The Defense Department Inspector General’s office Wednesday released a financial management report finding improvement is needed in DoD progress payments for Ground Combat Vehicle (GCV) contracts, as contractors were allowed to receive more payments than federal acquisition regulations allowed.

Bradleys_USArmyArmy Contracting Command–Warren (ACC-Warren) procurement contracting officers (PCO) “provided two DoD contractors the ability to obtain $110 million more in financing payments than were allowable under the FAR and increasing the effective progress payment rate above the 80 percent FAR threshold without proper approval,” the IG report said. “Additionally, ACC–Warren PCOs did not request or obtain an adequate amount of consideration. Using DoD guidance, the PCOs should have requested at least an additional $1.3 million in consideration from the contractors.”

Among several actions, the report recommended the Executive Director, ACC–Warren, should: review and initiate contracting actions to ensure GCV contracts comply with the FAR contract financing requirements; issue internal guidance prohibiting the authorization of contracts containing both progress payments and performance-based payments; and consider appropriate action against the PCOs, including requiring additional contracting officer training.

The Army contracted with BAE Systems

and General Dynamics [GD] for the GCV Technology Development phase, planning to choose one contractor in fiscal year 2014 for engineering and manufacturing development (Defense Daily, May 24). Those contracts run out in the June time period. However, due to congressional action, a nearly $600 million request for the program was reduced to $100 million in the omnibus appropriations bill. However, the Army still supports the need for the new vehicle.

The IG’s objective was to examine progress payments for the GCV Technology Development Phase to find whether DoD officials “authorized and administered progress payments in DoD contracts in accordance with selected Federal Acquisition Regulation (FAR) and DoD policies.”

The IG found that Army Contracting Command–Warren (ACC–Warren) PCOs “inappropriately” allowed unusual contract financing when they modified two GCV development contracts with award values totaling $889.7 million. The contract modifications authorized more financing payments for the contractors, though the contracts already included customary progress payments.

Also, the PCOs did not follow FAR and DoD guidance when negotiating consideration for the modifications, the report (DODIG-2014-039) said. This was because the PCOs “misunderstood the proper use and approval of contract financing payments. In one instance the PCO disregarded advice from the administrative contracting officer that the proposed contract actions did not comply with the FAR.”