Billions of dollars in Air Force projects may have cost more than they were worth, according to a report by the Inspector General for the Department of Defense.
For almost half the projects the DOD IG reviewed, worth almost $9 billion, the Air Force didn’t properly enforce rules that keep contract expenses down. Project managers inconsistently followed the process for using cost-reimbursable contracts, which lack a fixed price.“As a result, Air Force contracting personnel may increase the Air Force’s risk because cost-reimbursable contracts provide less incentive for contractors to control costs,” according to the DOD IG. Before approving such a project, officials must justify their choice, and show how the contract could transition to a fixed price later. The DOD IG review found several problems with the Air Force’s internal controls for approving the contracts. For 39 of the 156 projects reviewed, project managers didn’t get permission to use a cost-reimbursable contract. Officials didn’t justify use of the contracts for 25 more, and didn’t plan for a transition to fixed price for 42 more, worth $8 billion. Some were unaware of the rule because Air Force bases didn’t always update guidance for contracts, according to the DOD IG. Others didn’t think the rule applied to them, and some followed the rule but didn’t document that fact. “As a result, Air Force contracting personnel continue to issue cost-reimbursable contracts that may inappropriately increase the Air Force’s contracting risks,” the DOD IG report said.
The DOD IG recommended the Air Force emphasize the contract rules, require better documentation and encourage hybrid contracts to keep costs down.