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We determined whether the Defense Contract Management Agency (DCMA) Santa Ana contract management office performed quality assurance (QA) procedures and oversight of contractors in accordance with applicable policies for critical safety items (CSIs). For this audit, we reviewed QA oversight of four contracts valued at about $278 million. The DCMA Santa Ana quality assurance representatives (QARs) assigned to four contracts did not adequately perform or document their QA surveillance. For all four contracts, QARs did not develop QA surveillance plans to mitigate risk, plan and perform reviews of key manufacturing processes, and execute or adequately perform product examination before final acceptance. This occurred primarily because first-level supervisors did not provide oversight of the nonresident QARs to minimize the risk of defective CSIs reaching the warfighter. As a result, DCMA Santa Ana officials provided limited assurance that 18,507 critical safety items, consisting of T-11 parachutes, oxygen masks, drone parachutes, and breathing apparatuses met contract requirements. We recommend that the Director, DCMA Santa Ana contract management office verify that QARs developed adequate QA surveillance plans and performed process reviews and product examinations; certify that the supervisory reviews of QARs were accurate, complete, and timely; and perform a risk analysis in coordination with Service Engineers to identify QA risk areas and determine the need to recall or restrict the use of CSI items previously accepted.

We conducted this audit in response to a congressional request for the DoD Inspector General to investigate a constituent's complaint concerning an improper contract award for disc-rotor technology. We determined whether Defense Advanced Research Projects Agency (DARPA) personnel complied with Federal laws and DoD guidance when awarding contracts to The Boeing Company (Boeing) for disc-rotor technology research and development. The audit showed that DARPA personnel followed Federal and DoD acquisition regulations when awarding two contracts for disc-rotor technology research and development to Boeing. The total obligated value of the contracts was about $8.9 million as of June 20, 2013. Specifically, DARPA personnel properly awarded contract HR0011-07-C-0076 to Boeing on June 25, 2007, for $499,972, to perform a seedling concept study, a disc-rotor research effort, with Virginia Polytechnic Institute and State University (VPI). DARPA contracting personnel competitively awarded the contract based on Boeing's white paper and subsequent proposal submission to Broad Agency Announcement 06-15 to develop innovative ideas in the areas of aerospace systems and tactical multipliers. DARPA personnel received 147 white paper topic submissions and 72 proposals to Broad Agency Announcement 06-15. DARPA properly awarded contract HR0011-09-C-0056 to Boeing on January 30, 2009, for about $7.3 million. DARPA contracting personnel properly awarded the noncompetitive contract as a logical follow-on to the earlier effort conducted by Boeing and VPI. DARPA also followed appropriate procedures when responding to the complainant's white paper and proposal submissions. DARPA personnel responded to three of four white paper submissions with a recommendation based on the relevance to the mission and a preliminary technical assessment. Finally, DARPA personnel appropriately notified the complainant that his proposals were not selected for award based on their evaluation.

We reviewed DoD, Afghan National Security Forces (ANSF), and contractor accountability for 7,157 night vision devices (NVDs) and associated spare tubes procured for the ANSF. Defense Security Cooperation Agency (DSCA) officials, NATO Training Mission-Afghanistan/Combined Security Transition Command-Afghanistan (NTM-A/CSTC-A) officials, ANSF officials, and DoD contractors did not maintain complete accountability for NVDs and associated spare tubes procured for the ANSF. Specifically, we identified that 342 NVD serial numbers were missing from the Security Cooperation Information Portal (SCIP) and 88 NVD serial numbers were missing from the Operational Verification of Reliable Logistics Oversight Database (OVERLORD) during our shipping document reconciliations; 113 NVD serial numbers were missing from SCIP and 40 NVD serial numbers were missing from OVERLORD in our SCIP and OVERLORD comparisons; 75 NVDs were unaccounted for during our physical inventory; and 397 discrepancies existed in the contractor's database and 518 discrepancies across four units' property books during our accountable record reconciliations. This occurred because DSCA officials did not provide adequate oversight to verify that U.S. Army Communications-Electronics Command (CECOM) and NTM-A/CSTC-A officials properly implemented procedures; NTM-A/CSTC-A officials did not always reconcile the NVDs received to the shipping documents, use SCIP for NVD accountability, perform complete physical inventories, and provide adequate oversight of DoD contractors and ANSF officials; and CECOM officials did not provide adequate oversight of DoD contractors. As a result, NVDs and associated spare tubes are more vulnerable to theft or loss, officials cannot rely on the data as a tool to determine NVD requirements, and officials cannot perform effective end-use monitoring.

