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089065 1 (1977-03-01)

handle is hein.gao/gaobacvbs0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE OS O3 REGIONAL OFFICE SUITE 1010 WORLD TRADE CENTER 350 SOUTH FIGUEROA STREET Los ANGELES, CALIFORNIA 90071 MAR 1 1977 Brigadier General H. W. Baker -77 Commander, Headquarters Air Force Contract Management Division Kirtland Air Force Base New Mexico 87117 Dear General Baket The Los Angeles Regional Office has recently completed a survey of the settlement of noncompliance cases involving Cost Accounting Standards (CAS) at the Air Force Plant Representative Office, Northrop Corporation, Hawthorne, California The objective of the survey was to determine whether the administrative contracting officer (ACO) took timely and appropriate action to settle reported cases of contractor noncompliance with CAS during 1975 and 1976. We found that timely and aupropriate action had been taken by the ACO in processing noncompliance cases in accordance with the requirements of the Armed Services Procurement Regulation 3-1212 One case, however, was settled on the basis of direction from higher headquarters, which we believe requires reconsideration by your staff The details of the noncompliance case is presented as follows The ACO had requested that the resident Defense Contract Audit Agency determine whether expenses incurred in the preparation of cost performince resorts (CPR's) for F-5E/F aircraft under Foreign Military Sales contracts for delivery to Saudi Arabia were recorded in a manner consistent with applicable CAS requirements. The auditor advised the ACO on 'ay 7, 1976, that the contractor was in noncompliance with CAS 402, Consistency in Allocating Costs Incurred for the Same Purpose The noncompliance involved two Air Force contracts in which proposed labor and related expenses for preparation of CPR's was estimated as direct costs The contractor's established practice was to account for such expenses as Indirect costs The ACO made an initial determinition of noncompliance on May 17, 1976 In commenting on this matter, the contracLor sLated that the CPR's in question were special requirements directed by the Air rorce and were in addition to the cost reports provided on other contracts

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