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UNITED STATES GENERAL ACCOUNTHNG OFFICE
REGIONAL OFFICE
SUITIE 1010. worn' t1 1 iiAIt CLNTCR
350 SoilI st fI CIs 14QA SFRE.LT
Los ANGELES, CALWNuA 9007
Vice Admiral K. L. Lee
Commander, Naval Air Systems Ccomrand
Department of the Navy
Washington, D. C. 20361
Dear Admiral Lee:
We recently completed a survey of the pricing of negotiated con-P9 7
ract 00019-73-C-0505 awarded to G-.ncral Dynamics Corporation, Pomona .7
Division, Pomona, California, by the Nava3 Air Systems Command. Our
objective was to determine the extent of compliance with the require-
ments of Public Law 87-653 and the implementing provisions of the
Armed Services Procurement Regulation.
Although we did not perform an in-depth examination of the reason-
ableness of the contract price, we found that applicable defense procure-
ment procedures were adequately implemented with one exception. It
appears that the contract target price may be overstated by about $200,000
because silver used in the manufacture of batteries for the Standard Anti-
Radiation missile was priced in the contract although the silver was
Government-furnished to the battery supplier. The details of this mqtter
are presented as follows.
Contract -0505 dated November 28,
August 14 and September 21, 1973, at a
contractor's latest price proposal was
for consideration during negotiations.
or Pricing Data was executed by General
certifying to the data as of October 3,
1973, was negotiated between
target price of $59,750,000. The
submitted on September 7, 1973,
A certificate of Current Cost
Dynamics on October 26, 1973,
1973.
The post-negotiation business clearance dited October 11, 1973,
indicates that the proposed cost of the biatteries (p.-rt number 423-
202015) amounting to $794,172 was acccptud and negotiated in the prime
contiact Frice. The estimate wis baEe ! ain contractor-furnished silver.
At the: Lime of negotiations, General wya.mics was considerinq the use
of Governmnt-furnished silver. On .;eptember 14, 1973, the contractor
requosted price quotations from batter' suppliers based on Government-
furnished silver. The succoessful i.tdder's price quotation of $621,810
was submitted on Septerbr 1', 1973. cn-ra] Dynarics advised 'the con-
tractinq officer that the u.! of Go-o-! !'nt -i lver would dccrcasie the
prime contract tarqt cust by -.227 (0includes add-on raterial cost
factors) and that other chanq S in Lttral pat cinq would increase the
target cost by $333,682 due to fequat'. from suppliers. This information
was provided in an October ), 1973, entir.ate as part of an enclosure to
the pricing certificate.
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