Pricing of Subcontracts Awarded to Pratt & Whitney Aircraft of Canada

As part of a nationwide study on the pricing of noncompetitive prime contracts by the Department of Defense, GAO conducted a review of the negotiated fixed-price contracts awarded during 1972 and 1973 by the Naval Air Systems Command to Pratt and Whitney Aircraft of West Virginia, Inc. These contracts were valued at $9,015,747 and $48,292,115. Work performed at the West Virginia plant accounted for only about 20 percent of the incurred costs. The balance of the work was performed by Pratt and Whitney Aircraft of Canada, Ltd., Quebec, under subcontracts. Because the subcontract cost was significant, GAO sought to determine whether the subcontract work prices included in the prime contract were reasonable in relation to cost or pricing data available to the subcontractor at the time of price agreements between the prime contractor and the Navy. Under the regulations, contractors are required to submit pricing data in support of proposed prices for noncompetitive contracts over $100,000, and the prime contractor must verify that the cost and pricing data of the contractor and subcontractor are accurate, complete, and current.