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DCCJMiENT FESUME
O05 - [ B Ob7Ob4 11
[foL.ard PLiCIflq sate Agreements in Iritial Ccntract Pricing].
PSAD-78-127; B-168450. July 20, 1978. 4 pp. + enclosur3 410
pp.).
f eport to Secretary, Department of Defensi; by Jercme 14.
Stoiarow, DiLector, Prccurerent and Systems Acquisition Eiv.
Issue Area: Federel Procurement of Gccds and Services (1900) ;
Neqotiation of a Feasonable Price Eased on Incurred Costs
and No More Thian a Fair Profit. (1913).
Contact: Procurement and Systems Acquisiticn Div.
bud4et Function: NatIonal Defense: Department ¢f Defense -
Procurement 6 Contracts (058).
Orqanization Concerned: Department of the Army; Department of
the Navy; Department of the Air force.
Conressionai Relevance: House Coamittee cn Armed Serviues;
Senate Lomittee on Armed Services.
Authority: P.L. 87-b53. Defense Acquisition Regulaticn 3-8C7.12.
To determine whether Departwent of Defense. (DOD)
coi.tractifnq ofticials were obtaining adequate data in su port of
fcrward-pricinq rate propcsals from Lefense comtractczs and
whether contract admii.istration and audit perscnnei were
adequately evaiuatinq business volume forecasts in su jcxt of
indirect expense rate negotiations, a review was conducted of
iDefense contrectors' forecasts developed in connecticn with the
process of negotiating farward-pricing rate agreements for
allocatinq indirect expenses in the initial pricing of
contracts. In recent years, DODs prine ccntract awards have
exceeded $40 billion annually, and indirect exrenses are
est ated to account for at least toc-thirds -A contractors'
nplant costs and about one-third of total contract costs.
conLractorL: proposals were often in',cmzpete and did not
identify informat-ion sources and aethcdologies used in business
vclume foreca.sts; some contractors retl- ed to iurnisb suipcrting
data when requested to do so. Evaluaticns cf business volume
oLecasts did not Locus on the accuracy of supporting data or cn
the rationale of ccntractors' assumpticnE ard judgments.
uloverumert oprsoiinel, however, adequately mcnitcred the a;proved
or recomwendad rates after n(,otiaticns, and wken atrcjriate,
the rate aqreemaents were withrhi-fl. Ccst savings c~aus.2s were
inclu'ded in contracts, permittinq retroactive indirect exiense
fat(- adjustwents. Ihe 5ecretary of Defense sloid reemphasize
the need L.0.,x contracting officers to oitain adequate
forward-pricing rate proposals which identify the bases for
business voium- forecasts and for contract alministratict and
dudit pcrsor.ti.t to conduct thorough evaluaticnE of
tcrwaLi-pLi.i;o rate proposals. (FES)](ViewImageLocal?handle=hein.gao/gaobaaxrg0001&div=1&collection=&method=preview&ext=.png&size=3)