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PSAD-77-165 1 (1977-09-10)

handle is hein.gao/gaobaaapi0001 and id is 1 raw text is: CCOMPTROLLZR GENERAL OF THM UN[TZO STATE WASH 114t3tC. D.C. =0 Oq 4?61~ SEP 101977 The Honorable William Proxmire Chairman, Committee on Banking, Housing and Urban Affairs United States Senate Dear Mr. Chairman: In accordance with your letters dated June 9, 1977, and July 21, 1977, we have reviewed theicosts of compliance with the Renegotiation Act of 1951, as amended (50 U.S.C. App. 1211 et. seg.), claimed to have bien incurred by selected contrac- tors, as well as studies by the Renegotiation Board and two industry associations. As requested, our work was conducted at the following activities: Hewlett-Packard Company; FMC Corporation; Teledyne, Incorporated; Eaton Corporation; Cutler- Hammer, incorporated; Fairchild Industries; John Fluke Manufac- turing Company; Barnes Engineering Company; Financial Executives Institute; and the Renegotiation Board. In addition, we visited the Aerosoace Industries Association of America to review their survey of compliance costs, and the firms of Astrosystems; Hope- man Brothers, Incorporated; and Martin Marietta Corporation, in connection with our evaluation of the Board's study. Our specific objective was to ascertain if, as claimed by contractors, there were substantial costs incurred for cow- plying with the requirements of the Renegotiation Act. We also evaluated studies prepared by the Renegotiation Board and indus- try associations attempting to determine the extent of such costs. In general, we have concluded that some costs are neces- sarily incurred by contractors to comply with Renegotiation Act requirements. We are unable, however, to determine the magnitude of such costs or to what extent they are incremental to other financial data costs. The primary problem in deter- mining and verifying such costs was that the contractors' accounting systems are not designed to identify and segregate such data. the It is important to ncte that because of unusual aspects of the firms covered in this review, any conclusions drawn fromn the data are unlikely to be representative of the approximately 3,000 firms that file with the Board. To illustrate: One con - tractor, Hewlett-Packard, claims and obtains exemptions fo: about 75 percent of its otherwise renegotiable sales. Under

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