Increasing Procurement Cost Of M60A1 Tanks

Pursuant to a congressional request, GAO reviewed the Army's tank procurement which was financed from its fiscal year (FY) 1975 appropriation, focusing on the: (1) justification for the current tank price; and (2) reasons for the increase over the FY 1974 price.

GAO noted that: (1) the Army's production contract with Chrysler requires the contractor to assemble 1,240 M60A1 tanks and deliver them over a 19-month period from July 1975 through January 1977 at a contract price of $317 million; (2) Chrysler is responsible, by contract, to acquire certain materials and to manage vehicle assembly operations primarily at the government-owned, contractor-operated Detroit Arsenal Tank Plant; (3) the Army negotiated a unit price of $385,000 for 439 M60 tanks purchased in 1975, which is 29 percent more than it paid a year earlier; (4) the Army originally anticipated a 39-percent increase over the 1974 price; (5) the Army and Chrysler signed a contract in October 1975 but even now a unit price for the complete tank is not firm; (6) with approximately 45 percent of the tank costs still subject to possible repricing, the final price may exceed the 1974 price by more than the 29 percent projected in March; (7) for the 1975 program, the Army accelerated production by over 60 percent to an average of 65 tanks a month from approximately 40 a month for the 1974 program; (8) contractors were asked to increase the quantities produced without obtaining an extension of their normal delivery period; (9) the effects of the continuing upward inflation spiral were evident from the unwillingness of some of the major suppliers to accept contracts which did not provide for some form of price redetermination; (10) whether or not the 1975 M60A1 tank price is reasonable is a matter of judgement that could vary among individuals; and (11) the price of the tanks increased at a lesser rate than the 39 percent originally estimated by the Army.