent UCAs is by a manual self-reporting system, it is
possible that other delinquent UCAs have gone unreported.
The local commands we visited performed oversight of their UCA usage to
varying degrees. All of the military locations had some sort of reporting
of UCA activity to the local acquisition management on a regular basis,
ranging from monthly to quarterly reporting. The local commands also
varied in whether all UCAs were tracked versus only those that remain
undefinitized after the 180-day time frame. We found that the National
Geospatial-Intelligence Agency was not tracking or monitoring its DOD
UCAs,^10 even though its acquisition regulation requires a monthly report
on UCA activity.^11 After we raised this issue, National
Geospatial-Intelligence Agency officials stated that they will begin
monitoring their UCA activity.
UCAs Used to Quickly Fill Needs in a Variety of Circumstances
DOD is using UCAs to rapidly fill needs in a variety of circumstances,
many of which are directly or indirectly related to the war in Iraq. The
message from management at the locations we visited is to limit the use of
UCAs. However, this message seems to have resonated to different degrees
with the frontline acquisition staff who requested and awarded the UCAs we
reviewed. In some instances, inadequate acquisition planning drove the
need for the UCA.
UCAs Are Awarded for a Variety of Goods and Services
The UCAs we reviewed were for a range of goods and services--from
providing immediate support to the warfighter in theater to procuring long
lead items to keep weapon system program schedules on time. The military
services' commands awarded about half of the UCAs we reviewed for support
of war efforts and one third to meet schedules on production contracts. In
one instance, a UCA was awarded to immediately provide body armor on
combat vehicles already in use in operations in the Middle East. In
another, a UCA was awarded to obtain a jamming system that was needed to
avoid grounding F-15 aircraft. The National Geospatial-Intelligence Agency
awarded over half of the UCAs we reviewed for immediate intelligence needs
and about half to avoid disruptions of services it was receiving under
expiring contracts.
Table 2 provides a summary of the reasons presented by the contract files
and discussed with the contracting officers specifically for the 77 UCAs
we reviewed.
^10The National Geospatial-Intelligence Agency also has authority to
contract under the Central Intelligence Agency's procurement authority;
our review included the agency's DOD activity only.
^11National Geospatial-Intelligence Agency Instruction for Acquisition
Regulation Implementation 5X217.7403-91.
Table 2: Reasons Cited for Issuance on UCAs Reviewed
Reasons for issuance of UCA Number of instances
Maintaining program schedules 28
Direct support of war efforts 22
Indirect support of war efforts (e.g. replacing 16
depleted spare parts)
Timing of funding 11
Inadequate acquisition planning 10
Other 12
Source: GAO analysis of DOD data.
Note: We reviewed 77 UCAs. However, multiple reasons were cited for the
same action. "Other" reasons include actions to avoid costs for future
upgrades or changes required due to factors external to the program
office.
Poor acquisition planning is not an appropriate reason to award a UCA.
However, for 10 of the UCAs we reviewed, the government may have been able
to prevent the use of a UCA with better planning. These included, for
example, 4 UCAs issued to procure long lead items that could have been
contracted for earlier. The requirement for long lead items is typically
established early in a program and is normally provided advanced funding
in the annual budget process, which should provide sufficient time to
acquire the items through normal acquisition procedures. Other inadequate
planning situations included 4 UCAs--1 at the Naval Sea Systems Command
and 3 at the National Geospatial-Intelligence Agency--that we believe
could have been prevented by the program office. In each instance, the
requirement was known in a significant amount of time before the UCA was
issued. These situations ranged from late issuance of the request for
proposals (which had been planned earlier) to awards that were issued
quickly to avoid disruptions in services (which could have been
anticipated). For example, one National Geospatial-Intelligence Agency UCA
for the continuation of ongoing services was awarded the day after the
services from the prior contract ended. The agency should have been able
to reasonably estimate the requirement and prices in advance based on the
terms and work of the ongoing contract, which were already known. The
remaining three inadequate planning situations were due to circumstances
that were beyond the control of the program office. For example, a Navy
UCA was issued because the senior acquisition executive, external to the
program office, delayed the approval of the program's acquisition plan.
Furthermore, one UCA added requirements that expanded the work beyond what
was originally planned. Specifically, the National Geospatial-Intelligence
Agency awarded a UCA to quickly obtain aerial data from the regions
affected by hurricanes, but subsequently augmented it to establish a
permanent facility that had been planned for some time. Several
contracting officers across DOD expressed concern that program office
staff need training on the appropriate use of UCAs because they do not
always seem to be aware of the risks that these contract actions pose to
the government.
Local Command Policies Generally Focus on Limiting UCAs
The "tone at the top" provided by the local commands we visited is to not
use UCAs unless absolutely necessary. However, this message is emphasized
differently from one location to another and has only recently come about
in some locations. For example, an April 2000 Naval Air Systems Command
memorandum says that the use of UCAs is to be kept to the "absolute
minimum" and that they should not be used if the requirements are not
fully defined. On the other hand, the National Geospatial-Intelligence
Agency allowed its contracting officers to use UCAs without the need for
higher-level approval until a May 2006 memorandum elevated the approval
authority to the senior procurement executive.
