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B-146977 1 (1965-03-31)

handle is hein.gao/gaobaacta0001 and id is 1 raw text is: 1691 COMPTROLLER GENERAL OP THE UNITED STATES WASHINGTON, D.C 48 MAR 3 1 1965 B- 146977 .ELEA EQ Dear Mr. Speaker: In our review of certain aspects of the procurement of powder for .30 caliber blank ammuition, we found that the Government had incurred excessive costs that we estimate at over $1 million because the Depart- ment of the Army permitted Remington Arms Company, Inc., a contrac- tor with a cost-plus -a-fixed-fee contract, to procure the powder from a soeo-source subcontractor, Olin Mathieson Chemical Corporation, with- out taking appropriate action to determine if the price was reasonable. Although the Government had previously procured similar powder at about $0.90 a pound, the Army contracting officer approved Remington Arms' purchases at $1.72 a pound without requesting a review of Olin Mathieson's cost. Remington Arms took no action to have the Army review Olin Mathieson's costs even though it had not previously pro- cured powder of this type and had no valid basis for ascertaining the reasonableness of Olin Mathieson's price. Furthermore, even after the excessive prices were disclosed by the Army Audit Agency, contracting officials did not take timely action to obtain a lower price from Olin Mathiess•. Olin Mathieson earned profits amounting to about 162 percent of the cost of powder sold to Remington Arms during the period December 1958 to January 1962. When the excessive prices were eventually dis- closed by an Army Audit Agency review, Olin Mathieson and the Army negotiated a significantly lower price for deliveries of powder beginning in April 1962. On the basis of the actual costs incurred, and by apply- ing the rate of profit negotiated in 1962, we estimate that Olin Mathieson's billings of $241 million for powder sold to Remington Arms from Decem- ber 1958 to January 1962 were overstated by over $1 million., In June 1962, and again In December 1963, the Department of the Army requested that Olin Mathieson make a voluntary refund of the excessive profits re- alised. However, Olin Mathieson refused, on the grounds that its overall profit pattern in recent years en defense business had been considerably below levels It considered acceptable for purposes of renegotiation. i ! .-. - • .•- , . .- . . , , . ••:• -4 * I-. . . .

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