Examination of Possible "Buy-In" by Garrett AiResearch

PSAD-77-73: Published: Feb 16, 1977. Publicly Released: Sep 24, 1979.

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The AiResearch Division of the Garrett Corporation's practice of "buying-in" on contracts for the production of auxiliary power units was investigated. The investigation was limited to two subcontractors between Garrett and McDonnell Douglas Corporation under the F-15 contract.

Garrett submitted bids lower than their estimated costs on the F-15 subcontract. Garrett admitted making what it referred to as a $3 million "investment" in the F-15 program. Whether Garrett has followed a consistent pattern of buy-ins cannot be determined by examining two subcontracts, but a consistent pattern can be inferred from statements Garrett made in court affadavits. McDonnell officials were aware that Garrett's price was less than expected costs and suspected that Garrett was investing in the program. It is evident that McDonnell recognizes the investment concept. Before the initial procurement of the F-15 components involved in this investigation, competitive bids were solicited from many suppliers. The selection of Garrett was based on technical superiority as well as lower prices. (RRS)

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