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The Army’s Corrective Actions Improved Cost Measures for Stryker Vehicle Contracts

DODIG-2017-080

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May 9, 2017 — Objective

We determined whether the Program Executive Office for Ground Combat Systems effectively implemented corrective actions related to Recommendations 1.c through 1.e in DoD OIG Report No. DODIG-2012-102, “Better Cost-Control Measures Are Needed on the Army’s Cost-Reimbursable Services Contract for Logistics Support of Stryker Vehicles,” June 18, 2012.

Background

In previous DoD OIG Report No. DODIG-2012-102, we evaluated the effectiveness of the contractor logistics support strategy, involving contractor performance metrics and contract type, for sustainment of the Stryker vehicles.  The DoD OIG determined that officials with the Project Management Office for the Stryker Brigade Combat Team and Army Contracting Command, located in Warren, Michigan, did not implement adequate cost-control procedures on a cost-reimbursable services contract for logistics support of Stryker vehicles awarded to General Dynamic Land Systems. The DoD OIG included recommendations to improve cost-control measures on service contracts for Stryker logistics support. Recommendation 1.c that stated the Program Management Office for Stryker Brigade Combat Team should define contract remedies that include both positive and negative fee measures related to the number of times inventory is used and replaced during a given period (inventory turns) and inventory accuracy metrics for Stryker vehicles.  

Recommendation 1.d stated that the Program Executive Office for Ground Combat Systems, with the support of the Executive Director, Army Contracting Command, located in Warren, Michigan, (Army Contracting Command–Warren) requires the Program Management Office for Stryker Brigade Combat Team to use one of the basic contract forms, either: (1) a term-form contract in which the contractor is required to provide a specified level of effort for a stated period of time, with satisfactory performance or (2) a completion-form contract in which the contractor is required to deliver a specified, definitive end product and a tangible deliverable if logistics support Stryker vehicles are procured under a cost-reimbursable contract as required by the Federal Acquisition Regulation.1

Recommendation 1.e stated that the Program Executive Office for Ground Combat Systems, with the support of the Executive Director, Army Contracting Command–Warren, requires the Program Management Office for Stryker Brigade Combat Team to determine which portions of the Stryker logistics support contract can be transitioned to lower risk firm-fixed-price or fixed-price incentive type contracts and take appropriate action.

Finding

Officials from the Program Management Office for Stryker Brigade Combat Team and Army Contracting Command–Warren effectively completed corrective actions related to Recommendations 1.c through 1.e. Specifically, the Program Management Office for Stryker Brigade Combat Team and Army Contracting Command–Warren officials:

  • awarded a cost-plus-incentive-fee contract for wholesale supply services to encourage successful inventory management performance measured in terms of inventory turns and inventory accuracy; and
  • identified cost-plus-fixed-fee line items in the sustainment services contract as either a term-form or a completion-form contract in accordance with the Federal Acquisition Regulation.

Furthermore, the Program Management Office for Stryker Brigade Combat Team performed a business case analysis that considered the benefits between  a lower risk fixed-price incentive contract and cost-plus-incentive-fee contract, and determined that the use of a cost-plus-incentive-fee contract presented the least amount of schedule and performance risk to both the DoD and the contractor.

Recommendations

We did not make any recommendations in this report.  The Program Management Office for Stryker Brigade Combat Team and Army Contracting Command–Warren officials effectively completed corrective actions for DoD OIG Report No. DODIG-2012-102, Recommendations 1.c through 1.e, mitigating the  potential for excessive cost on performance-based logistics contracts for sustainment services and wholesale spare parts supply services to support the Stryker vehicle. Therefore, we consider recommendations 1.c through 1.e from DoD OIG Report No. DODIG-2012-102 closed.

Management Comments and Our Response

We provided a discussion draft of this report to management for review and comment. Management concurred with our conclusion and did not have any comments on the discussion draft. No written response to this report is required.


1 Federal Acquisition Regulation Part 16, “Types of Contracts,” Subpart 16.3, “Cost-Reimbursement Contracts,” 16.306, “Cost-Plus-Fixed-Fee Contracts.”