TITLE

Defense Contractor Restructuring: DOD Risks Forfeiting Savings on Fixed-Price Contracts: NSIAD-98-162

PUB. DATE
July 1998
SOURCE
GAO Reports;7/17/1998, p1
SOURCE TYPE
Government Document
DOC. TYPE
Article
ABSTRACT
The National Defense Authorization Act for Fiscal Year 1995 required GAO to report periodically on the implementation of the Defense Department's (DOD) policy on defense contractor restructuring. This report focuses on DOD's use of contract price adjustment clauses, also called reopener clauses, which can be used to ensure that DOD receives its fair share of contractor restructuring savings on fixed-price contracts awarded to companies involved in a business combination between the time a combination is announced and the time the restructuring savings are reflected in the mechanism used for pricing contracts. GAO found the time it takes for restructuring savings to be included in DOD contract prices can be considerable. For the contractor business segments GAO examined, it took an average of about 21 months from the announcement of the acquisition or merger to the time that contractors reflect the restructuring savings in reduced overhead rates.
ACCESSION #
18223871

 

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