Air Force Should Recover Excess Costs of Prior F-15 Contracts and Take Action To Save Costs on Future F-15 Contracts

PSAD-80-4: Published: Oct 24, 1979. Publicly Released: Oct 24, 1979.

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A review was made to determine the reasonableness of the production material costs accepted by the Air Force Aeronautical Systems Division for the production of 108 F-15 and TF-15 aircraft. The fixed-price incentive contract was awarded in 1977 to McDonnell Douglas Corporation at a negotiated target price of $789,053,670.

The target cost for the F-15 contract was overstated by about $2.4 million because the contractor did not use current, accurate, and complete cost or pricing data for negotiated production material cost. Also, because the contractor's profit was added to this overstatement, it will result in about $2.7 million excess cost to the government, depending on whether the target is underrun or overrun.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should take action to ensure that the Aeronautical Systems Division considers the information presented, including any other information, and determine if the government is entitled to a price adjustment.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should ensure that the Aeronautical Systems Division reviews production material costs proposed by the contractor and accepted by the Air Force for the fiscal year 1978 acquisition to determine whether adjustment of the contract price is appropriate.

    Agency Affected: Department of Defense

 

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