Our objective was to determine whether DoD noncompetitive contract awards were properly justified as sole source. The audit reviewed contracts issued by the U.S. Army Contracting Command -- Aberdeen Proving Ground, Natick Contracting Division (NCD). We reviewed 22 contracts, valued at about $31.6 million, that NCD contracting personnel awarded in FY 2009 and FY 2010. NCD contracting personnel adequately justified contracts as sole source for 21 of the 22 noncompetitive contracts. However, contracting personnel did not provide adequate justification for the noncompetitive award of one contract, valued at about $265,000. This occurred because contracting personnel did not conduct market research or adequately discuss in the justification and approval (J&A) why market research was not conducted, and they did not obtain approval of the J&A before awarding the noncompetitive contract. In addition, NCD contracting personnel did not include one or both of the statements required in 10 of the 22 contracts to ensure that interested sources were aware of actions they could take if interested in competing for noncompetitive contracts. As a result, NCD contracting personnel may have been able to award the noncompetitive contract using full and open competition. Also, NCD contracting personnel may have been able to award the contract at a lower price if additional market research had been conducted and multiple sources had been available to meet the Government's needs. Because NCD contracting personnel did not include the statements required by Federal Acquisition Regulation (FAR) 5.207, interested sources may not have been aware of actions they could have taken to compete for the awards. However, overall, NCD contracting personnel generally complied with content requirements in FAR 6.303-2, obtained approval from the proper official as required by FAR 6.304 for the 22 J&As, and had an approved J&A before awarding 21 noncompetitive contracts as required by FAR 6.303.

We initiated this audit because of a DoD Hotline complaint made in 2009 concerning the Defense Contract Management Agencys (DCMA's) actions following the discovery of nonconforming cables used in avionics systems produced by Northrop Grumman's Navigation Systems Division (NSD). We reviewed the hotline complaint and evaluated DCMA's actions taken to address the nonconforming cables. We also reviewed DCMA's current policies and procedures on investigating and controlling nonconforming cables for avionic systems produced by NSD. However, since the 2009 DoD Hotline complaint, there have not been any nonconforming cables identified. The Hotline complaint included allegations related to the cables that Rapid Manufacturing (Rapid) produced for NSD. We determined that DCMA officials took appropriate actions to address the nonconforming Rapid cables. Specifically, DCMA issued three corrective action requests (CARs), notified customers, and conducted an evaluation of Rapid's cable production to validate the corrective actions NSD took. According to DCMA-Los Angeles officials, they conducted reviews of suppliers based on contract administration delegations, work priorities, and critical safety items. In addition, the DCMA-Los Angeles Quality Assurance Supervisor stated that her office had not followed the Government Contract Quality Assurance (GCQA) surveillance plan as directed by DCMA policy because of limited personnel resources. Our review determined that DCMA and NSD addressed and resolved the Rapid cable problem and that there have not been any nonconforming cables since the Hotline complaint. As a result, this memorandum discusses the actions NSD and DCMA took to correct the nonconforming cables and also addresses DCMA's oversight of NSD's cable suppliers.

