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NSIAD-85-92 1 (1985-09-30)

handle is hein.gao/gaobabnub0001 and id is 1 raw text is: 



UNITED STATES GENERAL ACCOUNTING OFFICE
          WASHINGTON, D.C. 20548


RESOURCES. COMMUNITY.
AND ECONOMIC DEVELOPMENT
     DIVISION


3 0 SEP 1985


B_216182IIllllll                                            llll
The Honorable Martha Hesse Dolan                         128191
Assistant Secretary for Management
  and Administration
U.S. Department of Energy

Dear Mrs. Dolan:

     Subject: Overpricing on Naval Nuclear Contract
               (GAO/NSIAD-85-92)

     This report discusses the results of our review of the
reasonableness of prices negotiated for two fixed-price
incentive contracts--DE-AC11-76-PNROO158 and DE-AC12-SN00562.
The first contract (0158) was awarded by the Department of
Energy (DOE), Pittsburgh Naval Reactors Office, West Mifflin,
Pennsylvania. The price of the contract, including three
modifications, was $129.7 million. The second contract (0562)
was awarded by DOE, Schenectady Naval Reactors Office,
Schenectady, New York. The value of this contract, including
five modifications, was $132.4 million. Both contracts--for
nuclear reactor cores--were awarded to the Babcock and Wilcox
Company, Lynchburg, Virginia.

     The primary focus of our review was to determine the
fairness and reasonableness of the contract prices negotiated
based on contractor's proposals and the cost and pricing data
supporting those proposals. Essentially, we found the following
questionable costs included in the negotiated prices.


            Item

Escalation to firm fixed-price
  quotations for material

Interdivisional profits

Uranium recovery labor and
  overhead

Uranium recovery labor and
  overhead

Computational errors


Contract no.


  (0158)


(0158)


(0158)


(0562)

(0158)


Total


Amount of
question


$  345,884

3,112,519


    70,645


    301,484

    11 ,571

$3,842,103


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