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092611 1 (1971-06-29)

handle is hein.gao/gaobacwmi0001 and id is 1 raw text is: lout~' Commanding Naval Ship Arlington, Officer Systems Command Virginia 22202 Dear Sir: We have reviewed the pricing of 32 steam turbine generator sets (1000KW) purchased from De Laval Turbine, Inc., Trenton, New Jersey, under contract N00024-69-C-5254 awarded by the Naval Ship Systems Command on December 11, 1968. Negotiations resulted in a firm fixed-price contract of $8,993,360 which was definitized on April II, 1969. Our review was primarliy concerned with the reason- ableness of the price negotiated in relation to cost or pricing information available to the contractor at the time of negotiation and the adequacy of Government technical and audit evaluations of the contractor's cost proposal. Our review showed that the negotiated price was $201,257 higher than justified by cost or pricing data available prior to negotiation. Of this amount $131,408 resulted because the provision for setup labor was higher than warranted by experience under a pre- ceding contract. The balance of $69,849 is attributed to the failure of the contractor to adjust prior cost experience for a change in a testing procedure. The overpricing amount is detailed in the following tabulation: Direct labor Manufacturing overhead Subtotal General and administrative expense Subtotal Profit Overpricing Excessive setup charges $ 19,980 79,279 $ 99,259 16,934 $116,193 1 21 $131,408 Change in test procedure $10,620 42,140 $52,760 9,001 $61,761 _8608 $62 849 BEST DOCUMENT AVAILABLE 50TH ANNIVERSARY 1921-1971 UNIIED STATES GENERAL ACCOUNTING OFFICE REGIONAL OFFICE 502 U S CUSTOMHOUSE 2D AND CHESTNUT STREETS IPHILADELPHIA, PENNSYLVANIA 19106 June 29, 1971 Iotal 5 30,600 121,419 $152,019 25,935 $177,954 23,303 $201 257

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