Report | April 30, 2015

Complaint Regarding the Award of a $576 Million Navy Contract Without Appropriate Consideration of Audit Findings



We conducted this evaluation to determine the validity of a complaint alleging that a Navy contracting officer awarded a $576 million contract without appropriately considering significant findings reported by the Defense Contract Audit Agency (DCAA). 


We substantiated the complaint. We found that the contracting officer did not:

  • obtain the required prime contractor’s subcontract cost or pricing data in accordance with Federal Acquisition Regulation (FAR) 15.403 and 15.404 and
  • address DCAA-questioned material costs of $8.8 million as required by FAR 15.406 and Defense Federal Acquisition Regulation Supplement (DFARS), Procedures, Guidance, and Information (PGI) 215.406-1(b)(i).  

As a result, the Navy could not demonstrate that the negotiated $576 million contract price was fair and reasonable. The contracting officer may have achieved significant savings for the Government if he had complied with FAR and DFARS requirements and appropriately considered the audit findings.


We recommend that the Deputy Assistant Secretary of the Navy for Acquisition and Procurement implement procedures and provide training at the Naval Supply Systems Command Weapon Systems Support Philadelphia facility to help ensure contracting officers comply with the FAR 15.4 requirements for obtaining cost or pricing data, and appropriately resolve DCAA audit findings.

Management Comments

In a March 31, 2015, response, the Deputy Assistant Secretary of the Navy (Acquisition and Procurement) concurred with the reported recommendations. Comments on the recommendations were fully responsive and no additional comments are required.