Defense Subcontract for Machine Tools to Mitsubishi Corporation

PSAD-78-91: Published: Apr 5, 1978. Publicly Released: Apr 5, 1978.

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The Chrysler Corporation, under a contract with the Department of the Army, awarded a subcontract for a tank turret machining system to the Android Corporation and a Japanese firm, Mitsubishi International Corporation. Carlton Machine Tool Company's bid was approximately $200,000 more than the Android/Mitsubishi bid after adjustments in accordance with the Buy American Act. The contracting practices and procedures used by prime contractors of the government are generally not subject to the statutory and regulatory requirements which govern direct procurement by a federal agency. However, a basic principle prohibits the exposure of the lowest price to competing offerors in order to provide them with the opportunity to match the lower bid. Therefore, it would not have been proper for Chrysler to have permitted Carlton to lower its bid in order to obtain the subcontract. Regarding questions about Android's financing, Chrysler is responsible to the Army for the performance of the prime contract and for the performance of the subcontractors it selected. Although Chrysler may own 15 percent of Mitsubishi, there is no regulation or contract provision prohibiting the award of a subcontract to a company partially owned by the prime contractor as long as adequate price competition is maintained.

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