Contract Pricing: DOD's Use of the Truth in Negotiations Act Deterrents
Could Be Increased (Chapter Report, 10/25/93, GAO/NSIAD-94-7).

The Defense Department (DOD) has not recovered most of the defective
pricing uncovered by audits mainly because contracting officers (1)
dismiss audits for errors, inconclusive evidence, and lack of reliance
on the defective data during negotiations and (2) negotiate with
contractors and settle for lesser amounts.  In addition, interest on
overpayments has not been fully charged in all instances, and the
penalties have not been assessed.  Further, settlements of defective
pricing cases were late, involving a lengthy process with administrative
burdens on both the government and contractors.  DOD's tracking and
reporting system was inaccurate, and it lacked information needed for
oversight and management of the settlement process.  These conditions
diminish the deterrence needed to ensure that contractors and
subcontractors comply with the law.  Without adequate deterrence,
contractors have little incentive to eliminate inflated price estimates
and correct systemic pricing problems.  In addition, the costly and
burdensome process of identifying and settling defective pricing by the
government and contractors will likely continue.

--------------------------- Indexing Terms -----------------------------

 REPORTNUM:  NSIAD-94-7
     TITLE:  Contract Pricing: DOD's Use of the Truth in Negotiations 
             Act Deterrents Could Be Increased
      DATE:  10/25/93
   SUBJECT:  Contract costs
             Department of Defense contractors
             Defense procurement
             Auditing procedures
             Internal audits
             Internal controls
             Overpayments
             Interest rates
             Fines (penalties)
             Claims settlement

             
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