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News | Jan. 21, 2025

Press Release: Audit of the Army’s Management of Undefinitized Contract Actions Awarded to Provide Ukraine Assistance (Report No. DODIG-2025-059)

Audit

Inspector General Robert P. Storch announced today that the Department of Defense Office of Inspector General (DoD OIG) released the “Audit of the Army’s Management of Undefinitized Contract Actions Awarded to Provide Ukraine Assistance.” Undefinitized contract actions (UCAs) are an essential tool that allows the Army to rapidly respond to urgent operational needs, enabling timely delivery of vital equipment and services during contingencies. This audit determined whether Army contracting officials properly managed UCAs awarded to assist Ukraine by obligating funds and definitizing actions within the required limits and adjusting profit for costs incurred, or properly waiving the requirements in accordance with Federal and DoD policies.

“Undefinitized contract actions require particularly diligent oversight to protect taxpayer resources and maintain accountability,” said IG Storch. “This sort of contracting serves an important purpose, but the Army needs to establish additional procedures and oversight to ensure it is reducing unnecessary financial risk and potential for wasted taxpayer dollars.”

The audit highlights that, although Army contracting personnel generally awarded the UCAs and obligated the funds in accordance with federal and DoD policies, Army contracting personnel did not manage 18, or three-quarters, of the 24 UCAs sampled in accordance with federal and DoD policies. Specifically, Army contracting personnel did not obtain qualifying proposals by required dates, definitize UCAs in required timeframes, or comply with DoD requirements related to adjusting profit for the 18 UCAs, totaling $6.2 billion. This occurred because Army contracting personnel established unrealistic timeframes in definitization schedules, did not use their authority to withhold payments or unilaterally definitize, interpreted guidance inconsistently on when to start the 180-day period to definitize, and prepared an outdated form when calculating the Government’s profit objective.

As a result, the DoD took on unnecessary financial risk. During the undefinitized periods, the DoD incurred most of the cost of the contracts and risked paying increased costs. In addition, without adequate procedures to assess incurred costs and adjust profit rates, contractors have little incentive to control costs and provide timely qualifying proposals, creating a potential for wasted taxpayer dollars. Therefore, the DoD needs to ensure it is using UCAs only when necessary, negotiating them within the required timeframes, and adjusting profit rates for contract risk to reflect incurred costs.

The DoD OIG made 14 recommendations to the Commander, Army Contracting Command, including recommendations to implement procedures to establish realistic qualifying proposal due dates in definitization schedules, implement policy to standardize how contracting personnel establish the beginning of the 180-day period to definitize, and implement procedures to document contracting officers’ consideration of reduced cost risk during the undefinitized period.

The DoD OIG will monitor the implementation of the recommendations in this report.