GAO Contract Pricing Audits

T-NSIAD-88-45: Published: Sep 7, 1988. Publicly Released: Sep 7, 1988.

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GAO discussed the results of its audits of defense contract pricing to determine whether: (1) prime contractors and subcontractors complied with the Truth in Negotiations Act; and (2) contractor estimating systems were reliable and fully supported. GAO found that: (1) certain defense contracts were potentially overpriced by a total of about $18 million due to inadequate estimating systems and contractors' noncompliance with the act; (2) 1 contractor failed to disclose relevant pricing data on 84 of 144 material items, resulting in $8.4 million in overpricing on two contracts; (3) the Department of Defense (DOD) was unable to recover an estimated $5.4 million because that contractor obtained lower quotations for certain materials after contract negotiations; (4) a subcontractor failed to provide a contractor with its most current pricing data and the contractor did not disclose other material pricing data; and (5) contractors failed to evaluate subcontractors' cost estimates prior to negotiations. GAO also found that: (1) DOD required contractors to establish and maintain adequate estimating systems, disclose their systems in writing, and allow government system reviews; (2) the Air Force required its contractors to develop and maintain historical vendor pricing data and furnish the data to support material prices; and (3) DOD has recovered about $6 million in overpricing.

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