NCJ Number
73836
Date Published
1980
Length
28 pages
Annotation
A review of the Air Force C-130 contract with Lockheed-Georgia Company found that the contract price was overstated by about $4,227,186. The contract for eight C-130 Hercules airplanes and technical data for the Air National Guard was negotiated at $49.4 million.
Abstract
The price was overstated in part because cost or pricing data used by Lockheed to support proposed costs for production material were not current, complete, or accurate, and, in part, because the most representative experience available did not support proposed costs for production labor and development labor. Also, the Air Force Plant Representatives Office (AFPRO) had not adequately responded to the Defense Contract Audit Agency's (DCAA's) reports of weaknesses in Lockheed's accounting and estimating systems. The review was made at the Aeronautical Systems Division, Wright-Patterson Air Force Base, Ohio, and at Lockheed. Audit work done by DCAA and the cost and price analysis done by AFPRO were considered. The objectives of the audit were to determine if laws, regulations, and procedures were followed in negotiating the contract price, and whether the contract price is reasonable in relation to cost or pricing data available to the contractor at the time of contract negotiations. Lockheed's comment, where accurate and relevant, were considered and appropriately revised. ASD officials agreed that the contract price may have been increased due to Lockheed's failure to base proposed costs for material on current, complete, and accurate cost or pricing data. They said that actions would be taken to verify any overpricing and to approximately adjust the contract price. However, because the contracting officer did not rely on the contractor's cost or pricing data to support proposed labor cost, the Government may have no basis for recovery. AFPRO officials said they, including DCAA, were starting a detailed review of Lockheed's cost accounting and estimating systems. It is recommended that the contracting officer consider this information and take appropriate action to reduce the contract price. It is also recommended that the Secretary of Defense emphasize to the contracting officer the importance of obtaining, reviewing, and using cost and pricing data in negotiating noncompetitive contract prices. Appended materials include a review of the negotiated price, and Lockheed-Georgia's position. Tabular data are also provided. (Author abstract modified).