Potential Savings In Procurement Of Petroleum Products For Use By Navy Contractors

B-160334: Published: Feb 6, 1968. Publicly Released: Feb 6, 1968.

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GAO reviewed the Navy's practice of permitting contractors to furnish petroleum products used by them in the testing of aircraft and aircraft engines.

GAO noted that: (1) its review was made at three plants where estimated requirements represented about 86 percent of the total petroleum needs of Navy aircraft and aircraft engine contractors; (2) GAO estimated that during 1964 the Navy paid two of the contractors, Pratt & Whitney Aircraft Division of United Aircraft Corporation and Grumman Aircraft Engineering Corporation, about $229,000 more for such products than it would have paid if the products had been centrally procured by the Defense Fuel Supply Center and furnished to the contractors; (3) GAO believes that about $250,000 and about $400,000 could have been saved in calendar years 1965 and 1966, respectively, if the Navy had furnished the petroleum products used by the two contractors; (4) with regard to the third contractor, McDonnell Aircraft Corporation, GAO's review showed that the Navy had contractual arrangements in effect different than the arrangements at Pratt & Whitney and Grumman; (5) at McDonnell the government pays a profit on the administrative costs that the contractor incurs in buying and handling the fuel; and (6) under this method, the resulting profit is considerably less than it would be if the profit rate were applied to the basic cost of the fuel as it is done at Pratt & Whitney and Grumman.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: In cases such as that of Grumman, the Navy should consider contractual arrangements similar to those currently in effect with McDonnell. With respect to other aircraft contractors and aircraft engine contractors that furnish fuel, the Navy should examine its arrangements to see whether savings might be made by furnishing fuel to these contractors.

    Agency Affected:

 

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