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089127 1 (1975-08-07)

handle is hein.gao/gaobacvdu0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE REGIONAL. OFFICE ROOM 737, GATEWAY If BUILDING 4TH AND STATE KANSAS CTY, KANSAS 66101 August 7, 1975 Lieutenant General-James T. Stewart Commander J f Aeronautical Systems Division (AFSC) Wright-Patterson Air Force Base, Ohio 45433 Dear General Stewart: We have reviewed the price of Modification Number 72 to contract F33657-73-C-0335 which the Aeronautical Systems Division (ASD) negotiated with the McDonnell Douglas Corporation, St. Louis, Missouri. The basic contract, which provides for the acquisition of F-4 aircraft, contains the cost and pricing data clause required by the Armed Services Procure- ment Regulation. We made the review to determine whether McDonnell submitted current, accurate, and complete cost and pricing data as required by Public Law 87-653. The fact-finding and negotiation meetings for Modification Number 72 were held from September 24 to September 27, 1974. McDonnell submitted a proposal of $3,798,807 to accomplish the work, and the price ultimately negotiated was $3,610,000. A Certificate of Current Cost or Pricing Data was signed by McDonnell on September 27, 1974. McDonnell included in the proposed price a Westinghouse Electric Corporation subcontract at its not-to-exceed price of $1,525,726. ASD accepted about $1,468,500 for the subcontract. However, McDonnell did not inform ASD of indications that the subcontract price would be lower. Prior to September 13, 1974, Westinghouse had submitted a hand- written, updated DD Form 633, Contract Pricing.Proposal, to McDonnell showing a revised value of $1,306,199. A Westinghouse official attributed the updated quote to a change in costing rates, a revised bill of materiel and consideration of exceptions to the proposal by the Defense Contract Audit Agency. McDonnell purchasing officials said the DD Form 633 was merely a worksheet showing the subcontractor's position on the day it was presented, that the DD Form 633 was not a true proposal as it was not signed or dated, and there were no exhibits, supporting schedules or narrative referenced or attached. For this reason, McDonnell stated ASD was not informed of the updated DD Form 633 from Westinghouse. More current data was also available pertaining to engineering hours for the Westinghouse subcontract. McDonnell submitted an evaluation of the estinghouse.subcontract price of $1.5 million to ASD prior to fact- finding and negotiation meetings which included an estimate of 45,210 hours for engineering labor. However, a McDonnell document used in

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