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DCCUMENT FESUME
0385C - [B28541051
rErrors in Prices Charged Foreign Filitary Sales Customers].
LCD-77-449; B-183318. Octoter 7, 1977. 8 pp. + enclosure (1
pp.).
Report to Secretary, Department of Defense; by Joseph Normile
(for Fred J. Shafer, Director, Logistics and Ccmmunications
Div.).
Issue Area: Facilities and material Management: Supply and
Maintenance Operations Reporting Systems (703).
Contact: Logistics and Communicaticns Div.
Budget Function: National Defense: Department cf Defense -
Military (except procurement & contracts) (051).
Grqanizaticn Concerned: Department of the Army; Department of
the Army: Army Azmament Materiel Readiness Command, Rock
Island, IT.
Congressional Relevance: House Comwittee on Arued Services;
Senate Committee on Armed Services.
Authority: Army Regulation 37-60. DCD Instruction 2140.1.
A review cf free assets conducted at the Army Armament
Command from June to August 1975 showed that the Armament
Command had charged foreigr military sales curtomers less than
the market price for certain 50-caliber M2 machinsgun orders.
The prices charged fcr the machineguns should have been based on
the prices in effect when the guns were dropped from inventory
in accordance with Army policy. However, in spite of directions
to recover replacement prices on the M2 machinegun sales, the
Armament Ccmmand has repriced only five of these orders for an
additional $1.6 million. There are 22 other crders which are
urcerpriced by about $60.7 million on which sirilar action needs
to be taken. Findings/Conclusions: The hrmament Command's
contention that they have a pricing exception regarding
machinequn sales is incorrect. Assistant Secretary of Defense
and Army Comptrcller directives havs clearly indicated that the
collection of replacement prices tcr these rders is required.
Adjustments should be made and replacement pices collected on
all M2 machinegun sales for which items were delivered after the
U.S. Army Lrmament and Material Readiness Command had initially
identified the need for replacement in May 1974. The Army also
had no basis on which to grant a 2C% reduction on the sale of
overhauled items to foreign customers, and those discount
amounts should also te :eccuped. Fecommendaticns: Since the
ability of the United States to collect on these sales decreases
with the passage of time, the Secretary of Defense should take
immediate action to direct that the Army Lctempt collection of
the underpricing on M2 machinegun sales and shculd closely
monitor Army progress regarding these collecticns. (SC)](ViewImageLocal?handle=hein.gao/gaobaawde0001&div=1&collection=&method=preview&ext=.png&size=3)