Contract Pricing:

Dual-Source Contract Prices

T-NSIAD-90-11: Published: Nov 15, 1989. Publicly Released: Nov 15, 1989.

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GAO discussed the Department of Defense's (DOD) dual-source contracting practices, focusing on whether DOD contracting officers had sound bases for negotiating fair and reasonable contract prices. GAO found that: (1) DOD issued a new policy addressing adequate price competition for dual-source contracts after it found that contracting officers incorrectly determined that adequate price competition existed on 30 dual-source contracts totalling $8.8 billion; (2) DOD advised contracting officers to employ proper pricing safeguards when adequate price competition did not exist; (3) although DOD revised its guidance, it did not stress the need for contracting officers to exercise deliberation through review in determining whether adequate price competition existed; (4) on four of the eight dual-source contracts reviewed, contracting officers accepted contractor prices because they believed that adequate price competition existed, but could have found reductions of $28.9 million in three of the contracts; and (5) on the other four contracts, contracting officers obtained insight into contractors' proposed prices and negotiated prices more than $30 million below those proposed. GAO believes that DOD should revise its policy to have contracting officers obtain a through understanding of contractors' proposed prices before making adequate price competition determinations.

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