Inspector General Robert P. Storch announced today that the Department of Defense Office of Inspector General released the “Audit of the DoD’s Oversight of Cost-Plus-Award-Fee Contracts.” The objective of this audit was to determine whether DoD contracting officials oversaw contractor performance and justified award fees paid for cost-plus-award-fee (CPAF) contract actions in accordance with Federal and DoD policies.
The report found that for the 27 contracts reviewed, DoD contracting officials generally provided effective oversight of the contractors’ performance and justified award fees paid on cost-plus-award-fee contracts. However, the audit also determined that contracting officials did not properly justify award fees paid for three contracts, which resulted in potential monetary benefits of at least $872,309. Contracting officials also did not properly administer and manage 21 of 27, or 78 percent of the CPAF contracts we reviewed, and the DoD did not accurately account for the universe of cost-plus-award-fee contracts and award fees paid to contractors.
“The findings in this audit illustrate the need for the DoD to improve its contracting practices,” said IG Storch. “Robust justifications for award fees paid to contractors reduce the risk that contractors are paid more than they earned.”
This report highlights concerns regarding the administration and management of cost-plus-award-fee contracts and determined these concerns occurred because the Military Departments and Defense agencies did not have adequate controls to ensure that contracting officials complied with Federal and DoD criteria and the Defense Pricing and Contracting office did not establish and implement a DoD-wide solution to capture cost-plus-award-fee contract data.
To address the issues identified in this report, the DoD OIG made a dozen recommendations to contracting officials, including recommendations to recalculate the award-fee amounts earned by two contractors, pursue compensation for overpayments, and follow Federal and DoD contract administration and management requirements. The DoD OIG also made recommendations to the Defense Pricing and Contracting office, including a recommendation to more accurately capture cost-plus-award-fee data.