Representatives from the four companies we spoke with use UCAs with DOD to
different degrees--ranging from considering UCAs to be a "normal part of
business" to rarely using UCAs in recent years. One company said that its
UCAs are mostly used for short duration work needed to maintain critical
schedules in the development or production processes of other contracts.
Another company recently entered into several indefinite
delivery/indefinite quantity contracts with the government so that UCAs
could be avoided in that area of work.
DOD is Often Not Meeting Definitization Time Frame Requirements
DOD did not meet the definitization time frame requirement of 180 days
after award for over half the UCAs we reviewed. This situation places the
government at risk of paying increased costs, thus potentially wasting
taxpayers' money. On average, the UCAs we reviewed were definitized more
than 2 months past the required period, with 16 remaining undefinitized
for a year or more. While DOD regulations allow up to half of the funding
to be provided before definitization, we found that DOD tends to obligate
this maximum amount of funding immediately at award--a practice that could
provide a disincentive for the timely definitization of the UCA. In
addition, DOD does not monitor its compliance with the FAR requirement to
definitize letter contracts when 40 percent of the work is complete.
Most UCAs Were Not Definitized within Required Time Frames
Sixty percent of the UCAs we reviewed--46 of 77--were not definitized
within the 180-day time frame required by FAR and DFARS. Table 3 shows the
number of days elapsed before the UCAs were definitized.
Table 3: Elapsed Days before Definitization on UCAs Reviewed
Days until definitized
0-180 181-365 366-500 Over 500 Total
Air Force 12 7 3 2 24
Army 10 9 3 1 23
Navy 7 11 5 0 23
National Geospatial-Intelligence 2 3 2 0 7
Agency
Total 31 30 13 3 77
Source: GAO analysis of DOD data.
We found 16 UCAs that took more than a year to definitize, with the
longest taking over 600 days. Each location we visited had at least 1 UCA
in effect for over a year. In addition, we found no discernable
relationship between the dollar value or contract type of the UCAs and the
length of time it took to definitize. Approximately the same proportion of
small and large dollar value UCAs were definitized in less than 180 days
as were definitized in more than 180 days. Likewise, the final contract
type did not appear to influence the timeliness of definitization.
Approximately the same proportion of UCAs with final contract types of
fixed-price and cost-type were definitized in less than 180 days as were
definitized in more than 180 days.
We also identified a number of UCAs that met provisions that allow an
extension or waiver of the 180-day definitization requirement. FAR and
DFARS allow an additional 180-day extension of the definitization time
frame from the date a qualifying proposal (one that is complete and
auditable) is received from the contractor.^12 Our review showed that
definitization occurred during this extended time frame in only 7 of the
36 cases. Two UCAs were permitted waivers of the 180-day requirement since
they were in support of contingency operations, pursuant to a September
2003 Air Force memorandum waiving the time frame for actions related to
Operation Iraqi Freedom.
^12A "qualifying proposal" means a proposal containing sufficient
information for DOD to do complete and meaningful analyses and audits of
the information in the proposal and any other information that the
contracting officer has determined DOD needs to review in connection with
the contract. DFARS 217.7401(c).
Figure 3 illustrates the average time frames and the range of days that
lapsed before definitization.
Figure 3: Average Time Frame for Definitization of UCAs
Note: The average time frame includes 9 UCAs that took more than 180 days
to definitize but were provided extensions due to receipt of a qualifying
proposal or were authorized waivers when the requirement was for
contingency operations.
Delays in Definitization Occur for a Variety of Reasons
Contracting officials provided more than a dozen reasons for not
definitizing UCAs within the original 180-day time frame. Based on our
review of the contract files and discussions with contracting and program
officials, the most common reasons for the delays were (1) delays in
obtaining a qualifying proposal from the contractor, (2) acquisition
workforce shortages that led to overly heavy workloads, and (3) complexity
of requirements at award of the UCA or changing requirements after award.
In many cases, multiple reasons contributed to the definitization delay.
Some of the longest delayed definitizations occurred because of a
combination of the three reasons stated above. Table 4 provides a summary
of the number of instances each reason was provided as an explanation of
the delay.
Table 4: Definitization Delays Cited for UCAs Reviewed
Reasons for delays Number of instances
Untimely receipt of qualifying proposal 23
Government acquisition workforce shortages/workloads 11
Changing or complex requirements 10
Changes in funding availability 6
Contracting officer's inadequate performance 4
Required audits 4
Protracted negotiations 3
Hurricanes 3
Other 13
Source: GAO analysis of DOD data.
Note: "Other" reasons include data rights issues, waiting for program
milestone decisions, and delays in obtaining certified cost and pricing
data.
