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B-146905, MAY 4, 1964

B-146905 May 04, 1964
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LIMITED: MY REPRESENTATIVES ARE MAKING AN EXAMINATION OF NEGOTIATED CONTRACTS AWARDED TO THE MARTIN-BAKER AIRCRAFT COMPANY. THE DUTIES AND RESPONSIBILITIES OF THE COMPTROLLER GENERAL OF THE UNITED STATES FOR MAKING SUCH AUDITS AND INVESTIGATIONS ARE CONTAINED IN VARIOUS LAWS ENACTED BY THE CONGRESS OF THE UNITED STATES. THE COMPTROLLER GENERAL OF THE UNITED STATES AND HIS REPRESENTATIVES ARE GIVEN RESPONSIBILITY FOR INVESTIGATING AT THE SEAT OF GOVERNMENT OR ELSEWHERE. IT IS INCUMBENT UPON US TO EXAMINE CONTRACTUAL PROCUREMENTS SINCE THE EFFICIENT. EFFECTIVE AND ECONOMICAL MANAGEMENT OF SUCH TRANSACTIONS ARE AN INTEGRAL PART OF THE OVERALL FINANCIAL STEWARDSHIP OF GOVERNMENTAL DEPARTMENTS OR AGENCIES.

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B-146905, MAY 4, 1964

TO MR. JAMES MARTIN, MARTIN-BAKER AIRCRAFT COMPANY, LIMITED:

MY REPRESENTATIVES ARE MAKING AN EXAMINATION OF NEGOTIATED CONTRACTS AWARDED TO THE MARTIN-BAKER AIRCRAFT COMPANY, LIMITED, BY THE UNITED STATES NAVY PURCHASING OFFICE, LONDON, ENGLAND, AND VARIOUS AMERICAN AIRFRAME MANUFACTURERS FOR THE PRODUCTION OF MARK-5 EJECTION SEATS, EXPLOSIVE SEAT CARTRIDGES AND SPARE EJECTION SEAT PARTS. THE DUTIES AND RESPONSIBILITIES OF THE COMPTROLLER GENERAL OF THE UNITED STATES FOR MAKING SUCH AUDITS AND INVESTIGATIONS ARE CONTAINED IN VARIOUS LAWS ENACTED BY THE CONGRESS OF THE UNITED STATES, INCLUDING THE BUDGET AND ACCOUNTING ACT, 1921 AND THE ACCOUNTING AND AUDITING ACT OF 1950. UNDER THE BUDGET AND ACCOUNTING ACT, 1921, THE COMPTROLLER GENERAL OF THE UNITED STATES AND HIS REPRESENTATIVES ARE GIVEN RESPONSIBILITY FOR INVESTIGATING AT THE SEAT OF GOVERNMENT OR ELSEWHERE, ALL MATTERS RELATING TO THE RECEIPT, DISBURSEMENT, AND APPLICATION OF PUBLIC FUNDS. IN DISCHARGING THIS RESPONSIBILITY, IT IS INCUMBENT UPON US TO EXAMINE CONTRACTUAL PROCUREMENTS SINCE THE EFFICIENT, EFFECTIVE AND ECONOMICAL MANAGEMENT OF SUCH TRANSACTIONS ARE AN INTEGRAL PART OF THE OVERALL FINANCIAL STEWARDSHIP OF GOVERNMENTAL DEPARTMENTS OR AGENCIES. TO ASCERTAIN HOW WELL GOVERNMENTAL DEPARTMENTS OR AGENCIES AND THE CONTRACTORS HAVE FULFILLED THEIR FINANCIAL OBLIGATIONS TO THE UNITED STATES GOVERNMENT UNDER PROCUREMENTS ENTERED INTO THROUGH THE NEGOTIATION PROCESS, OUR REVIEWS INCLUDE ON EXAMINATION OF THE NEGOTIATION OF CONTRACT PRICES AND THE RELATED BID PROPOSAL REPRESENTATIONS AND SUPPORTING DOCUMENTATION, AS WELL AS CONTRACT PERFORMANCE.

RECOGNIZING THE NEED FOR OUR OFFICE TO EXAMINE NEGOTIATED PROCUREMENTS AND ANTICIPATING THOSE RARE INSTANCES WHERE A CONTRACTOR MIGHT REFUSE US ACCESS TO HIS RECORDS, THE CONGRESS OF THE UNITED STATES ENACTED PUBLIC LAW 245, APPROVED OCTOBER 31, 1951, WHICH HAS SINCE BEEN MODIFIED BY SUBSEQUENT LEGISLATION. THIS PUBLIC LAW, AS AMENDED, PROVIDES:

"EACH CONTRACT NEGOTIATED UNDER THIS CHAPTER SHALL PROVIDE THAT THE COMPTROLLER GENERAL AND HIS REPRESENTATIVES ARE ENTITLED, UNTIL THE EXPIRATION OF THREE YEARS AFTER FINAL PAYMENT, TO EXAMINE ANY BOOKS, DOCUMENTS, PAPERS, OR RECORDS OF THE CONTRACTOR, OR ANY OF HIS SUBCONTRACTORS, THAT DIRECTLY PERTAIN TO, AND INVOLVE TRANSACTIONS RELATING TO, THE CONTRACT OR SUBCONTRACT.'

