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B-171977 1 (1971-07-02)

handle is hein.gao/gaobabkpz0001 and id is 1 raw text is: WK~rCTff -- m@' to be released4ia ..da 4 - e ~-0-2 Q -7 Accoirf: ... pOa A- kept CoMPTROLLE GENE aL OP TH UNI1m 5lrAT= WAi4WroN, D. 25 B-171977 JUL2 1971 Dear Senator Humphrey: In your 2.etter received by us on February 17, 1971, you reamesteA our comments on a Jetter from Mr. David R. Hammer in which he expressed concern about the increase in cost to the National Aeronautics and Space Admi-iistration (NASA) of '47th lunar -roving vehiclesa boing#- mar'utamctured by -The BoeIng- o Company. Mr. Hammer also.irkquired why the contractor would O Jnot be penalized for the increased costs. On March 2, 1970, NASA awarded cost-plus-incentive-fee ) contract NAS8-25145 to The Boeing Company for the design, de- velopment, manufacture, and delivery of four lunar-roving ve- hicles. We examined contract NAS8-25145 at NASA Headquarters, Washington, D.C.; reviewed NASA's records pertaining to the amount of, and reasons for, the increased costs; and held dis- cussions with cognizant agency officials. We did not make a detailed analysis of the reasons cited by NASA for the in- creased costs. The results of our examination are discussed below. CONTRACT COST The news clipping enclosed with Mr. Hammer's letter did not mention the type of contract that was used for this pro- curement, and it appears that Mr. Hammer may have been under the impression that Boeing was awarded a firm-fixed-price con- tract. Under a firm-fixed-price contract, the price is not subject to adjustment because of the contractor's cost ex- perience during the performance of the contract even though unexpectedly high costs may result in a loss to the contrac- tor. A firm-fixed-price contract is normally used where performance has been demonstrated and where technical and cost uncertainties are low. NASA's contract with Boeing for the lunar-roviag vehicles, however, is a cost-reimbursement-type contract. A cost- reimbursement contract is normally used where performance has not been demonstrated and where technical and cost uncertain- ties make the use of a firm-fixed-price contract inappropriate. of k T4S M CooI Of 1 9 A1e - # 50TH ANNMSARY 1921-1971-------.

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