We determined whether costs on contractor invoices for services performed for DoD were accurate, allowable, and allocable. In addition, we determined whether U.S. Army Medical Research Acquisition Activity (USAMRAA) officials and TRICARE Management Activity (TMA) officials adequately tracked funding on one task order. We reviewed 251 invoices, totaling $32.9 million, on 3 task orders, valued at $64 million. The contractor for the three task orders invoiced costs that were generally accurate, allowable, and allocable. Specifically, the contractor appropriately invoiced $9.4 million on 94 invoices reviewed; generally complied with its time and attendance policy for 1,156 time sheets; billed for labor categories and rates established in the task order or base contract for 111 labor invoices, totaling $19.5 million; and hired employees that met the requirements of their labor categories for 15 contractor employees of the 19 in our sample. The contractor's invoices included minor unallowable costs of $925, which have been credited to the Government. The contractor complied with Federal Acquisition Regulation Subpart 31.2, Contracts with Commercial Organizations, which defines accurate, allowable, and allocable costs. As a result, the Defense Finance and Accounting Service and the TMA Payment Office paid the contractor for appropriate costs. In addition, Defense Finance and Accounting Service and the TMA Payment Office paid 244 invoices, totaling $32.6 million, in accordance with the Prompt Payment Act. USAMRAA and TMA officials did not adequately track and deobligate funding on one task order because they were unaware of whose responsibility it was to track funding. As a result, $521,889 in funds were unavailable for other purposes.

Public Law 99-591, section 908(b) requires the DoD Inspector General to periodically audit undefinitized contractual actions (UCAs) and submit a report to Congress. This is a summary of five reports discussing DoD compliance with section 2326, title 10, United States Code. We reviewed a nonstatistical sample of 251 UCAs with a total not-to-exceed value of about $15 billion awarded by the Army Contracting Command-Redstone Arsenal, Naval Air Systems Command, Marine Corps Systems Command, Air Force Electronic Systems Center, and Air Force Space and Missile Systems Center from FY 2004 through FY 2009 to determine whether contracting personnel complied with the restrictions of the United States Code and whether they appropriately justified and definitized UCAs at reasonable prices. We found that DoD contracting personnel did not consistently comply with statutory and DoD requirements for managing UCAs for 216 of the 251 UCAs that we reviewed. As a result, DoD assumed additional cost risk and may have paid excessive profit and more than fair and reasonable prices. Defense Procurement and Acquisition Policy personnel should revise the Defense Federal Acquisition Regulation Supplement Procedures, Guidance, and Information 217.74 to provide additional guidance for managing UCAs.

We reviewed U.S. Army Medical Research Acquisition Activity (USAMRAA) task orders issued under multiple award contracts (MACs) for services to determine whether they were properly competed among all awardees and whether contracting officers' representatives (CORs) performed adequate oversight, including reviewing invoices. We reviewed 20 task orders valued at about $235.1 million. USAMRAA contracting officials generally provided fair opportunity to compete for task orders awarded under MACs. However, USAMRAA contracting officials did not prepare adequate justifications for the use of sole-source procurements on three task orders, valued at $8.7 million, because contracting officials relied on the logical follow-on exception without verifying if the exceptions were valid. In addition, contracting officials did not prepare adequate fair and reasonable price determinations on two task orders awarded with only one proposal, valued at $35.4 million, because they relied on inadequate independent government cost estimates when determining price reasonableness. As a result, USAMRAA had no assurance that the Government obtained the best value when issuing the five task orders. The CORs did not perform adequate surveillance on 19 task orders reviewed. Specifically, quality assurance surveillance plans (QASP) were either nonexistent or inadequate, and the CORs did not maintain evidence of written approval for deliverables. In addition, the CORs approved six invoices containing unsupported other direct costs (ODCs) totaling $139,916. This occurred because contracting officers and CORs did not understand QASP requirements. As a result, USAMRAA had no assurance that services acquired were being rendered fully as agreed to in the task orders or that contractors were not overpaid.

