Inspector General Robert P. Storch announced today that the Department of Defense Office of Inspector General released the “Evaluation of DoD Financial Responsibility Reviews on Prospective DoD Contractors.”
The DoD IG evaluated whether DoD contracting officers performed financial responsibility reviews on prospective contractors in accordance with the Federal Acquisition Regulation (FAR), Defense FAR Supplement (DFARS), and DoD Component policies. The OIG found that 80 percent of DoD contracts it evaluated did not have sufficient documentation to support the contracting officer’s positive determination of financial responsibility in accordance with the DFARS.
IG Storch stated, “Comprehensive documentation of financial responsibility reviews is essential for maintaining the integrity and credibility of the DoD’s contracting process and supports informed decision making.”
The evaluation concluded that, for 47 (or 80 percent) of the 59 contracts reviewed, DoD contracting officers did not obtain sufficient documentation to support their positive determination of financial responsibility in accordance with the DFARS. The report further identified that DoD Component policies do not establish the type and extent of documentation that DoD contracting officers should obtain and keep, to support a positive financial determination. By not adequately supporting their financial responsibility determinations, the DoD contracting officers for the 47 contracts, worth a combined value of more than $7.8 billion, may have subjected the Government to increased risk of prospective contractors not being able to financially perform on the contracts.
The DoD OIG made five recommendations to the Army, Navy, Air Force, and Defense Logistics Agency, including that the DoD Component contracting officers assigned to open contracts reevaluate and adequately document the contractors’ financial responsibility determinations. In addition, we recommend that the DoD Components update and implement their policies to describe the financial information required to document the determinations.
The DoD OIG will continue to monitor the DoD’s progress toward full implementation of these recommendations.