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B-178821 1 (1973-09-17)

handle is hein.gao/gaobaafwi0001 and id is 1 raw text is: UNITED STATES GENERAL ACCOUNTING OFFICE 2 0A o WASHINGTON, D.C. 20548 PROCUREMENT AND SYSTEMS ACQUISITION DIVISION B-178821 SEP 1 71973 The Honorable The Secretary of Defense Attention: Assistant Secretary of Defense /IIIIIliiiIIIi1II (Comptroller) LM096071 Dear Mr. Secretary: The Deputy Chief of Naval Material requested us to examine the cost accounting system of the Ladish Company, Cudahy, Wisconsin, and consider its adequacy for developing cost or pricing data as required by Public Law 87-653. We also reviewed several completed subcontracts to determine costs and rate of return on Government work. Ladish has been awarded noncompetitive subcontracts under Navy and Air Force prime contracts. Where the prime contractor and the first-tier sub- contractor had been required to furnish cost or pricing data and the Ladish subcontract price was expected to exceed $100,000, Ladish had been requested, in most cases, to submit and certify cost or pricing data. Ladish has consistently refused to furnish such data and said it was un- able to present data in the form needed to satisfy the Government's require- ments that we would accept. Ladish stated it would not risk certifying data because it lacked a refined cost accounting or pricing system and forging manufacture conflicts with rigid cost certification. Ladish would furnish certified data if the Government would risk a cost overrun under a cost- reimbursement contract. Under such contracts, the price adjustment for sub- mitting defective data would be limited to a reduction of the fixed fee. We found that Ladish job-cost records, with a few adjustments, would be adequate for developin Lcost or pricing data in support of fixed-price pro- posalsQ Had such data been furnished, it would have raised questions as to J the reasonableness of proposed prices. LADISH'S ACCOUNTING SYSTEM DOES NOT PRECLUDE FURNISHING CERTIFIED COST OR PRICING DATA Under Ladish's formal accounting system, the cost of goods manufactured and sold is determined at the end of the year. The formal accounting system does not provide for the cost incurred on each order or job. However, in- formal job-cost records are maintained for all custom-forging items. These records are not integrated or reconciled with the formal accounting system. The Ladish accounting department has been compiling job-cost records with the help of data processing equipment for about 15 years. Although the records J~4 O6O7/

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