Payments on Air Force Aircraft Maintenance Contracts Violate Cost-Plus-a-Percentage-of-Cost Prohibition

PSAD-78-55: Published: Jan 12, 1978. Publicly Released: Jan 12, 1978.

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Five aircraft maintenance contracts were examined to evaluate the administration of unscheduled work and the payments for contractor-furnished materials. The five contracts were with E-Systems, Inc. (2 contracts); Hayes International Corp. (2 contracts), and Aero Corp.; they were awarded by the Air Force for programmed depot maintenance and modification of aircraft in the Special Air Mission Fleet and the KC-135, C-130, and F-4 aircraft.

Unscheduled work was found to be administered satisfactorily. Regulations prohibit use of the cost-plus-a-percentage-of-cost system of contracting. Payments for certain contractor-furnished materials on the two contracts awarded to E-Systems, Inc., violated the prohibition against this type of payment. E-Systems was reimbursed for indirect expenses and profit on the basis of fixed, predetermined rates. In addition, the Air Force agreed to pay an uncertain sum for materials since the contracts did not provide a specific sum to be spent for contractor-furnished materials. The other three contracts contain similar payment provisions for contractor-furnished materials and may be in conflict with the regulations.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: In view of the fact that illegal contract payment provisions have been used for overhaul and repair work and for contractor-furnished materials, the Secretary of the Air Force should: (1) determine the amounts properly allowable under the contracts involved and recover any excess payments; and (2) review all aircraft maintenance contracts and eliminate the cost-plus-a-percentage-of-cost system of contracting.

    Agency Affected:


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