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PSAD-77-153 1 (1977-08-16)

handle is hein.gao/gaobaacpi0001 and id is 1 raw text is: DOCUMENT RESUME 03242 - [A22934307 Need to Improve Reviews of Royalty Charges Tncluded in Air Force Contracts. PSAD-77-153; B-133386. Augus. 16, 1977. 7 pp. + enclosure (9 pp.). Report to Secretary, Department of the Air Force; by Richard W. Gutmann, Director, Procurement and Systems Acquisition Div. Issue Area: Federal Procurement of Goods and Services (1900); Federal Procurement of Goods and Services: Reasonableness of Prices Under Negotiated Contracts and Subcontracts (1904). Contact: Procurement and Systems Acquisition Div. Budget Function: National Defense: Department of Defense - Procurement & Contracts (058). Organization Concerned: Department nf the Air Force: Wright-Patterson AB, OH; Patent and Trademark Office. Congressional Relevance: House Committee on Armed Services; Senate Committee on Armed Services. The Armed Services Procucement Regulation permits a de. _nsp Contractor to include in his proposed contract price ro ilties he must pay a patent owner. The contracting officer must submit the informatior about royalties received from tha contractor to a patent office for advice on the propriety of the royalties. Findinqs/Conclusions: A review of patent royalty files indicated a general lack of documentation necessary to determine +he propriety of royalties approved. About 40 of files axamined did not contain documents showing that the Patent Division: (1) determined if the Government had rights to the patent; (2) obtai.ved engi.neers' comments; or (3) reviewel engineering drawings. The Patent Division recommended approval of about $106,000 under nine license agreements for which there was no evidence that the patents covered items procured. There wpre several instances in which royalty approvals were Questionable. Contracting officers were not familiar with general guidelines for processing royalty requests, Lnd some Air Force contracts included royalty charges without identification by the contractor. A review of four cases showed that conflicting opinions on the propriety of royalty approvals went unresolved for several years. Failure to obtain and review necessary information on royalty requests can lead to improper contract payments. Recommendations; Procedures shauld be astablished to assure that necessary documentation is obtained, reviewed, and maintained to support royalty approval action. Such procedures could involve requiring a statement or certification from the contractor regarding the amount of royalties included in a price proposal and the use of a checklist by the contracting officer. Steps should be taken to reevaluate those cases identified where royalties may have been improperly approved and, if appropriate, take measures to recover improper payments. (Author/TW)

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