National Defense:

Deferment Actions Associated With the Navy A-12 Aircraft

T-NSIAD-91-51: Published: Jul 25, 1991. Publicly Released: Jul 25, 1991.

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GAO discussed the Department of Defense's (DOD) decision to defer repayment of progress payments to former Navy A-12 contractors pending a settlement, focusing on the impact analysis, data used, and the reasonableness of the deferment decision. GAO found that: (1) DOD did not document its analysis; (2) DOD based its deferment decision on early information indicating that the contractor was in a weak financial condition; (3) the contractor submitted a copy of its January 11, 1991, debt forecast which showed that it would be in a negative cash flow position during 1991; (4) the contractor could not afford to repay the A-12 debt and needed additional short-term financing; (5) the deferment was reasonable because the contractor told DOD that its financial condition made obtaining additional credit from its banks or the securities market unlikely, the contractor is responsible for a variety of major weapons systems that could be adversely affected it is unable to continue performing, and the loss of a major defense contractor could have a negative impact on the U.S. defense industrial base; and (6) the majority of the analysis for the financial package submitted by the contractor was focused on the request for advance payments.

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