Contract Pricing: DOD's Use of Unpriced Contracts
Abstract
On September 30,1985, DOD's use of unpriced contracts was at its highest value ever - about $28 billion. Many of those contracts remained undefinitized for long periods of time, and a substantial dollar amount of unpriced contracts had not been definitized within the usual 180-day limit prescribed by DOD procurement regulations. At the five contractor locations, 46 percent of the value of unpriced contracts about $1.7 billion - had not been definitized a year or more after the contract had been placed. We provided this information to you in a letter dated December 20, 1986. We also pointed out that delays in pricing contracts (1) place the government in an unfavorable negotiating position, (2) shift cost risk from the contractor to the government, and (3) reduce contractor incentive to control cost. On May 2, 1986, we reported that DOD obligated 18 percent more than was subsequently needed to cover the definitized prices on 716 unpriced contracts we reviewed at the 5 contractor locations. Excess obligations on these contracts totaled $136 million. The excess obligations resulted because DOD contracting officers used contractors' estimates as the basis for obligating funds to cover not-to-exceed and ceiling prices. The contracts were initially obligated at $763 million and finally priced at $627 million, resulting in the $136 million in excess obligations. The period of time between initial obligation and final pricing was over 1 year in most cases.
Document Details
- Document Type
- Technical Report
- Publication Date
- Apr 01, 1987
- Accession Number
- AD1167239
Entities
People
- Frank C. Conahan
Organizations
- United States Government Accountability Office