DOD asserts more oversight of undefined contracts

Defense Department officials are requiring contracting officers to submit regular reports about contracts on which the contractor has started work even though the terms are not final.

Contracting officers must report plans for using contracts with undefinitized contract actions, or UCAs. The reports are intended to help DOD better manage the risks related to costs, according to an Aug. 29 memo from Shay Assad, director of Defense procurement, acquisition policy and strategic sourcing.

To get a handle on the UCAs, officials have created UCA management plans and semiannual consolidated UCA reports for actions worth more than $5 million, Assad said in the memo. The first management plan is due Sept. 28, and the initial consolidated report is due Oct. 31, according to the memo.

“Together, the plans and reports provide information on key aspects of UCA use and management, including actions taken to ensure timely and effective definitization,” Assad said in the memo.

A UCA is used when a contract’s terms, specifications or prices are not agreed to before the contractor begins the work. It can be a valuable tool for meeting urgent demands, Assad wrote. DOD procurement policy allows contracting officers to use UCAs when the negotiation of a contract isn’t possible in enough time to meet the government’s requirements or the work needs to start immediately.

“However, without appropriate management and controls, these instruments can lead to increased cost risks for the department,” he wrote.

Congress and the Government Accountability Office have found that DOD has had problems with following up on UCAs. In June 2007, GAO reported that DOD issued policies and guidance on UCAs but didn’t enforce the requirements. According to the report, some contracting officers said “their focus is on getting the UCA awarded; after that, they often must turn to other pressing awards so that following up on definitizations becomes less of a priority.”

This year, Congress mandated that DOD officials enforce its policies regarding UCAs. The fiscal 2008 National Defense Authorization Act (H.R. 4986) requires DOD officials to set detailed guidance on compliance and report to Congress about their plans to enforcement the guidelines.