Contract Pricing

Contractors Should Provide Historical Vendor Prices to DOD Gao ID: NSIAD-89-68 February 15, 1989

In response to a congressional request, GAO reviewed the Department of Defense's (DOD) policies for estimating material costs for fixed-price noncompetitive contracts valued at $10 million or more, to determine whether the contractors provided accurate and reliable material estimates.

GAO found that: (1) contractors often estimated material purchases of less than $1 million based on vendor quotations; (2) contractors' failure to consider historical vendor prices resulted in significant overpricing; (3) because contractors did not always adjust their estimates to reflect vendor price reductions, they were not providing accurate and reliable estimates; and (4) DOD procurement regulations did not require contractors to develop, maintain, or disclose historical vendor pricing information.

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