Contract Management: DOD's Profit Policy Provision to Stimulate Innovation Needs Clarification

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A letter report issued by the General Accounting Office with an abstract that begins "In negotiating profit on contracts, the Department of Defense (DOD) requires contracting officers to set negotiating objectives by relying on guidelines in defense regulations. Congress mandated that DOD review its profit guidelines and consider whether modifying them would provide more incentive for contractors to develop and produce complex and innovative new technologies for weapon systems. After completing its review, DOD issued a final rule in December 2000 that added a technology incentive to its guidelines for setting profit objectives on negotiated defense contracts. This report reviews ... continued below

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United States. General Accounting Office. July 26, 2001.

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Description

A letter report issued by the General Accounting Office with an abstract that begins "In negotiating profit on contracts, the Department of Defense (DOD) requires contracting officers to set negotiating objectives by relying on guidelines in defense regulations. Congress mandated that DOD review its profit guidelines and consider whether modifying them would provide more incentive for contractors to develop and produce complex and innovative new technologies for weapon systems. After completing its review, DOD issued a final rule in December 2000 that added a technology incentive to its guidelines for setting profit objectives on negotiated defense contracts. This report reviews whether the new policy is (1) likely to achieve its intended objective of stimulating increased innovation and (2) consistent with the revised policies for acquiring weapons systems. GAO found that the new profit policy may have limited effect on incentivizing additional innovation because the policy has limited reach during research and development and it does not provide adequate guidance on when to apply the incentive. The policy may not reinforce DOD's emphasis on technology maturity in its guidance on the system acquisition process."

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Government Accountability Office Reports

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for the U.S. Congress investigating how the federal government spends taxpayers' money. Its goal is to increase accountability and improve the performance of the federal government. The Government Accountability Office Reports Collection consists of over 13,000 documents on a variety of topics ranging from fiscal issues to international affairs.

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  • July 26, 2001

Added to The UNT Digital Library

  • June 11, 2014, 5:03 a.m.

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United States. General Accounting Office. Contract Management: DOD's Profit Policy Provision to Stimulate Innovation Needs Clarification, report, July 26, 2001; Washington D.C.. (digital.library.unt.edu/ark:/67531/metadc294823/: accessed January 22, 2018), University of North Texas Libraries, Digital Library, digital.library.unt.edu; crediting UNT Libraries Government Documents Department.