Contracting officers stated that delays in obtaining a qualifying proposal
were sometimes caused by the program office's changing requirements. Many
contracting officials stated the government's requirement was inadequately
described when the UCA was awarded or was subsequently changed after award
once the requirement was better understood. Contractor representatives and
contracting officers noted that it is difficult for a contractor to timely
submit an adequate proposal when the government is unsure about the
specifications of the product or service it requires. Officials at two
companies noted that they attempt to submit qualifying proposals on time,
but must redo them--sometimes multiple times--to reflect the government's
revised requirements.
In addition to timeliness of proposals and changing requirements,
shortfalls in the government's acquisition workforce were another key
reason for definitization delays. This issue was manifest in different
ways, including inadequate numbers of contracting officials, the heavy
workload of the Defense Contract Audit Agency, which is frequently called
upon to perform audits of the proposal's pricing structure, and, in four
cases, contracting officials who did not perform their duties to
definitize the UCAs. Some contracting officers commented that UCAs require
twice the work that a normal contract award does, because in essence they
go through the contracting process twice--once for the undefinitized
period and once for the definitized period. Problems with acquisition
staff or workloads at the commands resulted, in some instances, in a UCA
remaining undefinitized until someone turned attention to it. Some
contracting officers told us that their focus is on getting the UCA
awarded; after that, they often must turn to other pressing awards so that
following up on definitizations becomes less of a priority. We also found
one situation where a UCA simply fell through the cracks because it
dropped off the local reporting system due to a computer error. In one
case, the contracting officer awarded a UCA but took another job before it
was definitized, and the contracting officer who inherited it was not
aware for some time that it had not been definitized; thus, no one acted
on it for over a year.
UCAs Are Usually Awarded with Maximum Obligations Allowed
Most of the UCAs we reviewed were awarded with the maximum obligations
allowed. Specifically, 60 of the 77 UCAs--78 percent--were obligated with
approximately 50 percent or more of the not-to-exceed price at award. As a
result, contractors may have less incentive to hasten the submission of
qualifying proposals and agencies have little incentive to demand their
prompt submission, since funds are available to proceed with the work,
leading to a protracted negotiation process. One contracting officer
obligated a smaller percentage initially, but as time went by and various
issues arose that slowed definitization, he raised the obligated amount
little by little until it reached 50 percent. In hindsight, he said it
would have been easier to just obligate the 50 percent at the beginning.
Company officials said that the minimum amount needed to begin work under
a UCA depends on the circumstances of the work. Officials from all four
companies told us they usually receive 50 percent of the not-to-exceed
price at award.
While we found some evidence of monitoring the percentage of funds
obligated, in accordance with the DFARS requirement to definitize UCAs
before 50 percent of the funding is obligated, none of the commands we
visited act proactively to ensure the obligations do not exceed this
maximum amount. As a result, DOD is at risk of increasing the potential
that it is paying additional unnecessary costs during the undefinitized
period. The monitoring that does occur, at three local commands we
visited, is not effective in ensuring compliance with the requirement
because no alerts are generated if a UCA goes beyond the maximum
obligations before definitization. An official at one command that does
not monitor this requirement stated that the command does not do so
because it is the responsibility of the contracting officer to ensure it
is met.
Requirement to Definitize Before 40 Percent of Work Is Completed Is Not Tracked
DOD is not monitoring compliance with the FAR requirement to definitize
letter contacts when 40 percent of the work is complete. None of the local
commands we visited had procedures in place to track this provision.
Officials at two commands were not familiar with the requirement. As such,
we were unable to assess whether DOD is in compliance with this
requirement. Many contracting officers stated that the amount of work
completed before definitization could not readily be determined because
under a UCA there is no established baseline against which to measure the
percentage of work completed. Policy officials at several locations we
visited also stated that the FAR requirement would be difficult to
implement. Based on our findings, a DFARS case was initiated in April 2007
to clarify defense acquisition regulations.
Little Insight into Whether Reduced Risk Is Taken into Account when Negotiating
Profit or Fee
Contracting officers are not usually documenting, when applicable, whether
profit or fee is adjusted for work performed by the contractor at a lower
level of risk during the undefinitized period. All UCAs are essentially
cost-reimbursement contracts until definitized, as contractors are
reimbursed for all incurred costs that are reasonable, allocable, and
allowable during the undefinitized period. This contract type places the
greatest cost risk on the government. When the UCA is definitized, the
ultimate contract type is determined. Our sample included a variety of
final contract types, including firm-fixed-price, cost-plus-award-fee,
cost-plus-incentive-fee, and cost-plus-fixed-fee. Each contract type
includes either profit (fixed-price contracts) or fee (cost-type
contracts) for the contractor. During the undefinitized period, however,
profit or fee is not paid. The profit rate or fee is derived at
definitization and then applied across the entire period of performance,
including the undefinitized period.
