Settlement of Noncompliance Cases Involving Cost Accounting Standards at Northrop Corporation

A determination was made of whether the administrative contracting offices of the Air Force Plant Representative Office, Northrop Corporation, took timely and appropriate action in settling reported cases of contractor noncompliance with cost accounting standards.

The administrative contracting officer indicated noncompliance on two Air Force contracts in the preparation of cost performance reports (CPR) for aircraft sales to Saudi Arabia. Specifically, proposed labor and related expenses were accounted as direct, rather than indirect, costs. The Air Force legal counsel determined that noncompliance was unwarranted and should not be issued. The contractor was then informed by the administrative contracting officer that direct charging of preparation costs was acceptable to the Saudi Arabia effort. If the Saudi Arabia requirement had been negotiated with Northrop on a separate Air Force contract, the costs of the CPR would have been accounted for as an indirect expense, in line with the company's normal procedures.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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