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PSAD-75-72 1 (1975-05-22)

handle is hein.gao/gaobaabcm0001 and id is 1 raw text is: /L by t10a ~~COMPTRONUM-g-TF ED STATES B-178205 MAY 2 2 1975 The Honorable Mike McCormackllSlIlll lI\lllll\ House of Representatives LM097026 Dear Mr. McCormack: In response to your request of May 7, 1974, and subsequent discus- sions with your staff, we have covpleted a study on the effects of oil price increases on small business contracts. We examined 10 contracts awarded to small business concerns during fiscal years l173 and 1914 to identify problems that small businesses were having that could be related to oil price increases and to estimate to what extent contractors' profits or their ability to perform under the terms of the contracts were affected by such increases. We believe that the inflation experienced during fiscal years 1973 and 1974 has had an impact on profit and that the rate of inflation has been affected by the increase in the price of oil and oil-related pro- ducts. We were unable, however, to isolate oil-related increases from other price increases that contributed to the inflation rate. Your office directed us to study the effects of oil price increases through a profitability/performability assessment of a limited sample of Department of Defense small business, firm fixed-price contracts. Initially, we reviewed four contracts and found these contracts were not oil-related to the point where increased oil prices would affect pro- fitability or performability. One contractor stored Government-owned fuel and made the fuel available as needed. A second contractor designed and manufactured missile test stands; a third manufactured magnatron tubes for the Air Force; and a fourth contractor manufactured target tracking control systems. Because it appeared that these contractors would not experience profitability or performability problems related to oil price increases, we selected six more small business sup !y contracts for review. These contracts were for fuel to be delivered to the Government. EPch of the six supply contracts contained clauses that permitted the contract price to be adjusted periodically as the market price of certain base items in the contract fluctuated. These clauses are intended PSAD-75-72 AEST DOCUMENT AVAILABLE

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