U.S. Department of Defense (DoD), Defense Contract Management Agency (DCMA), Defense Acquisition University (DAU), U.S. Congress

The following titles, parts, and sections of the Code of Federal Regulations (CFR) should be modified to close loopholes, eliminate wasteful spending, and restore accountability in defense contracts: 48 CFR Part 234 – Defense Procurement Sections: §§ 75.225, 75.250, 75.260 Rescission Focus: Modify provisions related to contractor responsibility, profit margins, and incentives for cost overruns. Strengthen procurement regulations to prevent excessive contractor profits, reduce wasteful spending, and enforce accountability in defense contracting by applying stricter standards for cost control and contractor performance. 48 CFR Part 235 – Research and Development Contracts Rescission Focus: Modify provisions that encourage excessive contract terms and inflated costs for R&D contracts. Tighten regulations to ensure that taxpayer dollars are spent efficiently, reducing unnecessary cost increases and ensuring accountability in R&D spending. 48 CFR Part 30 – Cost Accounting Standards Administration Rescission Focus: Rescind loopholes in cost accounting standards that allow contractors to inflate expenses and pass excessive costs to taxpayers. Strengthen accounting rules to ensure more transparency and accountability in reporting costs, ensuring funds are used efficiently. 10 U.S.C. § 2306 – Procurement Standards Rescission Focus: Modify provisions that allow cost-plus contracts and lack of accountability in contractor performance. Rescind cost-plus contract loopholes and strengthen procurement standards to ensure contracts are awarded based on performance metrics, cost-efficiency, and measurable outcomes.

Defense Procurement Loopholes and Contractor Accountability Measures

Over the past several decades, defense procurement has been riddled with wasteful spending, inflated contracts, and lack of contractor accountability. Loopholes in the current procurement system allow defense contractors to inflate costs, exploit cost-plus contracts, and evade responsibility for cost overruns. These inefficiencies lead to unnecessary taxpayer burden, and in some cases, subpar performance and delayed deliveries of vital defense systems. Rescinding these regulations will streamline procurement processes, increase contractor accountability, and ensure that taxpayer money is spent effectively on delivering quality defense systems in a timely manner.

U.S. Department of Defense 1000 Defense Pentagon Washington, D.C. 20301

Office of Public Affairs Phone: 703-697-5131 Email: public.affairs@defense.gov

The Department of Defense (DoD) and its agencies manage the largest and most complex procurement system in the U.S. government. While the goal is to ensure the delivery of high-quality defense systems, the current regulations have created incentives for waste and inefficiency. The cost-plus contract model, which guarantees contractors a fixed percentage of the total cost, incentivizes cost overruns rather than efficiency. Additionally, contractor performance is often inadequately monitored, and cost accounting standards have been manipulated to inflate spending and avoid accountability. The result is billions of dollars in wasteful spending, with minimal oversight on contractor performance.

Rescinding these loopholes will: Increase competition in defense procurement by eliminating excessive profit margins and cost-plus contracts that encourage inflation. Enhance transparency and accountability by requiring contractors to meet more stringent performance and cost standards. Redirect taxpayer money from wasteful contracts to efficient procurement strategies, which can deliver higher-quality defense systems at a lower cost. Restore integrity to the defense procurement system, ensuring that funds are used to advance national security, rather than pad corporate profits.

Procurement Contracts: Remove cost-plus contract provisions and replace them with fixed-price contracts or performance-based contracts, where contractors are incentivized to stay within budget and deliver on time. Contractor Accountability: Implement more robust accountability standards, requiring contractors to meet milestone deliverables and ensuring that any deviations from the agreed-upon contract terms result in penalties or financial disincentives. Cost Accounting Standards: Reform accounting standards under 48 CFR Part 30 to prevent contractors from manipulating cost structures to inflate contract values, with increased audit requirements and oversight from the DCMA. Research and Development Contracts: Tighten the regulations for R&D contracts under 48 CFR Part 235, removing incentives for endless extensions or unrealistic profit margins.

Pete Hegseth

Secretary of Defense