Defense Department continues to overpay contractors

The Defense Department continues to make improper payments to contractors for their services, and reimbursements take longer than they should, according to a General Accounting Office report released Monday. In its report, GAO looked at 39 large government contractors, including Lockheed Martin Corp. and Boeing, who returned overpayments totaling $351 million in fiscal 1999. The contractors participating in GAO's study also reported $41 million in underpayments during the same period. Contract administration actions accounted for 77 percent of the overpayments, while billing or payment errors made up 18 percent. According to the Defense Finance and Accounting Service, the government overpaid contractors at least $670 million in fiscal 1999 and nearly $1 billion in fiscal 2000. "While these amounts represent a small portion of the total amount paid to contractors, they represent a substantial amount of cash in the hands of contractors beyond what is intended to finance and pay for the goods and services bought by DoD," said the report. GAO also said the government is not being promptly reimbursed: Contractors took more than 30 days to repay at least 39 percent of the $351 million they owed the government.

More than 70 percent of underpayments took longer than 30 days to resolve. The 1982 Prompt Payment Act and federal acquisition regulations require agencies to pay invoices for delivered items within 30 days. According to GAO, overpayments to contractors frequently occur when discrepancies arise between the actual costs incurred during a project and the original cost estimate. Contracting officers must monitor project progress and take action if progress lags behind payments, adjusting liquidation rates accordingly. The contracting officer is responsible for ensuring the government receives a refund when there is a change in the project schedule or quantity of items delivered by the contractor. Contractors attributed underpayments to cost miscalculations on the part of the Defense Finance and Accounting Service. GAO recommended that the Defense Contract Management Agency routinely review Defense data to uncover the reasons for overpayments and encourage contractors to refund excess payments promptly. The Defense Department partially agreed with GAO's findings, and said it plans to do an initial review of overpayment data to see whether regular review is necessary. However, the department disputed GAO's definition of "excess overpayments," instead characterizing the recoupment of money from contractors or additional payments to them as a normal part of the process. "It is misleading to characterize these amounts as excess payments. These amounts were, in general, proper at the time they were paid to contractors. They become 'excess payments' only if the contractor delays in making repayment after the adjustment process is completed," said Deidre A. Lee, director of Defense procurement, in a response to GAO's findings.

Stay up-to-date with federal news alerts and analysis — Sign up for GovExec's email newsletters.
FROM OUR SPONSORS
JOIN THE DISCUSSION
Close [ x ] More from GovExec
 
 

Thank you for subscribing to newsletters from GovExec.com.
We think these reports might interest you:

  • Sponsored by G Suite

    Cross-Agency Teamwork, Anytime and Anywhere

    Dan McCrae, director of IT service delivery division, National Oceanic and Atmospheric Administration (NOAA)

    Download
  • Data-Centric Security vs. Database-Level Security

    Database-level encryption had its origins in the 1990s and early 2000s in response to very basic risks which largely revolved around the theft of servers, backup tapes and other physical-layer assets. As noted in Verizon’s 2014, Data Breach Investigations Report (DBIR)1, threats today are far more advanced and dangerous.

    Download
  • Federal IT Applications: Assessing Government's Core Drivers

    In order to better understand the current state of external and internal-facing agency workplace applications, Government Business Council (GBC) and Riverbed undertook an in-depth research study of federal employees. Overall, survey findings indicate that federal IT applications still face a gamut of challenges with regard to quality, reliability, and performance management.

    Download
  • PIV- I And Multifactor Authentication: The Best Defense for Federal Government Contractors

    This white paper explores NIST SP 800-171 and why compliance is critical to federal government contractors, especially those that work with the Department of Defense, as well as how leveraging PIV-I credentialing with multifactor authentication can be used as a defense against cyberattacks

    Download
  • Toward A More Innovative Government

    This research study aims to understand how state and local leaders regard their agency’s innovation efforts and what they are doing to overcome the challenges they face in successfully implementing these efforts.

    Download
  • From Volume to Value: UK’s NHS Digital Provides U.S. Healthcare Agencies A Roadmap For Value-Based Payment Models

    The U.S. healthcare industry is rapidly moving away from traditional fee-for-service models and towards value-based purchasing that reimburses physicians for quality of care in place of frequency of care.

    Download
  • GBC Flash Poll: Is Your Agency Safe?

    Federal leaders weigh in on the state of information security

    Download

When you download a report, your information may be shared with the underwriters of that document.