Restructuring Activities - GAO Report 95-105

GAO Report - NSIAD-95-106

Pursuant to a legislative requirement, GAO reviewed the Department of Defense's (DOD) regulations regarding payments for contractors' business restructuring costs, focusing on whether the regulations:

• (1) are consistent with the Defense Authorization Act for Fiscal Year 1995 and other applicable procurement laws and regulations; and

• (2) ensure that restructuring costs are paid only when in the best interests of the United States.

GAO found that:

• (1) the DOD regulations do not comply with the authorization act's requirements because they do not require that all restructuring costs meet the certification requirements;

• (2) DOD makes a distinction in the types of restructuring activities and excludes so-called internal activity costs from the certification requirements;

• (3) internal activity costs are excluded from the act's certification requirements even if they are associated with the business combination;

• (4) the act does not distinguish between restructuring activities that are the result of the business combination;

• (5) DOD cannot ensure that payment of these restructuring costs are in the nation's best interest;

• (6) the regulations do not require contractor cost and savings data needed for DOD annual congressional reports to ensure that overall savings are obtained; and

• (7) DOD plans to pay restructuring costs up to the amount of the projected savings from the business restructuring, which will result in negligible savings to DOD.

GAO Report File:GAO - External Restructuring Cost Report.pdf