Media reports and a hearing before the House Armed Services Committee last September have spurred concern about the prices the Defense Logistics Agency pays through so-called prime vendors, and the Government Accountability Office has said management attention is needed to improve oversight of the practice.
Prime contracting, in which the Department of Defense relies on a distributor to provide a product line to a given region — and identified as a best practice by GAO — accounted for about $9 billion of DLA’s $32 billion in sales and services for fiscal 2005, according to GAO-06-739R.
It said however that DoD does not provide adequate oversight of defense contracts.
The federal acquisition regulations and defense federal acquisition regulation supplement, govern the use of prime vendor contracts, DLA manages the program, and the Defense Supply Center Philadelphia manages prime vendor contracts for medical materiel, subsistence-garrison feeding, construction and equipment, and clothing and textiles, the report said.
It said one aspect of oversight is to ensure that the government is obtaining fair and reasonable contract prices by, for example, conducting price reviews and ensuring that prices agreed to at contract award are fair and reasonable.
Personnel at the Philadelphia supply center did not always conduct pricing reviews for the food service equipment and construction and equipment commodities, GAO said.
It said for example that the contracts for food service equipment required verification of price increases, but officials from the supply center were unable to provide documentation on why the price of an aircraft refrigerator increased from $13,825 in March 2002 to $32,642 in September 2004.
According to officials from the logistics agency and supply center, the problems occurred because management at the agency and supply center level were not providing adequate oversight to ensure that contracting personnel were monitoring prices, GAO said.
It said problems still occurred because of a lack of management oversight by logistics agency and supply center officials to ensure that the policies and procedures were followed and that the corrective actions were implemented.