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PSAD-76-65 1 (1976-01-22)

handle is hein.gao/gaobabkzn0001 and id is 1 raw text is: 

                                                                           Oos3q


                           COM2TROL I . ' RNeAL OF THE UNITED STATL





           B-18378i

                                                                       Lm090539
           The Honorable Wiiliam Proxmire
           Chairman, Subcoinittee on Priorities    -    .
      /I     and Economy in Government
           Joint Economic Committe.
           Congress of the United States

           Dear Mr. Chainan:

                In your lettpr of April 28, 1975, you requested that vie undertake
           a study ofdepreciition charged to Government work by selected major
           defe. e contractors You werp particularly concerned with the pdssi-
           hi2ity that disproportionately heavy costs of deprecidtion had beet.
           allocated to defense contracts with the subseauer.t use of the relate!
           assets on coirnercial wo4rk at either no cost for depreciation or a
           disproportionately low cost.

                Our study was performed at five company locations that we under-
           stood you particularly wanted cov'eJ: --1.ockheed-California Company, .     -
           Burbank, Ca.ifornia, a division of Lockheed Aircraft Corpov-ucion;
           Convair Divi-ion, General Dynamics Corporation, San Diego, ,-iiFurnia; 0
         SPrn.tt & Whi Lcy Aircraft Division, United Technologies Coruortion,
           East Hartford, Connecticut*;Sikorsky Aircraft Division, United
           lechnologies Corporation, Stratford, Connecticut;-and Aircraft Engine
           Group, General Flectric Company, Evendale, Ohio.

                Based on our review of available data, depreciation charges
           appeared reasoiiably allocated between Gove: .... and cornercial work
           aL Lockheed-CaliFornia, Convair, and Pratt & W.4hitney over the 10-year
           period from lc5 through 1974. An analysis similar to that made at
           these three rilants could not be made at General Electric because of
           the contractor's cost accounting system design. An analysis at
           Sikorsky would have been possible; homev.r, it would Lave required an
           unreasonable expenditure of ti, for an exhaustive review (t detail
           records.
                At Lockheed-California, Convair, and Pratt 6 Whitaey our methodo-
           logy was to accumulata actual contractor deprec:atio- charges over a
           I0-year period for Government and conercial work. W4e -Lien it ated the
           lO-year period as a single accounting periad and reuistributec t_v 1toal
           depreciation charges. By using a 1O-yeav period we felt it w.'.d be



ESTE                                                                    FSAD-76-65
           uubum~     ~1T AVABLE

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