Civilian and military personnel involved in developing indefinite-delivery, indefinite-quantity (IDIQ) contracts and personnel who order off of IDIQ contracts should read this report. The report discusses compliance with Federal and DoD acquisition and contracting policy related to IDIQ contracts, participation of small businesses, information assurance requirements, effectiveness of internal controls, and the use of brand names. The World-Wide Satellite Systems (WWSS) program is procured through six IDIQ contracts that have a ceiling value of $5 billion and are available for up to 5 years. The WWSS contracts were awarded to six prime contractors, including four small businesses. The WWSS program encompasses six satellite terminals and associated support services for those terminals. The Inspector General (IG), DoD performed this audit to determine whether the award and administration of the WWSS contracts were consistent with Federal and DoD acquisition and contracting policy, including information assurance requirements and small business participation. The IG determined that the WWSS contracts were consistent with Federal and DoD acquisition and contracting policies for acquisition planning, commercial acquisition, contract clauses, ordering, performance-based contracting, solicitation, and source selection. However, the IG also determined that program officials did not adequately justify the specification of brand names for delivery orders awarded off of the WWSS contracts, as required by the Federal Acquisition Regulation. Using brand name requirements without justification potentially precludes consideration of similar or better products manufactured by another company at a lower cost. Therefore, the IG recommended that the contracting officer for the WWSS program comply with the Federal Acquisition Regulation policy regarding brand names and ensure future contract files contain written justification for every order using brand names.

Contracting personnel from the Army and other Federal agencies who are involved in information technology service acquisition decisions should read this report because it provides an assessment of how the Army can improve small business participation in indefinite-delivery, indefinite-quantity (IDIQ) contracts. The Inspector General (IG), DoD initiated the audit of the Army Information Technology Enterprise Solutions-2 Services (ITES-2S) contract because of the material impact this contract will have on the acquisition of information technology resources within DoD and the Federal Government. The ITES-2S contract has a ceiling price of $20 billion, a 3-year base period, and three 2-year option periods. The purpose of the ITES-2S contract is to support the Army enterprise infrastructure and infostructure goals with information technology services worldwide. The U.S. Army, DoD, and all other Federal agencies will be authorized to fulfill requirements under the ITES-2S contract. The Army Information Technology, E-Commerce, and Commercial Contracting Center contracting officials did not justify consolidating contract requirements for the ITES-2S contract. Also, the officials selected an inappropriate North American Industry Classification System (NAICS) code in the solicitation of the contract. As a result, ITES-2S is a bundled contract that improperly restricted small business competition and was unsuitable for small business award. Bundling a contract without justification violates U.S. Code and Federal regulations. The Army Contracting Agency internal controls were not adequate. The IG identified material internal control weaknesses on the adherence of the ITES-2S contract NAICS code to the Federal Acquisition Regulation requirements. The IG requested that the Assistant Secretary of the Army for Acquisition, Logistics, and Technology halt all ITES-2S contracting activity and future task orders until after the problems identified in this report are resolved.

Who Should Read This Report and Why? Managers of DoD information systems should read this report because it emphasizes the importance of continuity of operations planning for critical systems that may be disrupted during disasters. Background: On August 29, 2005, Hurricane Katrina devastated the Gulf Coast states of Louisiana, Mississippi, Alabama, and Florida with Category 3 winds and torrential rain. This audit report is the first in a planned series of audits on the effects of Hurricane Katrina on DoD information technology resources. Two Army logistics information technology systems operated by the 321st Theater Materiel Management Center Rear, located in Baton Rouge, Louisiana, experienced communications disruptions as a result of Hurricane Katrina. The Army information technology resources affected by Hurricane Katrina in Baton Rouge were categorized as Mission Assurance Category II systems. DoD Instruction 8500.2, "Information Assurance Implementation," February 6, 2003, requires Mission Assurance Category II systems to have a disaster plan that enables mission- or business-essential functions to resume within 24 hours. DoD Directive 3020.26, "Defense Continuity Plan," September 8, 2004, requires DoD Components to develop, coordinate, and maintain continuity plans, to update and reissue plans every 2 years; and to test and exercise continuity plans at least annually, or otherwise as directed.

