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B-178766 1 (1973-09-18)

handle is hein.gao/gaobaafwe0001 and id is 1 raw text is: / l\ U UNITED STATES GENERAL ACCOUNT OFF WASHINGTON, D.C. 2054 A SSE IlfJ~JJ~ J IIII ~lJIii111 111 llf~ ll~l ACQUISITION DJIVISION111111 11 11IiiIi 11 LM096066 SEP 18 1t3 B-178766 The Honorable George M. White, FAIA Architect of the Capitol '\~~~1 I Dear Mr. White: As requested by your letter of May 30, 1973, we have performed an evaluation of the, price proposal of May 10 1973, amounting to $2,-704,000, submitted by the Diamond Power Specialty Corporation for definitizing Jitter contract ACbr-605 dated December 15, 1972. Our evaluation included an examination of the contractor's data and records in support of all significant cost elements and the methods -l in projecting from the available data to the cost estimates. As agreed with officials of your office, we relied on determinations by your.,project engineering officer, Mr. Benjamin Karkert, and by the United States Secret Service personnel who assisted him, that the quantities and types of material and labor are needed for performing the contract. The enclosed schedules summarize by cost elements the results of our evaluation, showing overestimated and questionable costs. The overestimated costs include direct costs for material, labor, subcon- tract, telephone and warranty totaling $75,000, and general and admini- strative expense and applicable profit of either $142,000 or $360,000, depending on whether sales expenses are allocated to the Capitol con- tract, as discussed below. The questionable costs for catalog equip- ment and the service contract are submitted for y6ur consideration in final price negotiations,- The contractor has proposed general and administrative (G&A) expenses of $570,000, by using a rate of 37.9 percent of proposed direct contract costs. The rate was computed by dividing forecasted general and admini- strative expenses by forecasted cost of sales for calendar year 1973. Our analysis showed that the expcnse pool included forecasted sales expenses of $723,000 to be incurrcd mainly for comnercial sales. Since the Capitol contract was not obtained by such efforts, we question the inclusion of sales expenses for computing a G&A rate for the Capitol contract. Since the period of performance of the contract is 18 months, we used the contractor's experience for the 18 months ended June 30, 1973, and computed two G&A rates as shown below.

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