NSIAD-93-136 DOD Contracting: Techniques to Ensure Timely Payments to Subcontractors

This new, single-volume resource provides the most complete guidance available for analyzing the cost and pricing aspects of federal government contracts--so you can propose and negotiate appropriate prices and win contracts. The practical Contract Pricing Reference Guide reference combines five manuals into a single source, covering: Price Analysis Quantitative Techniques for Contract Pricing Cost Analysis Advanced Issues in Contract Pricing And Federal Contract Negotiation Techniques Determine the Proper Pricing to Win Government Business Throughout these pages, you will find highly detailed explanations of how the government evaluates proposals, arrives at pricing, chooses contractors, and awards contracts. With Contract Pricing Reference Guide, you can more confidently: Conduct market research for price analysis Employ proven techniques of quantitative price analysis Propose a fair and appropriate price Confidently engage in sealed bidding Include only what's allowable in the price Employ the most effective, competitive pricing strategies And engage in effective contract negotiations The One-of-a-Kind, Time-Saving Pricing Resource The all-new Contract Pricing Reference Guide provides a road-map for how to set correct pricing and engage in the competitive bidding process. It is a practical business tool to help you acquire government contract business--and it brings all the most valuable pricing information together in an easy-access, single-volume resource that puts everything you need literally right in front of you. No other resource delivers all of this together in one place, making it the most convenient way to obtain the most vital information on pricing government contracts.

Under time-and-materials contracts, payments to contractors are made based on the number of labor hours billed at hourly rates and, if applicable, other direct costs. Because of the risk they pose to the government, their use is supposed to be limited to cases where no other contract type is suitable. GAO was asked to identify trends in the Department of Defense's (DOD) obligations under time-and-materials contracts; analyze what DOD is buying under these contracts; assess why DOD is using them and whether actions are being taken to ensure that they are used only when no other contract type is suitable; evaluate DOD's monitoring of contractor performance; and determine the differences between the labor rates prime contractors bill DOD and the rates in their subcontracts. GAO reviewed 82 time-and-materials contracts, agreements, and orders and examined prime contract and subcontract labor rates on 12 additional contracts or agreements.

Congress enacted laws, such as the Miller Act (United States Code, title 40, section 270) and the Prompt Payment Act (United States Code, title 31, sections 3903 and 3905), to ensure that construction contractors pay subcontractors in a timely manner. In FYs 1990 through 1992, DoD awarded construction contracts totaling about $19 billion. The audit was required by the FYs 1992 and 1993 National Defense Authorization Act, section 806, "Payment Protections for Subcontractors and Suppliers." Effective September 8, 1992, provisions of the Act dealing with prompt payments for construction contractors were incorporated into the Defense Federal Acquisition Regulation Supplement subpart 228.1, "Bonds," and section 232.970, "Payment of Subcontractors."

Under time-and-materials contracts, payments to contractors are made based on the number of labor hours billed at hourly rates and, if applicable, other direct costs. Because of the risk they pose to the government, their use is supposed to be limited to cases where no other contract type is suitable. GAO was asked to identify trends in the Department of Defense's (DoD) obligations under time-and-materials contracts; analyze what DoD is buying under these contracts; assess why DoD is using them and whether actions are being taken to ensure that they are used only when no other contract type is suitable; evaluate DoD's monitoring of contractor performance; and determine the differences between the labor rates prime contractors bill DoD and the rates in their subcontracts. GAO reviewed 82 time-and-materials contracts, agreements, and orders and examined prime contract and subcontract labor rates on 12 additional contracts or agreements. GAO is recommending that DoD require more diligence in justifying the use of certain types of time-and-materials contracts, analyze the use of time-and-materials on indefinite-quantity contracts to ensure that it does not become the default contract type, and require monitoring plans to reflect the risks inherent in this contract type. In written comments on a draft of this report, DoD concurred with the recommendations.