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![handle is hein.gao/gaobaaxgq0001 and id is 1 raw text is:
DOCURUET RESURE
05960 - (B1426448]
[Use of Letters of Credit for Payments to Defenae Cnrtractors].
FGHSD-78-37; B-39995. Bay 18, 1978. 7 pp.
Report to Arthur Schoenhaut, Executive Secretary, Cost
Accounting Standards Board; by D. L. Scantlebury, Director,
Financial and General Banageneut Studies Div.
Issue Area: Accounting and Financial Raportin- (2800);
Accounting and Financial Reporting: Sound Cash Hanagesent
(2805).
Contact: Financial and General management Studies Div.
Budget Function: National Defense: rSpaLtment of Defense -
P7 curement & Contracts (0-8), Hiscellaneous: Financial
Ha-agement and Information Systems (1002).
Organization Concerned: Department of Deiense; DepartPent of the
Treasury; Energy Research and Development Adainistration.
Congressional Relevance: Nouse Committee on Armed Services;
Senate Committee on Armed Services.
A determination was requested as to whether the
Department of Defense (DOD) could advantageously use letter of
credi.t ri'ocedures for paying contLacts authorized to be financed
by advances and progress payments. The Energy Research and
Development Administration saved substantial Interest costs by
using the letter of credit approach to pay advances to
contractors. Under most large DOD contracts, contractors are
financed by progress payments which are tied in with progress
made in completing work. The checks paid letter of cred4t system
would permit a more precise identification of the level of
Government and contractor inrestment in the working capital
needed to perform specific contracts. However, it would alter
the existing level of Government and contractor investient in
working capital, and its known benefits do not justify the
extensive changes that vculd be necessary in DCD's
administrative &nd accounting systeaR . accommodate this
approach. A decision on how to pay contractors should not be
made until ,ore important decisions are reached regarding the
desired level of Government and crontactr investment in working
capital and whether contractors are adequately ccopensated fox
their investment. (Author/HTV)](ViewImageLocal?handle=hein.gao/gaobaaxgq0001&div=1&collection=&method=preview&ext=.png&size=3)