Pricing of Modification to Air Force Contract with the Boeing Company

PSAD-78-42: Published: Nov 25, 1977. Publicly Released: Nov 25, 1977.

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Modification P00450, awarded by the Air Force's Electronic Systems Division, is a fixed-price-incentive successive target contract for the first production buy of Airborne Warning and Control Systems and provides for the production of six systems and related training equipment, aerospace ground equipment, and data at a target price of $293,300,000.

The initial target cost of the modification was overstated by about $2.4 million because certain cost or pricing data the contractor provided the Air Force in support of proposed costs were not accurate, complete, and current. The overstatement will result in an estimated $508,000 of excess cost to the government. Also, the initial target cost may require a reduction of about $1.7 million because of the deferral and cancellation of the procurement of certain aerospace ground equipment and related data. The Cost Accounting Standards (CAS) Board agreed that the modification contract should have included the standard CAS clause which would have required the contractor to follow certain uniform costing accounting practices. Because this clause was omitted, $1.3 million of potentially unallowable property tax cost was not questioned during preaward audits of the contractor's proposal.

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