Contract Pricing

Material Prices Overstated on Standard Missile and Phalanx Systems Gao ID: NSIAD-87-31 February 11, 1987

As part of a nationwide review, GAO examined subcontract pricing on five prime contracts for the production of the Standard Missile System and the Phalanx Weapon System to: (1) determine whether the contractor complied with the Truth in Negotiations Act in providing accurate, complete, and current pricing data; and (2) assess whether Navy contracting officers implemented subcontract pricing requirements designed to ensure the negotiation of fair and reasonable prices.

GAO found that: (1) the contractor failed to disclose accurate, complete, and current pricing information for 14 of the 66 subcontract estimates before concluding contract negotiations; (2) the Navy contracting officers did not obtain evaluations from the contractor on 21 of 23 major noncompetitive subcontract price proposals for use in contract negotiations; and (3) the contractor overstated contract prices by about $1.9 million, including overhead and profit.


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