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108090 1 (1978-11-16)

handle is hein.gao/gaobacxsd0001 and id is 1 raw text is: MS- -~ r ~ ' - UNITED STATES GENERAL ACCOUNTING OFFICE REGIONAL OFFICE SUITE 1010. WORLD TRADE CETER 350 SOUTH FJGUEROA STREET Los ANGELES CALIFORNIA 9D071 Novef'ber 16, 1978 44e Brigadier Gene al Merton W. Baker, USAF Hieadquarters,;/ ir Force Contract Managemoent Div sion Kirtland Air Force Base, New Mexico / 47117 Dear General Baker: The General Accounting Office has ccmpleted a review of the pricing of Purchase Order R60697 awarded to Hughes Aircraft Company on February 1, 1971, by Bell-HRnicDtger CIm28eYunder the U.S. Army Aviation Systemrs Commiand Contract DAM01-74-C-0122. The siuiZt.ontract was for the iii podco f291 XM65 TOW Missile Subsystems, at a target price of $80,475,000. The prime contract was awarded on January 31, 1974, at a target price of $113,800,000. Procurement responsibility for the contract was transferred to the Arm Troop Support and Aviation aterisaleadiness-Ccad ndL(ATSARCo _.odiFt3 , 1977. Tnis subcontract was selected as part of a survey of the reasonableness of the pricing of noncopetitive negotiated subcontracts under Departmrent of Defense prime contracts. Our objective was to determine the reasoa5Iness of the subcontract price in relation to the subcontractor's supporting cost or pricing data, and whether the requirements of :Public.Law 87-653 were effectively iLplemented. ..We were unable to determine the reasonableness of the pricing of Purchase Order R60697 primarily beceuse Hughes failed to retain certain records used in preparation of the forward pricing rates that were used at the time of the negotiations of the subcontract. As a result, we believe that Hughes was in violation of Defense Acquisition Reguilatian (DAR) Appendix M, Records Retention Requirements. Hughes' proposal for Purchase Order R60697 included a material burden rate of 9.0 percent and an AE rospace Group G&A rate of 7.3 percent. The rates had been previously approved for forward pricing by the Air Vorce Plant Representative (APPR). Prior to negotiations Df the purchase order, Hughes revised its forwE rd pricing material burden rate to 9.7 percent and its Aerospace Group GrA rate to 7.6 percent and 1quested AFPR approval of the rates. lio;ever, the rates %?ere not -ppcoved. Hughes revised its p-irchase order proposal to include tie new rates in Novcinber 1973. The price for the purchase order was negotiated in Decevber 1973, and accL(cdinq to Hughes' rec-rds, included the revised rates. 'Ali .~ . ... J

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