A recent audit suggests the Federal Aviation Administration overestimated the value of task orders on the NextGen project by almost $2 billion.
The Transportation Department’s inspector general issued the audit March 28 and listed problems with the awards, starting with the contract’s nearly $7.3 billion ceiling value.
Seven companies received contract awards for engineering support related to the air traffic control modernization project.
According to the audit, the FAA miscalculated the ceiling value and said the task orders on the contract add up to no more than $5.1 billion.
The contracts are based on labor-paid cost reimbursement with a fee based on labor hours used.
The contracts include a downward adjustment of the fee if FAA does not use all of the labor hours included on the contract estimate.
The downward adjustment would not result in the FAA paying out a fixed fee equal to the amount it would have paid with a lower contract ceiling, auditors wrote.
The overestimate incorrectly resulted in an increase of the fixed fee calculation, according to the audit.
FAA may pay contractors more in fixed fees than the agency should be paying and will have to account for the overpayments at the end of the contracts, auditors wrote.
FAA officials responding to the audit saying they overestimated the cost to give them flexibility in distributing hours among contracts.
Auditors said the FAA already had that flexibility without the inflation.
The audit also points to a lack of performance-based acquisition and a narrow approach on past performance evaluations, the audit said.