B-133247, NOV. 25, 1960

B-133247: Nov 25, 1960

Additional Materials:

Contact:

Edda Emmanuelli Perez
(202) 512-2853
EmmanuelliPerezE@gao.gov

 

Office of Public Affairs
(202) 512-4800
youngc1@gao.gov

TO THE SECRETARY OF THE ARMY: FURTHER REFERENCE IS MADE TO OUR REPORT TO THE CONGRESS OF THE UNITED STATES OF THE EXAMINATION OF THE PRICE NEGOTIATED FOR DEPARTMENT OF THE ARMY CONTRACT DA-23-204-TC-230 WITH NORTHWESTERN AERONAUTICAL COMPANY. OUR FINDINGS WERE SUMMARIZED SHOWING THAT THE CONTRACT HAD BEEN MODIFIED TO PERMIT THE USE OF LOWER COST MATERIAL AND PARTS WITHOUT NEGOTIATING AN APPROPRIATE REDUCTION IN THE CONTRACT PRICE. ADVISED YOU THAT UNDER THE CHANGES ARTICLE OF THE CONTRACT THE CONTRACTING OFFICER WAS AUTHORIZED TO MAKE CERTAIN CHANGES IN THE WORK TO BE DONE PROVIDED THAT. AN EQUITABLE ADJUSTMENT WAS TO BE MADE IN THE CONTRACT PRICE. A REFUND WAS DUE THE GOVERNMENT. YOUR ATTENTION IS INVITED.

B-133247, NOV. 25, 1960

TO THE SECRETARY OF THE ARMY:

FURTHER REFERENCE IS MADE TO OUR REPORT TO THE CONGRESS OF THE UNITED STATES OF THE EXAMINATION OF THE PRICE NEGOTIATED FOR DEPARTMENT OF THE ARMY CONTRACT DA-23-204-TC-230 WITH NORTHWESTERN AERONAUTICAL COMPANY, ST. PAUL, MINNESOTA, COVERING THE OVERHAUL OF AIRCRAFT ENGINES.

IN OUR LETTER OF FEBRUARY 26, 1960, WHICH TRANSMITTED A COPY OF THIS REPORT TO YOU, OUR FINDINGS WERE SUMMARIZED SHOWING THAT THE CONTRACT HAD BEEN MODIFIED TO PERMIT THE USE OF LOWER COST MATERIAL AND PARTS WITHOUT NEGOTIATING AN APPROPRIATE REDUCTION IN THE CONTRACT PRICE, AND THAT THIS HAD RESULTED IN EXCESS COST TO THE GOVERNMENT OF ABOUT $125,000. ADVISED YOU THAT UNDER THE CHANGES ARTICLE OF THE CONTRACT THE CONTRACTING OFFICER WAS AUTHORIZED TO MAKE CERTAIN CHANGES IN THE WORK TO BE DONE PROVIDED THAT, IF ANY SUCH CHANGES CAUSED AN INCREASE OR DECREASE IN THE COST OF PERFORMANCE, AN EQUITABLE ADJUSTMENT WAS TO BE MADE IN THE CONTRACT PRICE. WE ALSO ADVISED YOU THAT, INASMUCH AS THE CONTRACTING OFFICER PERMITTED THE USE OF SURPLUS PARTS WITHOUT MAKING AN EQUITABLE ADJUSTMENT IN THE CONTRACT PRICE, A REFUND WAS DUE THE GOVERNMENT. RECOMMENDED THAT STEPS BE TAKEN TO OBTAIN AN APPROPRIATE ADJUSTMENT IN THE PRICE OF CONTRACT DA-23-204-TC 230.

YOUR ATTENTION IS INVITED, IN THIS CONNECTION, TO THE LETTER OF APRIL 28, 1959, (INCLUDED IN THE APPENDIX OF OUR REPORT), IN WHICH THE ASSISTANT SECRETARY OF THE ARMY (LOGISTICS) ADVISED US THAT THE FINDINGS IN OUR REPORT ARE SUBSTANTIALLY CORRECT AND THAT THERE IS NO APPARENT JUSTIFICATION FOR AUTHORIZING USE OF SURPLUS PARTS WITHOUT PROVIDING FOR AN APPROPRIATE REDUCTION IN THE CONTRACT PRICE. ABOUT A YEAR LATER, HOWEVER, THE ASSISTANT SECRETARY INFORMED US BY HIS LETTER DATED JUNE 6, 1960, THAT THE JUDGE ADVOCATE GENERAL OF THE DEPARTMENT OF THE ARMY HAS FULLY INVESTIGATED THE CIRCUMSTANCES AND THAT "IT HAS NOW BEEN DETERMINED THAT THERE IS NO LEGAL BASIS FOR AN ACTION TO COMPEL NORTHWESTERN AERONAUTICAL COMPANY TO REFUND A PORTION OF THE CONTRACT PRICE.' THIS LETTER DOES NOT SET FORTH THE GROUNDS FOR THE DETERMINATION AND, IN OUR OPINION, IT IS NOT SUPPORTED BY THE INFORMATION AND EVIDENCE OF RECORD.

AFTER FURTHER CAREFUL CONSIDERATION OF ALL THE FACTS AND CIRCUMSTANCES INVOLVED, AND IN THE ABSENCE OF ANY ADDITIONAL INFORMATION OR EVIDENCE WHICH WOULD JUSTIFY MODIFICATION OF OUR FINDINGS AND RECOMMENDATION IN THIS MATTER, WE HAVE DETERMINED THAT THE EXCESSIVE COSTS IN THE SUM OF $125,000 SHOULD BE RECOVERED FROM THE CONTRACTOR. WE ARE THEREFORE INITIATING STEPS TO EFFECT THE REQUIRED COLLECTION IN ACCORDANCE WITH THE ESTABLISHED PROCEDURE.