NCJ Number
72235
Date Published
1977
Length
9 pages
Annotation
This review examines whether the Department of Defense (DOD) obtains full reimbursement for the sale of defense articles to foreign governments, pursuant to the International Security Assistance and Arms Export Control Act of 1976.
Abstract
Sufficient management attention has not been given to the recovery of normal inventory losses on the sale of nonstock fund inventory items, although for 8 years DOD has issued instructions requiring the recovery of these losses from foreign governments under supply support arrangements. Furthermore, Defense's policies on sales from inventory not covered by supply support arrangements are costing the U.S. Government millions of dollars. Inclusion of these costs would be consistent with the intent of the Arms Act that Defense appropriations not subsidize foreign military sales. Unless timely action is taken by Defense to change its policy, additional millions of dollars will not be recovered. In recovering costs up to and including final billing, DOD standard sales contract provides that adjustments may be made to estimated costs when they are not commensurate with actual costs incurred. Therefore, any cost not recovered by the military services on those sales contracts should be subsequently billed. Adjustments to final billings are permitted when there are unauthorized deviation from DOD pricing policies. The longer DOD takes to collect undercharges, the more difficult it will be to recover these costs from foreign governments. Until action is taken to attempt to collect undercharges, the military service should not make any final billings for those contracts in which undercharges occurred. The DOD should change its pricing policy, requiring the inclusion of normal inventory losses in charges to foreign governments for all nonstock fund items sold from Defense inventories. The military services should implement Defense policies on the recovery of these losses and should attempt to recover previously unbilled costs in all cases, regardless of whether a final billing has been made.