B-148825, DEC. 19, 1962

B-148825: Dec 19, 1962

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TO THE SECRETARY OF THE ARMY: WE ARE ENCLOSING A COPY OF OUR REPORT TO SENATOR MCNAMARA AND SENATOR HART ON OUR REVIEW OF THE RECENT PROCUREMENT OF 498 M88 RECOVERY VEHICLES UNDER RFP NO. YOUR ATTENTION IS INVITED TO THOSE PORTIONS OF THE REPORT WHICH CONCLUDE THAT YOUR DEPARTMENT'S EVALUATIONS OF FIRST DESTINATION TRANSPORTATION COSTS ON 125 VEHICLES. ON ESTIMATED COSTS OF PAVING A TEST TRACK AND CONSTRUCTING A FORDING TANK AT FORT CUSTER WERE IMPROPER. YOUR FURTHER ATTENTION IS INVITED TO THAT PORTION OF THE REPORT WHICH DEALS WITH SUBCONTRACTING FOR SUSPENSION COMPONENTS. THE EVALUATION OF BOTH NEW AND EXISTING SPECIAL TOOLING WAS BASED UPON THE ASSUMPTION THAT SUCH TOOLING WOULD BE ADEQUATE TO SUPPORT A PRODUCTION RUN OF 1.

B-148825, DEC. 19, 1962

TO THE SECRETARY OF THE ARMY:

WE ARE ENCLOSING A COPY OF OUR REPORT TO SENATOR MCNAMARA AND SENATOR HART ON OUR REVIEW OF THE RECENT PROCUREMENT OF 498 M88 RECOVERY VEHICLES UNDER RFP NO. OTAC 62-14.

YOUR ATTENTION IS INVITED TO THOSE PORTIONS OF THE REPORT WHICH CONCLUDE THAT YOUR DEPARTMENT'S EVALUATIONS OF FIRST DESTINATION TRANSPORTATION COSTS ON 125 VEHICLES, AND ON ESTIMATED COSTS OF PAVING A TEST TRACK AND CONSTRUCTING A FORDING TANK AT FORT CUSTER WERE IMPROPER.

YOUR FURTHER ATTENTION IS INVITED TO THAT PORTION OF THE REPORT WHICH DEALS WITH SUBCONTRACTING FOR SUSPENSION COMPONENTS. AS INDICATED BY THE INFORMATION AND INSTRUCTIONS INCORPORATED INTO RFP 62 14 AND QUOTED IN OUR REPORT, THE EVALUATION OF BOTH NEW AND EXISTING SPECIAL TOOLING WAS BASED UPON THE ASSUMPTION THAT SUCH TOOLING WOULD BE ADEQUATE TO SUPPORT A PRODUCTION RUN OF 1,000 VEHICLES. THE PERIOD DURING WHICH THE CONTRACTOR OR HIS SUBCONTRACTORS PROPOSED TO USE SUCH SPECIAL TOOLING TO PRODUCE THE 498 VEHICLES CALLED FOR BY THE RFP WAS THEREFORE IMMATERIAL FOR PURPOSES OF DETERMINING THE RESIDUAL VALUE OF THE TOOLING OR THE COST OF ITS USE TO THE GOVERNMENT.

IT MUST, WE BELIEVE, BE ASSUMED THAT THE 1,000-VEHICLE PRODUCTION RUN FIGURE REPRESENTS A REASONABLY ACCURATE ESTIMATE OF THE LIFE EXPECTANCY OF THE SPECIAL TOOLING HERE INVOLVED, IN WHICH CASE IT NECESSARILY FOLLOWS THAT CHRYSLER'S USE OF SPECIAL TOOLING WITH AN ACQUISITION COST OF $257,851 FOR A PRODUCTION RUN OF 498 VEHICLES WOULD HAVE RESULTED IN WEAR OUT COSTS TO THE GOVERNMENT OF APPROXIMATELY $128,925. WE THEREFORE SEE NO JUSTIFIABLE BASIS FOR APPLYING A 6/11 TIME FACTOR TO SUCH WEAR OUT COSTS IN DETERMINING THE AMOUNT BY WHICH BMY'S CONTRACT PRICE SHOULD HAVE BEEN REDUCED TO COMPENSATE THE GOVERNMENT FOR CHRYSLER'S USE OF GOVERNMENT -OWNED SPECIAL TOOLING.

WE SUGGEST THAT ALL NECESSARY STEPS BE TAKEN BY YOUR DEPARTMENT TO PREVENT FUTURE USE OF THE ERRONEOUS PROCEDURES SET OUT ABOVE, AND THIS OFFICE BE ADVISED OF THE NATURE OF THE ACTION TAKEN.

ADDITIONALLY, WE ARE ENCLOSING A COPY OF OUR LETTER OF TODAY TO THE SECRETARY OF DEFENSE ADVISING OF OUR DISAGREEMENT WITH THE CONSIDERATION BY YOUR DEPARTMENT OF CERTAIN FACTORS, INCLUDING INCIDENTAL COSTS TO THE GOVERNMENT, IN MAKING THE DETERMINATION THAT IT WOULD BE IN THE BEST INTEREST OF THE GOVERNMENT TO AWARD THE CONTRACT TO BMY ON THE BASIS OF ITS LOW CASH OUTLAY PROPOSAL, AND RECOMMENDING THAT CONSIDERATION BE GIVEN TO THE ISSUANCE OF MORE DEFINITIVE REGULATIONS ON THIS SUBJECT. SPECIAL ATTENTION IS INVITED TO THAT PORTION OF THE LETTER WHICH REFERS TO THE INTERPRETATION OF ASPR 13-102.3.

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