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B-156806 1 (1973-12-11)

handle is hein.gao/gaobaaftx0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFCE WASHINGTON, D.C. 20548 PROCUREMENT AND SYSTEMS ACQUISITION DIVISION B-1568o6 DEC 1 11973 The Honorable LM095990 The Secretary of Defense Attention: Assistant Secretary of Defense (Comptroller) Dear Mr. Secretary: On December 11, 1972, we forwarded for your comments our findings and proposals on the erieS' s of e,;,al~a~o cluss. (See OSD Case No. 3556.) We emphasized the need for guidance at the Department [ of Defense level for determining when escalation clauses /should be used and for establishing the provisions of escala- tion clauses. Our examination showed that the military services were inconsistent in providing for escalation pay- ments. Using different methods could result in differences in payments for economic fluctuations. The Acting Assistant Secretary (Installations and Logis- tics) advised us on February 14, 1973, that your department has known of these matters for some time. He said the Arlgd 5yfi-c prr giiCqoi mn44tee was considering the advisability of revisions that would substantially agree with our proposal. On March 28, 1973, a revision to the Armed Services Pro- curement Regulation was approved. The revision provides criteria for determining when to use escalation clauses and guidelines for establishing the provisions of the clauses. The guidelines for special economic price adjustment clauses are similar to those which the Navy uses for ship construc- tion contracts. Under these guidelines the provisions for escalation payments will be established before soliciting bior offers fM =eLaJfarxs. They will proiTedt p-h ieages of 2/J34O%0%97

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