Pricing of Noncompetitive Contracts Subject to the Truth-in-Negotiations Act

Gao ID: PSAD-77-91 April 11, 1977

GAO conducts a continuing review and evaluation of how purchasing offices carry out the purposes of the Truth-in-Negotiations Act for pricing negotiated noncompetitive contracts and the reasonableness of the contract prices. The pricing of 10 prime contracts and 18 subcontracts with a value of about $400 million was examined at the Department of Defense (DOD).

Generally, DOD procurement personnel are effectively using the system established. However, in reviewing available cost information, 28 contracts and subcontracts were found to be valued about $22 million higher than could be supported by cost or pricing data available at the time of negotiations. Overpricing was attributed to: (1) inaccurate, incomplete, or noncurrent data submitted by contractors and subcontractors; (2) prime contractors inadequately evaluating subcontractor proposals; and (3) government personnel inadequately evaluating contractor proposals. DOD purchasing offices are acting on GAO reports of overpricing. Procedural improvements have been made or promised.

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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