Observations Concerning Profit Rates on Selected Navy Contracts

In response to a congressional request, GAO reviewed allegations concerning possible excess profits under Department of Defense contracts with four corporations to determine whether the profits discussed were normal for similar work and whether there were any special circumstances which accounted for these profits. In addition, GAO obtained other financial information that has been considered relevant in past determinations of excessive profits.

GAO found that the profit figures cited in the allegations were essentially accurate. In each case, the contractors claimed special circumstances which they believed justified their profits, such as unusual quality control requirements, highly trained personnel, or other special features. GAO presented an analysis of the allegation, comparative profit data, and a discussion of the special circumstances involved for each allegation.