When calculating the negotiating position on profit or fee for a UCA, the
FAR and DFARS require contracting officers to assess the relative risk
borne by the contractor versus the government. The amount of profit or fee
available to the contractor is usually determined via a structured
calculation that is a function of several different factors, such as the
complexity of the work, resources required to perform, independent efforts
by the contractor to bring about improved performance, and contract type.
Specifically, the DFARS states that when determining a profit or fee
position during negotiations to definitize a UCA, contracting officers
must consider any reduced risk on the portion of the contract performed
before definitization and any reduced risk on the remaining portion that
will be performed after definitization. For example, the DFARS states that
"When the final price of a UCA is negotiated after a substantial portion
of the required performance has been completed, the head of the
contracting activity shall ensure the profit allowed reflects (a) Any
reduced cost risk to the contractor for costs incurred during contract
performance before negotiation of the final price; and (b) The
contractor's reduced cost risk for costs incurred during performance of
the remainder of the contract."^13
When costs have been incurred prior to definitization, contracting
officers are to generally regard the contract type risk to be in the low
end of the designated range. If a substantial portion of the costs have
been incurred prior to definitization, the contracting officer may assign
a value as low as 0 percent, regardless of contract type.^14
Table 5 shows the range of profit and fee rates negotiated at
definitization for the UCAs we reviewed. We did not assess the
reasonableness of the profit or fee percentages determined by the
contracting officers.
Table 5: Range of Negotiated Profit or Fee Rates for UCAs Reviewed
Profit or fee percentage
Fixed-price Cost-type
Low High Low High
Air Force 3.0 15.0 5.2 14.5
Army 6.0 17.2 9.0 15.0
Navy 7.9 13.9 7.0 15.0
National Geospatial-Intelligence Agency none none 4.0 15.0
Source: GAO analysis of DOD data.
We found that these adjustments to profit or fee were usually not
documented in the price negotiation memorandum, a contract document that
sets forth the results of the negotiations and contains the contracting
officer's determination that the negotiated price is fair and reasonable.
Specifically, the memorandums for only 14 of the 77 UCAs we reviewed
discussed how the negotiated profit or fee was affected by the UCA. As a
result, for the majority of the UCAs we reviewed, no determination can be
made whether the costs incurred during the undefinitized period were
considered when the allowable profit or fee was determined. Similarly, in
a 2004 report, the DOD IG found that contract records did not contain
evidence that allowable profit factors, such as the reduced cost risk,
were considered in the final profit rate awarded to the contractor. It was
also not evident that already incurred costs were taken into account when
determining profit.^15
^13DFARS 217.7404-6.
^14DFARS 215.404-71-3(d)(2).
The majority of the contracting officers responsible for the UCAs we
reviewed acknowledged that they are required to document how the shift in
risk associated with the undefinitized period was accounted for in
determining the profit or fee calculated for negotiations.
Conclusions
UCAs are a necessary tool for DOD to use to meet urgent contracting needs,
but DOD must ensure that their use is limited to appropriate
circumstances. Even when UCAs are used appropriately, increased management
attention is needed regarding definitization time frames so the
government's position during subsequent negotiations is not overly
weakened. Existing regulations and guidance governing UCAs are not always
understood or followed. Actions are needed to strengthen management
controls and oversight of UCAs; otherwise the department will remain at
risk of paying unnecessary costs and potentially excessive profit rates.
Recommendations for Executive Action
To improve oversight of UCAs, we recommend that
o the Administrator of the Office of Management and Budget's
Office of Federal Procurement Policy assess whether the Federal
Procurement Data System-Next Generation data fields need to be
modified to require coding that will identify undefinitized task
and delivery orders and undefinitized contract modifications, and
o the Secretary of Defense issue guidance to program and
contracting officials on how to comply with the FAR requirement to
definitize when 40 percent of the work is complete.
To help ensure that UCAs are definitized in accordance with regulations,
we recommend that the Secretary of Defense take the following two actions:
^15DOD IG Report Number D-2004-112.
o put in place a reporting channel to headquarters that includes
information on UCAs in place for 180 days or more and that
outlines plans and time frames for definitization, and
o supplement acquisition personnel on an as-needed basis to
quickly definitize UCAs once they are awarded.
To mitigate the risks of paying increased costs under UCAs, we recommend
that the Secretary of Defense set forth supplemental guidance to
accomplish the following two actions:
o direct contracting officers, where feasible, to obligate less
than the maximum allowed at UCA award to incentivize contractors
to expedite the definitization process, and
o specify that the effect of contractor's reduced risk during the
undefinitized period on profit or fee be documented in the price
negotiation memorandum or its equivalent.
Agency Comments and Our Evaluation
We provided a draft of this report to DOD and the Office of Federal
Procurement Policy for comment. In written comments, DOD concurred with
our findings and recommendations and noted actions underway that are
directly responsive. The department's comments are reproduced in appendix
III. The Office of Federal Procurement Policy provided oral comments,
stating that it had no concerns regarding our recommendation to add a data
field in FPDS-NG that would identify undefinitized task and delivery
orders and contract modifications at award. Such data are needed to
provide DOD (and other agencies) more complete information on UCAs, which
can then be used to improve oversight of their use.
