An Analysis of the Relationship of Overage Time Spans in the Contract- Closure Process and Opportunity Costs
Abstract
Department of Defense acceptance of goods or services purchased by contract does not signify the completion of a contract. The completion of the required administrative tasks subsequent to acceptance is called the contract- closure process. Delays in completing the contract-closure process are creating opportunity costs. The opportunity cost of an extended contract-closure process is the alternative that is sacrificed to maintain the present contract-closure process. The earlier the closure process is completed, the earlier excess funds can be released to other government projects. The study analyzed the overage contracts on the Contract Status Report issued by Air Force Contract Management Division. Factors that increase the overage time span were identified. In addition, the opportunity cost (over $2.8 million) associated with these factors was calculated. The conclusions of this study indicate, (1) overage time span increases with face value, (2) overage time span decreases with an increase in unliquidated obligation, (3) a few overage reason codes have a significant impact on the overage time span of contracts, and (4) a majority of the opportunity cost incurred is attributable to a small number of overage reason codes.
Document Details
- Document Type
- Technical Report
- Publication Date
- Aug 01, 1975
- Accession Number
- ADA016263
Entities
People
- Frederick N. Galante
- Rick J. Williams
- Ronald J. Peterson
Organizations
- Air Force Institute of Technology