Examination of the Pricing of a Negotiated Fixed-Price Incentive Contract Awarded on a Noncompetitive Basis

International Telephone and Telegraph (ITT) failed to provide accurate, complete, and current cost or pricing data at the time of negotiation of a fixed-price incentive contract for flight models and parts for the National Aeronautics and Space Administration (NASA).

Examination of the NASA procurement files and the cost and pricing data submitted by ITT showed that the contract price was overstated by about $62,000 because of the ITT misrepresentation of pricing of integrated circuits. Although ITT indicated in its technical proposal that it would use integrated circuits from one manufacturer, it priced out the proposal using much higher priced integrated circuits from another manufacturer. After the contract award, ITT purchased the lower priced parts. The estimated difference between the proposed purchase price included in the proposal and the actual purchase price amounted to about $33,300. The total overpricing included the proposed ITT factors for such items as material escalation, normal parts replacement, and general overhead and profit. Had ITT provided appropriate data, the contracting officer would have had a sound basis for negotiating a lower contract price.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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