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094276 1 (1976-06-08)

handle is hein.gao/gaobacxkc0001 and id is 1 raw text is: QIJ42i1& UNITED STATES GENERAL ACCOUNTING OFFICE DALLAS REGIONAL OFFICE SUITE 800, 1200 MAIN TOWER DALLAS, TEXAS 75202 JUN 08 1976 Commander U.S. Army Aviation Systems Command LM094276 P. 0. Box 209 St. Louis, Missouri 63166 Dear Commander: Our review of pricing of selected contracts at Bell Helicopter Textron (formerly Bell Helicopter Company), Fort Worth, Texas, indicates action should be taken to recover overpayments and to prevent future overpayments to Bell and its affiliate, the Fafnir Bearing Company. These overpayments occurred when Bell's noncompetitive procurements from Fafnir were not charged to military contracts on a transfer at cost basis, i.e., without profit to Fafnir, as required by the Armed Services Procurement Regulation (ASPR), Section 15-205.22(e). Bell, a division of Textron, Inc., manufactures military and com- mercial helicopters. As of August 31, 1975, Bell held open Government contracts totaling $2.2 billion. Of that amount, about $1.8 billion were incentive type contracts negotiated on a noncompetitive basis. About $890 million of the incentive type contracts were fully delivered but administered as open contracts because final price negotiations had not been conducted. We found that although Bell awards subcontracts for substantial portions of Government contract work to other Textron divisions on a transfer at cost basis, it awards certain noncompetitive procurements to one Textron division (Fafnir Bearing Company) on a nontransfer at cost basis. Thus, contrary to the requirements under ASPR, such pro- curements are probably resulting in two tiers of profit - one to Bell and one to Fafnir. Bell's negotiated profit rates on major incentive-type Government contracts have generally varied from 9 to 14 percent since January 1, 1967, the approximate date that Fafnir became a corporate entity of Textron, Inc. Total noncompetitive purchases from Fafnir for Government contracts during the period January 1, 1967 through May 31, 1975, amounted to at least $2.85 million. Fafnir's costs of goods sold and profit margins were not determined during our review. However, assuming a profit margin for Fafnir of at 7/O0F

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