Contract Management: DOD's Profit Policy Provision to Stimulate Innovation Needs Clarification
GENERAL ACCOUNTING OFFICE WASHINGTON DC
Pagination or Media Count:
In negotiating profit on contracts, the Department of Defense DOD requires contracting officers to set negotiating objectives by relying on guidelines contained in defense regulations. Congress mandated in the National Defense Authorization Act for Fiscal Year 2000 P.L. 106-65, Oct. 5, 1999 that DOD review its profit guidelines and consider whether modifying those guidelines would provide an increased 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. At your request, we reviewed DODs change to its profit policy to determine whether the new policy is 1 likely to achieve its intended objective of stimulating increased innovation and 2 consistent with its revised policies for acquiring weapon systems.
- Administration and Management