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089570 1 (1976-03-29)

handle is hein.gao/gaobacvpl0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE REGIONAL OFFICE ROOM 1903 JOHN F. KENNEDY FEDERAL BUILDING GOVERNMENT CENTER BOSTON, MASSACHUSETTS 02203 March 29, 1976 Lieutenant General James T. Stewart Commander, Headquarters Aeronautical Systems Division Wright-Patterson Air Force Base Ohio 45433 Dear General Stewart: As part of ourfreview of the negotiation of contract prices under the provisions of Ublic'Law 87-653, we examined a firm fixed-p ice subcontract awarded by the Boeing Company to Northrop Corporation, Czo Precision Products Department, Norwood, Massachusetts. Boeings' pur-P chase order R-844556-7054 was for 1,362 rate gyros for the FY 1974 Short Range Attack Missile (SRAM) program. We examined the reasonableness of the subcontract estimates included in the prime contract price in re- lation to cost or pricing data available at the time of prime contract negotiations. Our review showed that Northrop (1) refused to provide Boeing and the Government with cost data for the rate gyro on the basis that the rate gyro was proprietary and (2) excluded a required Armed Services Procurement Regulation (ASPR) clause regarding DOD audit rights from the subcontract. We found that the Administrative Contracting Officer (ACO) at Boeing failed to comply with ASPR in responding to Boeing's inability to furnish the required subcontractor cost data. Further, we found that the ACO was unaware of the exclusion of the required ASPR clause from the subcontract. Our examination did not disclose any sub- stantial overpricing of the subcontract or of the price estimate for the subcontract which was included in the prime contract price. Northrop's proposal for $1,258,482 was submitted to Boeing on January 29, 1973. The prime contract between Boeing and the Air Force was negotiated on June 8, 1973, and included $1,068,067 for Northrop's subcontract. On November 6, 1973, Boeing negotiated a firm fixed-price purchase contract with Northrop for $1,139,994. Northrop refused to provide Boeing and the Government with cost and pricing data supporting $432,517 for the rate gyro because it considered the rate gyro to be

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