Pricing of Two Army AN/APR 39 Contracts Awarded to E-Systems, Inc.

PSAD-79-77: Published: May 30, 1979. Publicly Released: Jun 11, 1979.

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Several contracts awarded to E-Systems, Inc. for an Army AN/APR 39 were reviewed. The sources of materials used by E-Systems and other bidders were examined as well as vendor quote information to determine whether vendors were quoting different prices for the same items and why.

On the sole-source modification the contracting officer did not require the contractor to fully support or explain the basis for its labor hour estimates. Labor and material costs were overstated because supporting cost or pricing data were not current, complete, and accurate. E-Systems accounting practices used to account for a portion of engineering hours violated cost accounting standards. On the advertised contract, E-Systems' bid included material costs which were much less than other bidder's. In cases where suppliers quoted material prices to both E-Systems and other bidders, similar prices were quoted for similar quantities. Finally, the E-Systems bid on the advertised contract understated anticipated costs by more than $1 million and, thus, can be considered a buy-in.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Commanding General, Communications and Electronics Materiel Readiness Command should: (1) ensure that adequate cost and pricing data are obtained to support all noncompetitive cost proposals; (2) consider the overpricing information to determine if any contract price reduction is warranted; (3) resolve the E-Systems' violation of cost accounting standards; (4) reduce the contract price by $2,532; and (5) ensure that E-Systems does not recover on future contract actions any costs excluded from its bid price for the advertised contract.

    Agency Affected:


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