The Government Accountability Office released a report on Thursday detailing how that the Department of Defense has failed to regularly assess the impact of its contract financing policies to industry since 1985. GAO analyzed DoD’s progress payments, which are based on costs the contractor incurred, as well as its performance-based payments as part of the study.
According to the report, the Pentagon didn’t comprehensively analyze how its payment policies impact the defense industry despite economic changes that occurred since 1985 including lower interest rates and the emergence of nontraditional companies. DoD officials noted that it failed to assess factors such as contractor profitability and financing policy changes upon the release of a proposed rule to incentivize contractor performance in 2018.
The government watchdog said that until the DoD regularly conducts a comprehensive assessment of payment policies’ impact to the private sector, it will “not be in a position to understand whether current or future contract financing policies are achieving their intended objectives.”