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PLRD-83-21 1 (1983-01-18)

handle is hein.gao/gaobabmug0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE WASHINGTON, D.C. 20548 AND RMKANX80 DIVSION 12035Z B-209656 JANUARY 18. 1983 The Honorable Caspar W. Weinberger The Secretary of Defense Dear Mr. Secretary: Subject: Poor Procurement Practices Resulted in Unnecessary Costs in Procuring M1 Tank Spares (GAO/PLRD-83-21) We have examined sole-source negotiated procurements for M1 tank spare components under contract DAAK30-77-C-0006 awarded initially to Chrysler Defense, Incorporated, and subsecuently acquired by General Dynamics Corporation, Land Systems Division, Sterlin Heights, Michigan. This contract provided for the initial procurement of M1 production tanks and spares on a fixed-price incentive basis. The spares are being obtained at a negotiated ceiling price of $48.8 million. The overall objective of this review was to assess the reasonableness of sole-source negotiated prices for spares to support first year M1 tank production and training requirements. Our objective included determining whether the M1 contracting officer (1) followed sound procurement practices, (2) obtained cost or pricing data to support proposed prices, and (3) evaluated and used the data in neqotiating contract prices. we made our review at the Office of the Project Manager, M1 Tank system, and at the U.S. Army Tank-Automotive Command, both in Warren, Michioan. We examined contract files and held discussions with contracting officials. In addition, we held discussions with cognizant Defense Contract Audit Agency resident auditors at the Lima Army Tank Plant in Lima, Ohio, and at the Detroit Army Tank Plant in Warren, Michioan. This review was performed in accor- dance with generally accepted qovernment auditinq standards. Details of our review are included in the enclosure. In summary, we found that in procuring M1 tank spares, the Government incurred unnecessary costs because the contracting officer (1) accepted ceilinq prices for spares negotiated on a sole-source basis before obtaining cost or pricing data and then failed to change the ceiling prices once the cost data was received, (2) combined the sole-source spare ceiling prices with the one competitively established in the original contract, and (3) permitted inappropriate transfers of spares to other contracts. The last two actions resulted in decreasing the contractor's risk (942050) (, ~K*U~

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