Pricing of Subcontracts Awarded to Western Gear by Grumman

Gao ID: PSAD-79-47 March 19, 1979

A review was made of the pricing of two firm-fixed-price subcontracts awarded by Grumman Aerospace Corp. to Western Gear Corp, Flight Structures Division, for weapons rail system ship-sets for the F-14 aircraft. The review was part of a nationwide survey of the pricing of negotiated noncompetitive Department of Defense subcontracts to determine the reasonableness of the subcontract prices in relation to cost or pricing data available to the subcontractor at the time of negotiations.

Western Gear's subcontracts were overpriced because the cost or pricing data used was not current, complete, and accurate. Computation of labor costs contained arithmetical errors. The balance of the overpricing was due to add-on factors and profit. Change orders were negotiated to delete the cost of obsolete material, which may have increased the overpricing further.

Recommendations

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