Although DOD concurred with our recommendation to issue guidance
addressing the FAR definitization requirement, in its comments, DOD stated
that our reference to the FAR requirements for UCA definitization
schedules did not consider the difference in requirements for DOD that are
specified in the U.S. Code. However, our report does address those
differences. DOD also stated that the Defense Acquisition Regulation
Council has initiated a DFARS case, based upon our discussions during this
review, to clarify that DOD contracting officers should use the DOD
definitization schedule criteria. DOD agreed that the need for enhanced
oversight of UCAs is appropriate and said it will consider requiring the
military departments to enhance oversight of UCAs and to provide periodic
reports, with remediation plans, for those past the definitization time
frames. The Department also published two notices in the Federal Register
on May 22, 2007, seeking public comments on current DOD contract financing
and funding policies, including the weighted guidelines that are used to
determine appropriate profit or fee based on an assessment of contractor
risk.
We are sending copies of this report to the Secretary of Defense, the
Director of the Office of Management and Budget, the Administrator of the
Office of Federal Procurement Policy, and other interested congressional
committees. We will also make copies available to others upon request. In
addition, the report will be available at no charge on the GAO Web site at
http://www.gao.gov .
If you have any questions about this report or need additional
information, please contact me at (202) 512-6986 or
[email protected]. Contact points for our Offices of Congressional
Relations and Public Affairs may be found on the last page of this report.
Key contributors to this report were Michele Mackin, Assistant Director;
R. Eli DeVan; Lily Chin; Matthew T. Drerup; Victoria Klepacz; John Krump;
Jean K. Lee; and Lynn Milan.
Ann Calvaresi-Barr
Director, Acquisition and Sourcing Management
Appendix I: Scope and Methodology
To determine the level of insight the Department of Defense (DOD) has into
its use of undefinitized contract actions (UCA), we interviewed DOD
senior-level acquisition officials and service-level acquisition officials
to identify any additional policies specifically addressing the use of
undefinitized contract actions at the locations selected for our review.
We analyzed information from DOD's procurement system (DD350) and local
commands for undefinitized contract actions from fiscal year 2001 through
fiscal year 2005. We also reviewed the relevant sections of the Federal
Acquisition Regulation and the Defense Federal Acquisition Regulation
Supplement, as well as service-level guidance pertaining to the use of
undefinitized contract actions.
To identify how and when DOD is using UCAs and whether DOD is definitizing
these actions in a timely manner, we reviewed a random sample of
undefinitized contract actions from six military commands and one non
military defense agency. While undefinitized contract actions may include
letter contracts, task or delivery orders, and contract modifications,
only letter contracts are recorded by DD350 in a manner that allowed GAO
to identify them as undefinitized at the time of award. Therefore, the
specific locations for our review were selected based on the total dollar
value and volume of letter contracts issued during fiscal years 2004 and
2005 by various DOD buying organizations as recorded in the DD350 system.
On the basis of this data, we selected the two commands with the largest
dollar volume of letter contracts within each of the three military
services (Air Force, Army, and Navy). As such, the six military locations
represented over 75 percent of the total dollars awarded for letter
contracts during the period. We also selected the non military defense
agency with the largest number of letter contracts. The specific locations
selected for our review were:
U.S. Air Force Aeronautical Systems Center, Dayton, Ohio Warner Robins Air
Logistics Center, Warner Robins, Georgia
U.S. Army TACOM Life Cycle Management Command, Warren, Michigan Aviation
and Missile Command, Huntsville, Alabama
U.S. Navy Naval Sea Systems Command, Washington, D.C . Naval Air Systems
Command, Patuxent River, Maryland
Non military defense agency National Geospatial-Intelligence Agency,
Washington, D.C.
To include other types of undefinitized contract actions in our review, we
requested a listing of task and delivery order and contract modifications
issued as undefinitized contract actions during fiscal years 2004 and 2005
from each of the seven locations that we planned to visit. This request
was necessary because these types of undefinitized actions are not
identified in the federal procurement data system. We then established a
population of undefinitized contract actions at each location and selected
a random sample of contract actions to review. Not every location could
provide us with a listing of other undefinitized contract actions prior to
our site visit, and in some cases there were an insufficient number of
such actions to meet our sampling needs. In such cases we reviewed
additional letter contracts selected at random to achieve similar sample
sizes at each location. A total of 77 undefinitized contract actions were
sampled for this review. The six Army, Navy, and Air Force contracting
organizations that we selected for our review initiated 70 of the
undefinitized contract actions that we reviewed. The National
Geospatial-Intelligence Agency initiated 7 of the undefinitized contract
actions that we reviewed. Observations made from our review cannot be
generalized to the entire population of undefinitized contract actions
issued by DOD.
