Pricing Data on the Proposed Sale of AWACS to Saudi Arabia

GAO reviewed the pricing data associated with the proposed sale of E-3A Airborne Warning and Control Systems (AWACS) to decide whether the U.S. military would be charging Saudi Arabia a full pro rata share of nonrecurring costs.

The Department of Defense stated that the estimated value of the sale, $5.8 billion, included: five aircraft worth $1,200 million, spare parts worth $500 million, support equipment worth $40 million, contractor support of AWACS worth $1,300 million, an upgrade of the ground command and the control system worth $2,100 million, and miscellaneous expenses worth $660 million. The figures include provisions for a 4-percent surcharge for non-recurring production costs, a 3-percent administrative surcharge, and a 1.5-percent surcharge for quality assurance. The Defense Security Assistance Agency has granted no cost waivers on this proposed sale. The United States would charge Saudi Arabia the full cost of developing commercial replacements for certain non-releasable U.S. Air Force Systems. Nonrecurring costs recoupment is prorated as a pool against total estimated quantities of the sale model, past and projected. The recoupment estimate to be paid by Saudi Arabia for nonrecurring costs would range between $145 million and $160 million for five aircraft. The United States would share a portion of that recoupment with the North Atlantic Treaty Organization (NATO), probably between $29 million and $32.45 million for the five aircraft. The sharing and recoupment with NATO is another aspect which could be pursued further, if the proposed sale were approved, because the United States made extraordinary cost waivers and financial concessions in selling 18 AWACS to NATO.