Air Force Procurement of Certain F-16 Support Equipment From General Dynamics

Testimony was given concerning the Air Force's procurement of certain F-16 support equipment from the General Dynamics Corporation. GAO noted that: (1) the Air Force's use of an unpriced contract modification resulted in excessive prices for support equipment; (2) approval of the unpriced contract modification committed the government to payment of incurred costs; (3) the final prices agreed to were substantially determined by the level of costs claimed by General Dynamics and its subcontractors; (4) the requirements determination process did not ensure that only needed items were authorized and obtained in the most cost-effective manner; and (5) the Air Force compromised its right to challenge the reasonableness of item prices when it authorized General Dynamics to proceed with support equipment development without pricing the items. GAO found that: (1) General Dynamics recommended items for new development that were already in existence; (2) the final negotiated price for many noncomplex items did not reflect their intrinsic value; (3) there were errors in both direct labor and material charges; (4) there were anomalies in some of the individual equipment items; and (5) the Air Force did not follow its regulations requiring thoughtful consideration of need, value, and price.