Under Audit

By John Liang / October 29, 2010 at 3:11 PM

The Pentagon inspector general's office recently audited the Marine Corps Systems Command's undefinitized contract actions (UCAs), which "allow a contractor to begin work and incur costs before the government and the contractor have reached a final agreement on contract terms, specifications, or price."

The IG reviewed 88 UCAs worth about $2.75 billion awarded by MARCORSYSCOM from fiscal years 2004 through 2009, according to the Oct. 27 report, and found that command contracting officials "did not consistently comply with statutory requirements for managing 80 of the 88 UCAs." Further:

Contracting officials did not prepare adequate requests for authorization to issue 34 UCAs, justify the issuance of 34 UCAs, definitize 57 UCAs within time frames, support whether the contactor's reduced risk during the undefinitized period was reflected in profit for 45 UCAs, obligate funds within limits for 54 UCAs, or document that the government received a fair and reasonable price on 15 UCAs.

MCSC contracting officials did not consistently comply with UCA restrictions because they did not follow statutory and DOD regulations for requesting to issue a UCA; they issued UCAs unnecessarily because of poor acquisition planning, and customers changed requirements after the UCA issuance; the contractor submitted inadequate proposals; they did not adequately document the profit determination; they were unaware of funding limits; and they did not adequately document that the Marine Corps received a fair and reasonable price.

As a result, the Marine Corps assumed increased cost risk in the award and negotiation process and may have paid excess profit.

Consequently, the IG recommends:

Marine Corps officials should develop a guide to assist with UCA justification, obligation, and definitization compliance; develop procedures to ensure that all UCAs are approved by the head of the agency or delegate; develop procedures to ensure that UCA requests include the impact on agency requirements if contracting officials do not issue a UCA; develop track methods for definitization of UCAs; better coordinate with customers to identify changes in Government requirements; and require contracting officials to adequately document the profit determination for UCAs.

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