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PSAD-76-56 1 (1975-12-31)

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REPORT TO


           GE   U' TD 3T4TES

THE C62SENSeE


JAN 5


BY THE COMPTROLLER GENELKA1

OF THE UNITED STATES


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     LM096869


JQ/6 0 66


Causes


Of Excessive


Profits On


Defense And Space Contracts




The Renegotiation Board



During the years 1970 through 1973, the
Board found excessive profits primarily at
small contractors who produced relatively
low-technology items and did most of their
business with the Government. The contrac-
tors' average profit rates were 28 percent-on
costs and 84 percent on capital and were
made on negotiated as well as formally adver-
tised contracts.

The profits were caused primarily by a seller's
market rather than poor procurement proce-
dures.

Because good procurement procedures will
not necessarily prevent excessive profits, re-
negotiation is needed if the Congress intends
to recover these profits.


PSAD-76-56


DEC. 31, 1975


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