Procurement

Pursuant to a congressional request, GAO reviewed the Air Force's multiyear contract for F-16 aircraft for fiscal years 1982 to 1985 to assess: (1) potential savings from using a multiyear contract instead of a series of annual contracts; (2) the effect of foreign military sales on multiyear contract prices; (3) the effect of adding aircraft to the fiscal year 1984 budget; and (4) other benefits of using multiyear contracting.

GAO noted that: (1) in the justification submitted to Congress in 1981, the Air Force estimated that a multiyear contract for 480 aircraft over a 4-year period would cost $246 million less than a series of four annual contracts; and (2) before the multiyear contract was finally negotiated, several changes took place which outdated the savings estimates for inflation projections, foreign sales, and airframe improvements. GAO found that: (1) although it was difficult to determine if total savings were achieved, subsystem purchase orders were awarded in a manner that permitted an evaluation of order prices on an annual and a multiyear basis; (2) about $16.4 million of the multiyear savings were attributed to subsystem purchases; (3) the other $14.2 million in savings were achieved by combining subsystem quantities for foreign sales orders with the quantities purchased to fill Air Force needs; (4) additional aircraft added in fiscal year 1984 were purchased as a separate lot from the multiyear quantities, and the unit price for those aircraft was 7.5 percent more than the unit price for the 480 aircraft included in the multiyear buy; (5) the negotiated multiyear contract contained a variation-in-quantity clause with prices established for aircraft added at a later time; and (6) besides cost savings, other benefits such as broadening the defense industrial base are expected to result from multiyear contracting.