The nation's long-term fiscal imbalances will likely make DOD's 1.6 trillion planned investment in new weapon systems unsustainable. Thus, it is critical that DOD retains the flexibility to end programs and contracts when necessary and appropriate. Although the federal government generally has the legal right to terminate contracts for convenience, defense stakeholders have sometimes expressed concerns that it will cost more to terminate a contract than to complete it. To address this perception, GAO examined (1) how expected contract termination costs and other factors affect DOD decisions on whether to end programs and contracts; (2) the circumstances under which it would cost more to terminate a contract for convenience than to complete it; and (3) the options DOD has for retaining value or reducing costs, when DOD ends programs or contracts. To do this, GAO examined DOD data on terminated contracts over $100 million; reviewed laws, regulations, and guidance; and met with key DOD officials. GAO recommends that DOD review, and as needed amend, guidance on terminations across the military services and DOD agencies to ensure that termination guidance identifies the conditions under which it is appropriate to end programs or contracts, and provides knowledge needed to use terminations as an investment portfolio tool. DOD agreed.

Defense Acquisitions: Termination Costs Are Generally Not a Compelling Reason to Continue Programs or Contracts That Otherwise Warrant Ending

Coal-fired power plants generate about 1/2 of the nation's electricity and about 1/3 of its carbon dioxide (CO2) emissions, which contribute to climate change. In 2003, the DoE initiated FutureGen -- a commercial-scale, coal-fired power plant to incorporate integrated gasification combined cycle, an advanced generating technology, with carbon capture and storage. DoE's cost share was 74%, and industry partners agreed to fund the rest. Concerned about escalating costs, DoE restructured FutureGen. This report examines: (1) the original and restructured programs' goals; (2) similarities and differences between the new FutureGen and other DoE CCS programs; and (3) if the restructuring decision was based on sufficient info. Illus.