GAO Faults Lax Management of Defense Contracts The Government Accountability Office warned that the Defense Department is not following “sound business arrangements” in awarding and managing many of its contracts. In congressional testimony Sept. 7, the head of GAO, Comptroller General David Walker, said DOD is relying more and more on contractors, especially for services, but its overworked acquisition workforce often fails to monitor contractor performance. “If appropriate monitoring is not being done, DOD is at risk for paying contractors more than the value of the services they performed,” he told the House Appropriations Committee’s Defense Subcommittee. Walker said DOD procurement in 2005 totaled about $270 billion, an 88% increase over fiscal 2000, but the size of its acquisition workforce has remained flat. GAO found that performance monitors were not appointed on many contracts, and some others were overseen by part-time monitors. Kenneth Krieg, undersecretary of Defense for acquisition, technology and logistics, testified that creating a 21st-century acquisitions workforce was his number-one goal. Walker also criticized DOD’s heavy use of sole-source contracts. He said the Army relied on sole-source awards to hire security guards at 46 bases at a cost of $495 million, but Army officials acknowledged those contracts cost 25% more than security contracts that were competed. He repeated GAO’s call for tighter restrictions on incentive awards to contractors. He said DOD paid $8 billion in award fees, some of it on contracts that were behind schedule or over budget. He said the department should not give award fees to companies whose performance was graded only “satisfactory.” DOD has previously rejected that recommendation. (SAA, 4/7) GAO also found that DOD acquisition policies were not followed on many contracts, but officials who violated the policies were rarely held accountable. Subcommittee Chairman C.W. “Bill” Young pointed out that DOD’s own figures show the latest cost estimates for 25 of 85 major programs are 50% higher than the original estimates. “It appears that cost estimates for major programs are understated at the outset in order to get military service, (Office of the Secretary of Defense) and congressional buy-in,” he said. ”This is exacerbated by the tendency of the services to add new requirements during system development.”