We omitted undefinitized contractual actions for foreign military sales,
purchases that did not exceed the simplified acquisition threshold,
special access programs, and congressionally mandated long lead
procurement contracts since these actions are not subject to compliance
with the definitization requirements we were reviewing. We also excluded
all undefinitized task orders issued under basic ordering agreements. The
majority of pricing and contract terms are established under basic
ordering agreements, leaving few terms and conditions to be definitized
after award when orders are issued under this type of contract.
At each location, we reviewed contract document files and interviewed
officials from the local program office as well as the cognizant
contracting officers. In a few cases the contracting officer could not
speak to the reasons for definitization delays because that officer was
not involved with the award or definitization of the UCA selected for our
review. We relied on data provided to us by DOD and the buying commands we
visited, which we verified where practical. For example, in determining
the length of time to definitize the sampled actions, we verified the data
reported in DD350 by tracing the reported award and definitization dates
to the contract file documentation. We also verified contract obligation
and not-to-exceed amounts reported in DD350 by reviewing contract file
documentation available in hard copy at the sites we visited and
electronically from DOD's Electronic Data Access Web-based system.
To obtain insight into the issues surrounding the use of UCAs from a
contractor's point of view, we interviewed representatives from four
companies who entered into undefinitized contract actions with one or more
of the buying organizations that were selected for this review.
We conducted our work from August 2006 through April 2007 in accordance
with generally accepted government auditing standards.
Appendix II: Undefinitized Contract Actions Reviewed
Total Contract/
Description of Obligation dollar order
goods or Award Definitization Not-to-exceed amount at value at pricing
services date date amount award award type^a
Air Force
Aeronautical Systems Center
1 B-2 aircraft aft 2/17/04 8/17/04 $16,737,000 $8,368,500 N/A^b CPFF
deck inner mold
kits
2 Required 9/5/02 12/23/03 5,250,000 2,146,118 N/A^b CPAF
navigational
performance link
for C-17
aircraft
3 Common crypto 2/20/04 7/1/04 1, 366, 402 683,201 N/A^b CPFF
applique for
F-15 aircraft
4 Enterprise 5/28/04 7/24/04 1,508,938 1,131,704 N/A^b FFP
support
infrastructure
5 Threat 12/19/03 6/1/05 23,100,000 10,781,000 N/A^b CPFF
Situational
Awareness System
for B-1 aircraft
6 Aircraft Defense 12/8/04 5/2/05 6,038,000 3,019,000 N/A^b FFP
Systems for Army
C-37A aircraft
7 Receiver/exciter 9/30/05 5/18/06 1,287,000 965,250 $965,250 FFP
controller
upgrade kits
8 9 Lynx radar 7/29/05 9/29/06 13,867,301 10,400,476 10,400,476 FFP
upgrade for
Predator
unmanned aerial
vehicle
9 Tactical Micro 2/8/05 5/18/05 2,202,337 1,101,169 2,202,337 FFP/T&M
Unmanned Aerial
Vehicle
improvements
10 Receiver/exciter 5/19/04 2/25/05 5,938,414 4,453,811 8,889,104 FFP
controller
upgrade kits for
ASARS-2A radar
system
11 Readiness spare 7/1/04 8/24/05 26,427,245 26,427,245 131,028,443 FFP
package kits for
Predator
unmanned aerial
vehicle
12 Battlefield Air 9/29/05 3/8/06 619,852 309,925 309,925 FFP
Targeting Camera
Autonomous
Micro-Air
Vehicles
Warner Robins Air Logistics Center
13 Remotely 6/30/04 10/29/04 9,473,313 9,473,313^c 9,739,688 CPFF
Operated Video
Enhanced
Receiver upgrade
14 Engineering 7/22/04 3/20/06 3,240,000 720,000 1,739,934 CPFF
services for
C-130 aircraft
15 Repair of low 6/2/04 9/28/04 2,900,000 1,450,000 3,648,606 FFP/T&M
power color
radar
16 Upgrade factory 8/2/05 7/27/06 4,102,751 3,077,063 3,077,063 FFP
test equipment
for Joint Helmet
Mounted Cueing
System
17 Purchase power 5/3/04 8/11/04 1,500,000 750,000 1,565,250 FFP
supplies for
repair
18 Multi-functional 9/29/05 5/26/06 7,800,000 3,900,000 3,900,000 FFP
Information