IT IS, THEREFORE, A STATUTORY REQUIREMENT THAT THE ABOVE CITED PROVISION NOT ONLY BE INCLUDED IN ALL CONTRACTS AWARDED DIRECTLY BY AGENCIES OF THE UNITED STATES GOVERNMENT BUT ALSO IN ALL SUBCONTRACTS AND PURCHASE ORDERS ISSUED BY CONTRACTORS DOING BUSINESS WITH THE UNITED STATES GOVERNMENT. THE CONTRACTS YOU HAVE ENTERED INTO WITH THE UNITED STATES NAVY PURCHASING OFFICE AND VARIOUS AMERICAN AIRFRAME MANUFACTURERS CONTAIN THE PROVISION RELATING TO THE RIGHT OF THE COMPTROLLER GENERAL AND HIS REPRESENTATIVES TO EXAMINE CONTRACTORS'RECORDS.

WE HAVE BEEN ADVISED BY MR. IRWIN D-ADDARIO, A DULY AUTHORIZED REPRESENTATIVE OF THIS OFFICE AND MR. EDWARD JOHNSON, DIRECTOR OF OUR EUROPEAN BRANCH, THAT THEY WERE FURNISHED WITH GENERAL COST SUMMARIES BUT WERE DENIED ACCESS TO THE UNDERLYING COST RECORDS REQUIRED BY THIS OFFICE FOR THE PURPOSE OF DETERMINING THE REASONABLENESS OF THE NEGOTIATED PRICES FOR THE SUBJECT CONTRACTS. IT IS OUR POSITION THAT THE SUBJECT CONTRACT PROVISION GIVES US THE RIGHT TO EXAMINE ALL BOOKS, DOCUMENTS, PAPERS, AND OTHER RECORDS RELATING DIRECTLY TO THE CONTRACTS AND THE COSTS BORNE BY THE UNITED STATES GOVERNMENT, AND THAT SUCH BOOKS, DOCUMENTS, PAPERS AND OTHER RECORDS ARE NOT LIMITED TO THE FORMAL COST ACCOUNTING RECORDS AND THEIR SUPPORTING DATA, BUT INCLUDE ALL DATA CONCERNING CONTRACT ACTIVITIES AND OPERATIONS WHICH AFFORD THE BASIS FOR ESTABLISHING PRICES, OR ARE INVOLVED IN ANY WAY WITH THE COSTS OF PERFORMING CONTRACTS WITH THE UNITED STATES GOVERNMENT.

THEREFORE, WE MUST INSIST UPON EXAMINING ALL BOOKS, DOCUMENTS, PAPERS, AND RECORDS OF THE MARTIN-BAKER AIRCRAFT COMPANY, LIMITED, THAT WERE USED OR PREPARED IN CONNECTION WITH, OR FOR THE PURPOSE OF ESTIMATING CONTRACT COSTS, CONDUCTING NEGOTIATIONS AND PERFORMING CONTRACTS ENTERED INTO WITH THE UNITED STATES GOVERNMENT AND THE VARIOUS AMERICAN AIRFRAME MANUFACTURERS. FAILURE OF THE MARTIN-BAKER AIRCRAFT COMPANY, LIMITED, TO COMPLY WITH OUR REQUEST FOR SUCH RECORDS SHALL CONSTITUTE A BREACH OF ITS CONTRACTUAL OBLIGATIONS UNDER THE SUBJECT CONTRACTS AND WE WILL HAVE NO ALTERNATIVE BUT TO DIRECT THE UNITED STATES NAVY TO WITHHOLD FURTHER PAYMENTS TO THE MARTIN-BAKER AIRCRAFT COMPANY, LIMITED, AND THE AMERICAN AIRFRAME MANUFACTURERS INVOLVED, UNTIL SUCH TIME AS THE REQUIRED RECORDS ARE MADE AVAILABLE FOR OUR REVIEW. ACCORDINGLY, YOU ARE REQUESTED TO ADVISE ME WITHIN 15 DAYS OF THE DATE OF THIS LETTER WHEN THE REQUESTED RECORDS WILL BE MADE AVAILABLE FOR OUR EXAMINATION. IN ADDITION, WE REQUEST THAT YOU WRITE OR TELEPHONE THE DIRECTOR OF OUR EUROPEAN BRANCH OF YOUR DECISION CONCURRENT WITH YOUR REPLY TO THIS OFFICE. HIS ADDRESS IS U.S. GENERAL ACCOUNTING OFFICE, HOTEL TALLEYRAND, 2 RUE ST. FLORENTIN, PARIS 1, FRANCE.

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