Contract Overpriced and Established Pricing Regulations and Procedures Not Followed

MASAD-81-16: Published: Mar 5, 1981. Publicly Released: Mar 5, 1981.

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GAO reviewed a contract which was awarded to Raytheon Company by the Federal Aviation Administration as part of a nationwide review of the pricing of negotiated noncompetitive contracts awarded by civil agencies. The contract provided for the purchase of multiple pieces of contract-related equipment and revisions of test procedures and miscellaneous documentation. The objective of the review was to determine whether Federal Procurement Regulations were followed in negotiating the contract price and whether the contract price negotiated was reasonable in relation to cost or pricing data available to the contractor at the time of contract negotiation.

In the opinion of GAO, the contract was overpriced. The contract price was increased during negotiations by more than 9 percent to compensate Raytheon for a decrease in the number of pieces of equipment to be purchased. An increase of less than 4 percent would have been more appropriate. The additional overpricing was due to the use of noncurrent prices and quotes, the inclusion of duplicate parts in the proposal, and questionable judgment in the selection of a power supply vendor.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Secretary of Transportation should (1) emphasize to contracting officials the importance of established regulations in obtaining, reviewing, and using cost or pricing data in negotiating noncompetitive contract prices and documenting contract negotiations files; and (2) require the contracting officer to consider this information presented in this report along with any other pertinent information and determine if the Government is entitled to a contract price reduction.

    Agency Affected: Department of Transportation


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