Adequacy and Implementation of DoD Profit Policy
Abstract
Our announced audit objectives were to: evaluate the adequacy of the DoD Profit Policy-Final Rule, effective August 1987, and determine whether any additional changes were needed to increase its effectiveness, evaluate whether DoD contracting officers were fully implementing the profit policy and adequately documenting their profit decisions, and evaluate the effectiveness of DoD internal control policies, procedures, and practices applicable to preparation, supervisory review, and reporting of profit objectives. Using a combination of random statistical and judgmental sampling techniques, we selected for review 150 DD Forms 1547 amounting to $2.3 billion from the 1,101 forms totaling $16.9 billion in DoD's management information system for FY 1988. Details of the audit universe and sample selection are in Appendix B. We visited the 18 contracting and acquisition locations identified in Appendix C. Of the 150 forms selected, only 147 were actually reviewed because 2 of the forms did not require the use of profit factors and the third form used the old profit weighted guidelines method. The Defense Logistics Agency (DLA) was excluded from our audit universe because DLA contract actions were primarily competitive and small in dollar size. Also, DLA is not subject to the DFARS reporting requirements for completing DD Forms 1547. At each contracting activity, we reviewed profit data that contracting officers included in price negotiation memorandums to determine why weights and values were assigned to the profit factor items on the DD Form 1547. We compared the rationale in the price negotiation memorandums with criteria in DFARS 15.970-1 to evaluate why contracting officers were not complying with the DFARS requirements. We also reviewed contract negotiation files, including price negotiation memorandums, Government pricing and technical reports, and Defense Contract Audit Agency audit reports dated 1987 and 1988.
Document Details
- Document Type
- Technical Report
- Publication Date
- Dec 28, 1990
- Accession Number
- ADA380694
Entities
Organizations
- Office of the Inspector General, U.S. Department of Defense