Distribution
System initial
spares
19 Replace fire 3/22/04 6/30/04 2,052,092 1,026,046 1,943,807 FFP
suppression
system
20 Interim support 5/5/05 9/28/05 4,372,865 2,186,433 4,372,865 FFP/T&M/
for repair of CPFF
radar systems
for C-130
aircraft
21 Develop and 3/3/04 7/23/04 350,000 175,000 336,814 CPFF
upgrade
transponder
software for C-5
aircraft
22 Joint 3/25/04 9/30/04 11,840,000 10,763,636 N/A^b CPAF
Surveillance
Target Attack
Radar System
initial spares
23 Joint 9/1/05 8/28/06 4,110,537 4,110,537^c N/A^b CPAF
Surveillance
Target Attack
Radar System
initial spares
for programmed
depot
maintenance
24 Replace floor in 1/26/05 2/17/05 1,433,000 716,500 1,425,906 FFP
hangar for C-17
aircraft
Army
Aviation and Missile Command
25 Periscope head 2/25/04 6/22/05 2,500,000 1,250,000 1,597,656 CPFF
assembly for
Bradley fighting
vehicle system
26 Improved data 8/27/04 6/22/05 3,060,000 1,530,000 2,703,497 FFP
modems for
avionics
targeting
communication
system
27 Patriot missile 4/7/05 9/28/05 1,699,323 832,668 1,419,925 FFP
rack spares
28 Battery assembly 3/3/05 8/05/05 1,227,425 601,438 1,159,705 FFP
29 Integrated sight 12/20/04 2/28/06 7,120,000 3,488,800 3,488,800 CPFF
repair
30 Motion picture 9/28/05 6/8/06 11,430,000 5,715,000 2,857,500 FFP
camera
31 Auxiliary Power 3/11/05 9/20/05 8,541,860 4,185,511 N/A^b FFP
Unit kits and
Auxiliary Power
Unit spare
filter assembly
32 Engines for 6/2/04 9/28/04 4,118,648 2,018,138 N/A^b FFP
Blackhawk
helicopters for
State Department
33 Auxiliary Power 7/19/05 9/21/05 2,183,893 2,183,893 N/A^b FFP
Unit for UH-60
aircraft
34 Laser range 9/13/04 2/6/06 7,064,844 1,305,691 N/A^b FFP
finders for
Avenger vehicles
35 Engines for 1/12/04 9/28/04 46,426,934 22,749,198 N/A^b FFP
Blackhawk
helicopters
36 Cargo hooks for 4/26/05 3/15/06 7,760,000 3,802,400 N/A^b FFP
CH-47 Chinhook
helicopters
TACOM Life Cycle Management Command
37 Purchase air 3/5/04 9/24/04 12,321,566 6,160,783 50,222,433 FFP
conditioning
units for trucks
located in
Southwest Asia
38 Performance of 12/8/04 2/17/05 1,103,200 551,600 14,516,695 CPFF
system technical
support services
on M707 KNIGHT
vehicle program
39 Conversion of 9/30/05 3/28/06 17,350,000,000 219,245,691 254,245,691 CPFF/CPIF
existing
contract for
remaining system
development
efforts for
Future Combat
System
40 Procurement of 5/3/04 9/27/04 33,453,860 25,090,387 43,031,578 FFP
cargo/troop
carrier armor
kits and
underbody blast
protection kits
41 Rebuild of 2/10/04 8/11/04 20,000,000 10,000,000 31,178,228 CPFF
Medium Tactical
Vehicles to
repair damage
sustained in
overseas
deployments
42 Procurement of 6/30/05 10/31/06 517,660,000 258,830,000 388,245,000 FFP
the M1117
Armored Security
Vehicle
43 Rebuild of well 3/4/05 7/8/05 200,000 100,000 180,000 FFP
drilling
equipment
44 Procure 3/31/05 9/22/05 12,840,178 6,420,089 41,030,715 FFP
ballistic
protection armor
systems for
M-1062 and M-978
fuel tankers
45 Add-on-armor 2/8/05 12/5/05 1,080,650 540,325 540,325 FFP
spare parts for
Family of Heavy
Tactical
Vehicles
46 Procurement of 9/29/05 5/26/06 17,827,685 8,913,843 8,913,843 FFP
Automatic Fire
Suppression
System kits for
U.S. Marine
Corps light
armored vehicles
47 Procurement of 8/2/05 1/26/06 3,559,485 1,779,743 1,779,743 FFP
armor protection
for M-978 fuel
tankers
Navy
Naval Air Systems Command
48 Unmanned Aerial 4/18/05 9/16/05 14,500,000 7,250,000 28,360,209 FFP
Vehicle services
for Navy
deployments and
Gulf oil
platform
security
49 Low Rate Initial 12/12/03 8/9/04 9,075,300 4,537,650 8,157,609 FFP
Production for
the 8X10
displays for
F/A-18 aircraft
50 Support of the 3/31/04 10/25/04 3,840,000 1,920,000 12,118,512 FFP
purchase of
Fiber Channel
Network Switches
for F/A-18
aircraft
51 Upgrades to the 9/19/05 12/20/06 9,500,000 4,750,000 4,750,000 CPFF
USQ-113
communications
receiver/jammer
installed on
EA-6B aircraft
52 Test version of 6/18/04 2/11/05 1,400,000 700,000 1,855,115 FFP
Digital Flight
Control System
replacement unit
for the EA-6B
aircraft
53 Development and 2/11/05 6/29/05 4,370,815 2,185,408 4,393,755 CPIF/CPFF
