Audit of Contractor Accounting Practice Changes for C-17 Engineering Costs
Abstract
In 1981, the Air Force initiated development of the C-17 aircraft to provide additional capability to airlift the full range of Defense cargo. The Air Force plans to buy 120 aircraft for an estimated $35 billion. Douglas Aircraft Company, the prime contractor, has a fixed-price-incentive contract for development and production of six aircraft, including the production of the C-17 flight test aircraft, with an estimated ceiling price of $6.6 billion. As of July 1991, a Government estimate for completion of the contract was $7.3 billion. In July 1991, the Air Force awarded a contract for four more aircraft with target and ceiling prices of $1.0 billion and $1.2 billion, respectively. The C-l7 was one of nine programs included in the "Audit of the Effectiveness of the DoD Use of Contractor Cost and Schedule Control System Data on Major Defense Acquisition Programs." The audit objective was to evaluate the effectiveness of the implementation and oversight of cost and schedule control systems and the use of data reported by contractors complying with Cost and Schedule Control System Criteria. The accounting practice changes were reflected in contractor Cost Performance Reports reviewed as part of the overall audit. Douglas Aircraft Company was allowed to inappropriately redefine the point at which the transition to sustaining engineering occurred, and progress payments were approved to Douglas based on retroactive cost accounting changes, which were contrary to Cost Accounting Standards. Also, the Defense Contract Audit Agency did not comply with its audit manual and ensure compliance with applicable Federal Acquisition Regulations in reviewing and approving the accounting change.
Document Details
- Document Type
- Technical Report
- Publication Date
- Feb 13, 1992
- Accession Number
- ADA378448
Entities
Organizations
- Office of the Inspector General, U.S. Department of Defense