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GAO examined sole-source negotiated procurements for M1 tank spare components.

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Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense 1. The Secretary of Defense should direct the Director, Defense Acquisition Regulatory Council, to strengthen Defense guidance on fixed-price incentive contracts by identifying circumstances which preclude combining ceiling prices under an existing contract with those established under modifications to those contracts, especially when the contract cost will exceed, or are expected to exceed, the target prices.
Closed - Implemented
DOD does not agree that GAO established a need to strengthen Defense guidance. It does agree that, if it is possible to strengthen guidance in this area, it should be done. Therefore, by June 30, 1984, DOD plans to review the present DAR coverage and, if needed, issue additional policy guidance. No further followup is necessary.
Department of Defense 2. The Secretary of Defense should direct the Secretary of the Army to instruct M1 contracting officers of the importance of complying with the requirement in the DAR to prepare and maintain adequate memorandum records of the negotiations which demonstrate that the negotiated prices were fair and reasonable.
Closed - Implemented
On November 3, 1983, the Deputy Undersecretary of Defense issued a memo to the three military departments requiring that a record of price negotiation be prepared at the conclusion of negotiation and that it address all significant issues discussed during negotiation. No further followup on this recommendation is necessary.

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