demonstration of
upgrades to
AN/SPN-46
landing system
54 MA-31 aerial 6/22/04 12/16/04 16,364,000 8,182,000 N/A^b FPIF
targets and
related
equipment that
represent
anti-ship cruise
missile threats
55 Digital Map 3/2/04 9/30/04 9,325,397 6,994,048 N/A^b FFP
Computer and
Video Map
Computer units
for installation
on F/A-18
aircraft
56 Accelerate the 11/26/03 6/21/04 3,118,057 3,118,057^d N/A^b FFP
Wing Center
Sections
improvement for
EA-6B aircraft
57 Redesign of 2/12/04 2/22/05 1,800,000 882,000 N/A^b CPFF
specific EA-6B
aircraft parts
that support
upgraded
electronic
attack
capabilities
58 Implement 9/27/04 9/26/05 7,000,000 3,500,000 N/A^b CPAF
additional fault
isolation for
ALQ-218 receiver
and wing tip
pods on the
EA-18G aircraft
Naval Sea Systems Command
59 Allow contractor 5/25/05 5/28/06 2,951,200,000 123,720,000 136,768,931 CPAF
to continue
detail design
and integration
efforts on the
DD(X) destroyer
program
60 Begin work that 9/30/05 12/22/05 53,400,000 26,700,000 26,700,000 CPAF
supports the
start of the
DD(X) destroyer
detail design
activities
61 Advanced 12/2/03 6/18/04 27,866,659 7,299,338 323,177,007 CPFF/CPIF
planning
services and
long lead items
for dry-docking
of a Navy
aircraft carrier
62 Design and 3/19/04 8/24/04 22,500,000 11,250,000 51,222,594 CPIF
purchase of
Affordable
Weapon System
guided missile
system
63 Production and 9/30/05 10/20/06 30,200,000 14,569,800 14,569,800 FFP/CPFF
support of
Remote
Minehunting
System to
operate from
Navy surface
ships
64 Support of AEGIS 5/14/04 3/7/05 250,000,000 18,867,529 167,991,564 CPFF/CPIF
missile guidance
system
development
sites in New
Jersey
65 AN/SPS-48 radar 7/22/05 12/6/05 9,765,598 4,882,799 4,882,812 FFP
system
refurbishment
66 Design and 9/28/05 12/22/06 27,873,202 477,994 477,994 CPFF/FFP
production of
Submarine Rescue
System
67 AN/SPQ-9B radar 7/1/04 3/31/05 8,943,742 4,471,871 41,248,398 FFP
systems and
related change
kit equipment
68 Migration of 5/11/04 8/30/04 38,699,471 10,182,000 26,442,884 CPAF
Ship Self
Defense System
software and
hardware to Navy
compliant open
architecture
form
69 Purchase of 6/22/04 3/25/05 13,266,978 6,633,489 21,040,136 FFP
AN/BPS-16(V) 4
radar sets
70 Design and 11/18/04 3/23/06 8,801,797 3,760,400 3,760,400 CPFF
development for
Pacific Fleet
Tactical
Component
Network
National Geospatial-Intelligence Agency
71 Commercial data 9/30/05 7/26/06 9,043,024 4,521,512 4,521,512 CPFF
services
72 High-bandwidth 8/5/05 9/25/06 5,036,147 2,301,692 N/A^b CPFF
portable
hardware
prototype for
Secure,
Portable,
Accessible,
Remote,
Communications
System
73 Low-bandwidth 7/26/05 9/25/06 2,934,315 1,467,158 N/A^b CPFF
hardware
services for
Secure,
Portable,
Accessible,
Remote,
Communications
System
74 Deployable 8/23/05 2/16/06 12,000,000 3,414,074 3,414,074 FFP/CPAF/
Transit-Case LOE
System/Video
Processing
Capability to
support research
program
75 Provide support 12/24/03 8/31/04 24,269,846 3,770,000 54,872,580 CPFF/CPIF
services at the
agency's
Virginia
facility
76 Utility 12/1/04 8/19/05 3,300,000 550,000 2,516,000 CPFF
assessment and
tools
development
support program
77 Procurement of 11/12/03 4/15/04 6,550,000 4,950,000 1,619,973 CPAF
Mobile
Integrated
Geospatial
Systems vehicles
Source: GAO analysis of DOD contract files.
aCPAF - Cost Plus Award Fee CPFF - Cost Plus Fixed Fee CPIF - Cost Plus
Incentive Fee FFP - Firm Fixed Price FPIF - Firm Fixed Price Incentive Fee
LOE - Level of Effort T&M - Time-and-materials
bN/A - Not available from DD350 database
cThese two UCAs were permitted waivers of 50 percent obligation
requirement since they were in support of contingency operations, pursuant
to an Air Force memorandum waiving the requirement for actions in support
of the Global War on Terror.
dThis UCA was awarded via a contract modification. The obligations at
award for this UCA do not include obligations for the entire contract
amount--only for the undefinitized portion.
Appendix III: Comments from the Department of Defense
(120637)
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