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Amendment to Senate DOD Authorization Will Help Contractors Hide $76 Screws and 618% Price Hikes

May 26, 1999 


An amendment expected to be offered to the Senate Defense Department Authorization bill will give defense contractors a free ride from cost accounting standards (CAS). These standards apply to a majority of defense contracts and allow auditors to prevent overcharging of the government.

According to the attached September 4, 1998 letter from Defense Contract Audit Agency (DCAA) Deputy Director Michael Thibault to Under Secretary of Defense Jacques Gansler, the government-industry review panel that recommended limiting application of CAS, as the amendment is reported to do, was:

    ". . . primarily limited to obtaining industry input on the cost of doing business with the government . . . This apparent lack of balance in data gathering is disturbing. . ." [emphasis added]

Another strongly worded letter dated September 1, 1998 - this time from the DCAA's Defense Legal Services Senior Assistant General Counsel - elaborates on the problem:

    ". . .one must question the true agenda of those who chant the "CAS as a barrier" refrain. It must be to eliminate TINA [Truth in Negotiations Act] and Government audit as well as CAS. Only the complete elimination of the three-prong accounting protections will ensure reluctant commercial entities that they can enter into cost-based Government contracting without disruption to their way of doing business. The opportunists who would begin dismantling the accounting protection trilogy shouldn't be permitted the floor at this point." [emphasis added]

In conclusion, the DCAA's Senior Assistant General Counsel wrote:

    "My work makes me skeptical of the pre-ordained "theme" of our working group. We were told that changes have occurred in the procurement environment which necessitate changes in CAS. . . . Unless someone can show something truly new under the sun, something that is supported by auditable objective data, I must respectfully dissent from embracing or lending my name to the pre-ordained conclusion. Intellectual honesty won't permit." [emphasis added]

The amendment limiting application of the cost accounting standards will tie the hands of government auditors whose job it is to uncover defense contractor overbilling. In the last year, these government auditors have discovered $76 screws and 618% overcharging in spare parts prices. The American taxpayer can't afford this amendment.

Founded in 1981, the Project On Government Oversight (POGO) is a nonpartisan independent watchdog that champions good government reforms. POGO's investigations into corruption, misconduct, and conflicts of interest achieve a more effective, accountable, open, and ethical federal government.

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