This audit report is the second in a planned series of audits on the effects of Hurricane Katrina on DoD information technology resources. The first report, DoD Inspector General Report No. D-2007-006, "Hurricane Katrina Disaster Recovery Efforts Related to Army Information Technology Resources," October 19, 2006, discussed the effects of Hurricane Katrina on Army information technology resources operated by the 321st Theater Materiel Management Center. The Defense Information Systems Agency Continuity of Operations and Test Facility (DCTF), located in Slidell, Louisiana, experienced communications disruptions as a result of Hurricane Katrina. DCTF provides information technology services that consist of integrated environments for product evaluation; technology; functional, developmental, performance, and information assurance testing; operational assessments and demonstrations; and knowledge management. Federal policy requires all systems to have a contingency plan to ensure that service support continues through disruptions. In addition, DoD Directive 3020.26, "Defense Continuity Program," September 8, 2004, requires DoD Components to have a comprehensive and effective continuity program that ensures DoD Component mission-essential functions continue under all circumstances. The Directive also requires DoD Components to develop, coordinate, and maintain continuity plans; to update and reissue plans every 2 years; and to test and exercise continuity plans at least annually, or as otherwise directed.

The Federal Financial Management Improvement Act of 1996 mandates that financial management systems comply with Federal financial system requirements, Federal accounting standards, and the U.S. Standard General Ledger at the transaction level. Within DoD, those three mandates are generally referred to as Federal financial management systems requirements. In January 2001, DoD identified 187 critical systems and initiatives, and estimated that it will cost approximately $3.7 billion to correct system deficiencies and result in systems that are compliant with Federal financial management systems requirements. Objectives. Our objective was to determine the effectiveness of the DoD Financial and Feeder Systems Compliance Process to address compliance with applicable Federal financial management systems requirements. Specifically, we determined whether the DoD Financial and Feeder Systems Compliance Process would achieve compliance of both individual and integrated systems.

Our objective was to evaluate the status and operation of the Defense Environmental Security Corporate Information Management Program.

This report summarizes 20 audit reports and also analyzes recently issued studies and memorandums pertaining to the DoD process for developing quantitative munitions requirements. The auditors summarized reports and studies on the process from June 1994 through November 1999. The overall objective was to summarize audits of the munitions requirements determination process that were performed during the last 5 years by the General Accounting Office; the Inspector General, DoD; and the Military Departments. We included analyses of systemic problems that were identified in the reports, studies, and memorandums. We reviewed changes to overall guidance, the phased threat distribution development process, and the capabilities-based munitions requirement process resulting from the audits. We reviewed the management control program as it related to the overall objective.

This report is the sixth in a series of reports on DoD management and implementation of the capabilities-based munitions requirements process. The capabilities-based munitions requirements process identifies required procedures that the Military Departments and the U.S. Special Operations Command must follow to establish munitions requirements in support of the DoD Planning, Programming, and Budgeting System. The capabilities-based munitions requirements process requires that the Commanders in Chief of the Combatant Commands distribute outyear threats to the U.S. Special Operations Command and the Services based on their warfighting concept of Operations. Based on the threat distributions, U.S. Special Operations Command is to establish munitions requirements projected to the last year of the Future Years Defense Program to support planning for future procurements. The U. S. Special Operations Command did not use the capabilities-based munitions requirements process for classified munitions or those covered by special access programs. The flow chart on the preceding page illustrates the capabilities-based munitions requirements process. Previous reports addressed the capabilities-based munitions requirements theater models and associated analytical procedures used to generate threat distributions; the management of the capabilities-based munitions requirements process; and the Army, Navy, and Marine Corps processes, models, and assumptions used to generate quantitative requirements. A follow-on report will address the Air Force models and assumptions used to generate quantitative requirements.