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092868 1 (1970-09-21)

handle is hein.gao/gaobacwsz0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE REGIONAL OFFICE 502 U.S. CUSTOMHOUSE. SECOND AND CHESTNUT STREETS PHILADELPHIA, PENNSYLVANIA 19106 EP F Commanding General U.S. Army Munitions Co-mand Dover, New Jersey 07801 LM092868 Dear Sir- Wa have made a review of the procedures and practices of the Frankford Arsenal, Philadelphia, Pennsylvania, for negotiating fixted- price contracts during fisc3l year 1969. The review was directed primarily toward determining whather fair and reazonable prices had bee= obtained under negotiated fixed-price contracts valued at $100,000 or more. Awards for 20-mm projectiles Inclued advertised ccatrzcts. We considered these procurements in our evaluation. In addition, we tcted options for additional quantitles valuod at $100,000 or more that were exercised under the provisions of selected contracts. Our review showed there Is a need for the Arsenal to make closer evaluations of (1) the adequacy of price competition before accepting a low bid as being fair and reasonable and (2) the use of options for the purchase of additional quantities of Items to assure that they are exercised only when advantageous. These matters are discussed more fully below. NEED TO IDENTIFY WESTO 'ALE COMPETIT10I WHEN CONTRCTORS RAVE APPARENT DETERM IATIVE ADVANTAGE Wo believe there is a need for the Arsenal to give closer attention to the adequacy of competition when such competition is to be used as a basis for accepting the low bid as being fair and reasonable. This Is especially important when the low bidder may have a determinative advan- tage which places him in a preferred position over other potontial producers, as outlined in ASPR 3-807.1 and explained In the Armed Services Procurement Regulation Manual for Contract Pricing, chapter 3. For example, a determinative advantage can exist when substantial costs, such as startup costs, have already been absorbed in connection with previous contracts. The Arsenal negotiated 63 contracts, valued at $65 million, without tho benefit of cost data on the assuraption that adequate price compoti- tion existed In accordance with ASPR 3-307.1. We Identified 16 of these negotiated contracts, valued at $17 million, on which we believe the -r 0- i? E

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