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NSIAD-85-20 1 (1984-10-29)

handle is hein.gao/gaobabnnm0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 NATIONAL SECURITY AND INTERNATIONAL AFFAIRS DIVISION B-216239 OCTOBER 29, 1984 The Honorable Caspar W. Weinberger The Secretary of Defense Dear Mr. Secretary: Subject: Ambiguous Federal Acquisition Regulation Criteria on Defense Contractors' Public Relations Costs (GAO/NSIAD-85-20) f On July 25, 1984, we testified before the Subcommittee on Legislation and National Security of the House Committee on Gov- ernment Operations, on the need to strengthen the criteria gov- erning the allowability of defense contractors' public relations (PR) costs. This hearing focused on such expenses as advertis- ing; selling; entertainment; and trade, business, technical, and professional activity costs. Recently, we reviewed contracting officer final overhead cost settlements at 12 contracting activities. Our work was performed in accordance with generally accepted government auditing standards. In reviewing the settlements, we observed what we believe is a fundamental problem in the way these costs are treated in determining whether or not they are allowable. The problem lies in the ambiguity of certain Federal Acquisition Regulation (FAR) criteria for determining what is an allowable contract cost. This ambiguity causes contractors, the Defense Contract Audit Agency (DCAA), and contracting officers to have differing interpretations on allowability. If a contractor believes a specific cost item is subject to interpretation, the contractor generally includes the cost in overhead. DCAA, in doing its contractor overhead audits, and using the same FAR criteria, will often advise the contracting officer that in its opinion the costs should not be allowed in overhead. If the contractor does not concede the questioned costs, and if the contracting officer chooses not to unilaterally disallow the costs, they will be introduced into negotiations between the contracting officer and the contractor. (942090)