Contract for the Development and Production of F-16 Aircraft

PSAD-78-3: Published: Oct 21, 1977. Publicly Released: Nov 17, 1982.

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A fixed-price incentive contract was awarded without price competition to General Dynamics Corporation for the development and production of F-16 aircraft. The contract provided for a full-scale development program and firm-priced production options. The development program is currently valued at $442 million, and three production options are priced at about $1,130 million.

Indications are that the F-16 program costs will increase. Contracting officers are required to obtain cost or pricing data from contractors to support proposed prices for negotiated noncompetitive contracts, and contractors are required to certify that the cost or pricing data used as a basis for negotiating contract prices is accurate, current, and complete. The Aeronautical Systems Division of the Air Force Systems Command did not strictly follow Department of Defense regulations which provided that a cost analysis be prepared to assure the reasonableness of the price proposed. Instead of conducting a cost analysis of the contractor's data, the Air Force relied heavily on its own cost estimate to determine that the offer was fair and reasonable. Such an independent analysis cannot identify inconsistencies or duplications between the contractor's cost elements or errors in his estimates. Overpricing of $20.5 million was identified. This amount related to costs included for government-furnished aeronautical equipment.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Aeronautical Systems Division should evaluate available information to determine whether the government is entitled to a price adjustment on the F-16 development program or a reduction in the prices established for the production options as provided for by the defective pricing clause included in the contract.

    Agency Affected:


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