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Newly Issued DoD Contract Finance Study

The Principal Director, Defense Pricing and Contracting (DPC) recently released a new “Department of Defense Contract Finance Study” report along with associated supporting appendices. According to…

Newly Issued DoD Contract Finance Study

Newly Issued DoD Contract Finance Study
Bill Kobren

The Principal Director, Defense Pricing and Contracting (DPC) recently released a new “Department of Defense Contract Finance Study” report along with associated supporting appendices. According to the DPC Director, “this memorandum issues the Department of Defense (DoD) Contract Finance Study. The Study was the first comprehensive review of contract financing since 1985. Defense Pricing and Contracting (DPC) performed the Study in response to a Government Accountability Office (GAO) recommendation that the Department conduct a comprehensive assessment of the effect that its contract financing and profit policies have on the defense industry. The Study report includes 16 recommendations for action within the following seven tenets:

  1. Recognize the role of profit and cash flow in a healthy defense industrial base;
  2. Improve means to ensure timely payments to subcontractors;
  3. Ensure progress payment rates reflect the business environment;
  4. Assist small businesses on defense contracts with financing;
  5. Address perceived challenges with government accounting system;
  6. Determine effectiveness of performance-based payments; and
  7. Understand the role of interest”

The DPC website goes on to state “Background: In 2019, the U.S. Government Accountability Office (GAO) recommended that DoD conduct a comprehensive assessment of the effect that its contract financing and profit policies have on the defense industry. Accordingly, DoD initiated a comprehensive Defense Contract Finance Study at the end of 2019 to assess defense industry financial performance over a twenty-year timeframe. This 2023 Defense Contract Finance Study is published in two parts: