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B-183079 1 (1978-04-19)

handle is hein.gao/gaobabjks0001 and id is 1 raw text is: COMF;tOLtLR GENERAL OF THE NITEO STATES WASHIOTO, D.C. 3054 B-183079 (A qC .APR1978 The Honorable William Proxmire Chairman, Committee on Banking, ' Housing and Urban Affairs United States Senate Dear Hr. Chnirmant: This is in reference to your. letter dated April 4# 1978, dealing with your concerTjs about section 509 off 5. 1264, the Federal Acquisltion Act of 1977.-1 As you noted, section 509 piovides for the waiver of certain Govern- ment surveillance requirements for contractor locations if they have more' than 75 percent of their business in commercial or competitive Government contracts,. You correctly noted that in testimony on S. 1264 and in a letter dated July 14, 1977, to the Senate Committee on Govert.mental Affairs, we opposed section 509 and urged its deletion. The version* of section 509 that we were discussing, however1 was significantly differe-.t from the one now under consideration. The objective of the waiver provision is to lessen the red tape and the burdensome Government surveillance effori that so many Government cnn- tractors are complaining of. A basic defect in the earlier version of the waiver provision was thait it would have applied to many major defense non- tractor activities. For this reason, we worked with Senator Chiles' staff to develop limitations on the application of the waiver in order to pre- serve essential Government controls on major Government procurements while relieving smaller contractors of some of the surveillance requirements. Thus, the $10 million limitation was written into section 509. Essentially, any coistractor activity that incurs more than $10 million in annual costs under nonprice-compet4tve contracts cannot obtain a waiver# We believe this effectively excludes the major Government contractor activities. For example, statistics indicate that ouly one of the contractors' locations covered in our report on Increased Costs to Government Under the Depart- ment of Defense Program to Reduce Audits could qualify for waivers under the currently proposed section 509 language, In this regard* it is also important to note that, during the period covered by our revleg, a con- tractor activity could become qualified for a waiver If it could uhow thit 50 percent of its costs were incurred under commnercial* or competitively awarded firm-fixed-.price contracts. This rat) was subsequently increased by the Department of Defense to 75 percent and section 509 also requires the 75 perceat rate. The higher percentage rate makes it much more diffi- cult for a contractor to become eligible for a waiver of Government sur- veillance requirements,

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