Contract Pricing:

Material Prices Overstated on Ground/Vehicular Laser Locator Designators

NSIAD-88-25: Published: Oct 13, 1987. Publicly Released: Oct 13, 1987.

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GAO reviewed the pricing of an Army contract for Ground/Vehicular Laser Locator Designators to determine whether the: (1) contractor complied with the Truth in Negotiations Act in providing accurate, complete, and current cost or pricing data; and (2) contracting officer negotiated fair and reasonable prices.

GAO found that the contractor overstated target prices by $2,339,601, including overhead and profit, because it: (1) failed to disclose current materiel prices; (2) made a computation error; and (3) failed to disclose an updated bill of materiel. GAO also found that contract prices were overstated by an additional $1,777,396, including overhead and profit, because the contracting officer: (1) did not rely on an audit recommendation regarding anticipated materiel price reductions between the contractor and its vendors; and (2) accepted escalation on materiel costs that the contractor had based on firm vendor quotations.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: The contractor has claimed substantial offsets to the GAO claim for defective pricing and the Command has made a decision to close this case without reducing the price of the contract.

    Recommendation: The Commander, U.S. Army Missile Command, should initiate action to recover these funds from the contractor.

    Agency Affected: Department of Defense: Department of the Army: U.S. Army Missile Command

 

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