AWACS Contract Price Overstated Because of Noncurrent, Inaccurate, and Incomplete Cost or Pricing Data

PLRD-81-29: Published: May 26, 1981. Publicly Released: May 26, 1981.

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Robert M. Gilroy
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A fixed-price incentive contract was awarded to a firm by the Air Force Systems Command, Electronic Systems Division. A review was made of the pricing of one modification to the contract. The objective of the review was to determine the reasonableness of the contract price in relation to cost and pricing data that were available to the contractor at the time of contract negotiations.

GAO found that the target price was overstated by as much as $3.4 million because cost and pricing data provided by the firm were not current, complete, or accurate. Furthermore, the Air Force price negotiation memorandum does not accurately reflect the results of negotiations for some major cost elements and is vague as to the justification for a $5.5 million pricing concession by the Air Force. Electronic Systems Division officials have agreed to take action to recover any overpricing that may have occurred and have also agreed to stress improving procurement records.

Recommendation for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should direct the: (1) contracting officers to take action to reduce the contract price; (2) contracting officers to highlight, for future review, those portions of contract price that were based on questionable data; and (3) Commander, Electronic Systems Division, to examine its contracting officers' price negotiation memorandums to ensure that they are prepared in accordance with the established regulation and guidance.

    Agency Affected: Department of Defense


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