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093243 1 (1972-11-16)

handle is hein.gao/gaobacxcg0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE REGIONAL OFFICE otR ROOM 403. U.S. CUSTOM.HOUSE, 610 SOUTH CANAL STREET CICAGO, ILLINois 60607 NOV1 1972 Commander U. S. Army Munitions Command Joliet, Illinois 60436 Dear Sir: We recently completed a limited survey to determine whether the U. S. Army Munitions Command (MUCOM) provided contractors with funds for the acquisition of industrial plant equipment through negotiated supply contracts. Our survey included a limited review of selected negotiated contracts awarded by MUCOM during fiscal year 1972 and discussions with responsible procurement officials. We identified two letter contracts, awarded to Marathon Le Tourneau and Avco Corporation for production of bomb bodies and booster adapters (see appendix), where the respective contractors' proposed contract prices, totaling about $7.4 million, included estimated costs of about $1.5 million for acquisition of plant equipment and reactivation of Government-owned production facilities. Estimated add-ons for General and Administrative Expense (G&A) and profit applicable to these costs are shown in the appendix. At the time of our survey, the letter contracts awarded to Marathon Le Tourneau and Avco Corporation were scheduled for definitization in November 1972. The contractors' plants are commercially owned; however, the plant equipment for production of the bomb bodies and booster adapters is Government-owned. In this regard, a basic facilities contract is in effect on a no-fee basis with Avco. We were told that a facilities contract was in process of award to Marathon Le Tourneau relative to the existing Government-owned production facilities at the plant. We believe that the cost of the production equipment, and reactivation work included in the proposals for definitizing con- tracts DAAAO9-72-C-0330 and -0339 should be excluded from the production contracts. By using no-fee facilities contracts for this effort, cost savings will accrue to the Government to the ex- tent of the contractors' profit on the proposed equipment costs.

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