**GAO-08-269**                      Published: Jan 25, 2008. Publicly Released: Jan 25, 2008.                  

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## Highlights

One-third of the Department of Defense's (DOD) fiscal year 2006 spending on goods and services was for subcontracts. Concerns have been raised among DOD auditors and Congress about the potential for excessive pass- through charges by contractors that add little or no value when work is subcontracted. To better understand this risk, Congress mandated that GAO assess the extent to which DOD may be vulnerable to these charges. This report examines (1) DOD's approach to assessing the risk of excessive pass-through charges when work is subcontracted, (2) the strategies selected private sector companies use to minimize risks of excessive pass-through charges when purchasing goods and services, and (3) DOD's interim rule to prevent excessive pass-through charges. GAO's work is based on analysis of 32 fiscal year 2005 DOD contract actions at 10 DOD top contracting locations and discussions with DOD acquisition policy, audit, and contracting officials, including Defense Contract Audit Agency (DCAA) and Defense Contract Management Agency (DCMA) staff. GAO also interviewed nine selected private sector companies with diverse contracting experience.

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## Topics

National Defense

CompetitionContract administrationContract costsContract oversightCost analysisDefense cost controlDefense procurementDepartment of Defense contractorsInteragency relationsPolicy evaluationPrivate sectorProcurement policyProcurement practicesReporting requirementsRisk assessmentRisk managementSubcontractors