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AGA
~GA 0
4 A aointablty I Integrity * Reliability
United States Government Accountability Office
Washington, DC 20548
October 28, 2010
The Honorable Carl Levin
Chairman
The Honorable John McCain
Ranking Member
Committee on Armed Services
United States Senate
The Honorable Ike Skelton
Chairman
The Honorable Howard P. McKeon
Ranking Member
Committee on Armed Services
House of Representatives
Subject: DEFENSE ACQUISITIONS: Additional Guidance Needed to Improve
Visibility into the Structure and Management of Major Weapon System
Subcontracts
According to some Department of Defense (DOD) and industry experts,
consolidation of the defense industry along with a shift in prime-contractor business
models has resulted in prime contractors subcontracting more work on the
production of weapon systems and concentrating instead on systems integration.
Based on some estimates, 60 to 70 percent of work on defense contracts is now done
by subcontractors, with certain industries aiming to outsource up to 80 percent of the
work. At the same time, there is evidence that subcontractor performance may
contribute to cost and schedule delays on weapon system programs.
Congress has raised questions about the extent to which primes are awarding
subcontracts competitively and about the government's insight into the process
prime contractors use for determining what work to make in-house and what work
should be bought from subcontractors (make-or-buy decisions).' In the 2009 Weapon
Systems Acquisition Reform Act (WSARA), Congress directed DOD, as part of efforts
'Weapon Systems Acquisition Reform Act of 2009 (WSARA), Pub. L. No. 111-23 § 202 (2009). These
provisions were incorporated in the Defense Federal Acquisition Regulation Supplement (DFARS) on
Feb. 24, 2010. Make or buy refers to the prime contractor's written plan for a contract identifying
those major items to be produced or work efforts to be performed in the prime contractor's facilities
and those to be subcontracted. Make items include those produced or performed by the prime's
affiliates, subsidiaries, or divisions. (FAR 2.1 and 15.407-2 [b]).
GAO-11-61R Subcontract Structure and Management](ViewImageLocal?handle=hein.gao/gaobaanve0001&div=1&collection=&method=preview&ext=.png&size=3)