Air Force to contractors: watch your expenses.

• Author: Erwin, Sandra I.
• Position: Defense Insider

* U.S. Air Force weapon buyers are asking suppliers to be more "transparent" in how they price weapon systems and to reduce overhead expenses that are billed to the government.

Recent audits of Air Force programs have revealed that "sometimes we were paying more than we should have," says Maj. Gen. Wendy M. Masiello, Air Force deputy assistant secretary for contracting.

One of the reasons why some projects have drawn attention is excessive contractor profits, Masiello says. In several programs "our industry partners in fact were paid a lot more profit than we had anticipated."

These are isolated cases, she says, and the problem is not widespread across Air Force programs.

During flush times, contractor profits are less scrutinized, but now that funding for weapon programs is expected to decline, there will be less tolerance for questionable expenses that are billed to the U.S. government, she says.

Air Force acquisitions managers also are expected to use more fixed-price incentive contracts to keep prices down. That is easier said than done, however, Masiello says. Most program officials are more comfortable issuing cost-plus awards, in which contractors are reimbursed for expenses plus a pre-negotiated fee. As part of a broader effort to cut costs, the Defense Department is now requiring military program managers to use fixed-price contracts for projects that use mature technologies.

"We are being challenged now to look at every one of our acquisitions in a...