The General Accounting Office (G formance of various components of the federal g

Question

The General Accounting Office (G formance of various components of the federal government employee of GAO major defen AO) is responsible for evaluating the per- . Assume that as an you have been asked to evaluate the performance of four se contractors with respect to cost overruns. The government lects the lowest competitive bid that meets the specification required for the project assuming that the firm also meets certain other standards. Since many of the projects commissioned by the Department of Defense and unproved technologies, accurate cost projections are Therefore, the government often pays for cost overruns by the con- oncerned that some of the firms are underestimating involve unique, new, tractors. Your agency is c costs to ensure getting the contracts. They hope that the government will c their overrun st this. you randomly select 10 percent of the contracts awarded to four major firms in the past two years and record the number of s involving overruns and the number completed within budget. Com To te each of the contract pany A completed 25 of 36 within budget. Company B completed 32 of 44 within budget. Company C had 11 of 15 within budget, while D had 20 of 29 within budget. hat conclusion. if any, can you draw from these data?

Explanation / Answer

% of contracts invloving overruns -

A) 25/36=69.44%

B) 32/44=72.72%

C) 11/15= 73.33%

D) 20/29 = 68.69%

Average = 88/124 = 70.96%

As we can see, all the companies cost overrun rate is close to the average of 70.96% . Hence, we can conclude that all firms do business the same way and either every first is underestimating costs intentionally or nobody is.

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