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B-167034 1 (1973-09-17)

handle is hein.gao/gaobaafwh0001 and id is 1 raw text is: * UNITED STATES GENERAL ACCOUNTING OFFICE cU , WASHINGTON, D.C. 20548 PROCUREM ENT AND SYSTEMS. ACQUISITION DIVISION B-167034 SEP 17 1573 LM096070 The Honorable The Secretary of Defense Dear Mr. Secretary: In April 1973 we reported to the Senate Committee on Armed Services on the effect of section 203 of Public Law 91-441 on payments b y~ ht re- Learch and develqpmtn IR&D and bid and- r s B&P c s (B-167034, Apr. 16, 1973 That report identified is- sues relating to IR&D and B&P costs which we were planning to examine further. One such issue was decribed as: * * * Concerns expressed by representatives of smaller companies not required to enter into ad- vance agreements about the inequity of applying DOD's formula approach to determine the reason- ableness of their IR&D and B&P expenditures. They feel that the formula approach, which is based on recent sales and IR&D and B&P costs incurred, is inadequate for young, fast-growing companies. They contend that their right to appeal for an advance agreement is too burdensome and costly. * * *. DOD instituted the formula approach by issuing Defense P ,cgnt Circular (DPC) 90 on September 1, 1971. We there- fore made a survey to identify problems of small contractors in complying with DPC 90. We concluded that DOD can minimize potential problems by (1) emphasizing to small contractors that compliance with DPC 90 (now incorporated in the Armed Services Procurement Regulation (ASPR), sections 15-205.3 and 15-205.35) is required and may be necessary to avoid disal- lowance of otherwise legitimate IR&D and B&P costs, (2) making it clear to contractors and contracting officers which DOD representative should negotiate advance agreements with small contractors, and (3) advising the appropriate DOD contracting officers of the criteria to be used in negotiating advance agreements and allowing equitable cost recovery. 74~rOWfo7 Oj(

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