The allocation of contractor environmental remediation costs to Department of Defense contracts

Abstract

This thesis investigates the allocation of environmental remediation costs to Department of Defense (DOD) contracts. Environmental remediation costs are incurred in the current period to cleanup contamination resulting from the performance of work in the past. Consequently, there is little direct beneficial or causal relationship between DOD's current contracts and the costs incurred. Yet, the manner in which remediation costs are allocated will substantially determine who pays for the rising costs of yesterday's contamination. Background material is presented to illustrate Government cost accounting practices and DOD guidance on environmental costs. Research material was obtained from the Congress, the General Accounting Office, DOD, defense contractors and industry associations. The research concludes that none of the current allocation methods are consistently fair and equitable. Any reimbursement for DOD's share of cleanup costs should be made independently of the contract cost accounting system.