Contract Pricing: Competitive Subcontract Price Estimates Often Overstated
Abstract
The four DOD contracts we reviewed were overpriced by about $8.9 million because the estimates Westinghouse proposed for 66 subcontracts were not accurate or reliable. According to the contractor, the subcontract estimates included in its proposals were based on competitive vendor quotations. However, we found Westinghouse had not used the quotations to award the subcontracts. Rather, the contractor had solicited and obtained significantly lower prices in awarding its subcontracts. Contracting officers, unaware of the contractor's practice of soliciting and obtaining lower prices in awarding the subcontracts, accepted the estimates included in the contractor's proposals. Our work, and that of the Air Force Audit Agency and the DOD Inspector General, has shown that in many cases the government is not realizing the benefits to be gained through competition because prices actually obtained by prime contractors are lower than the competitive subcontractor prices included in contractor proposals. One set of competitive prices are used to support prime contractors' proposals to the government. Subsequently, prime contractors solicit prices from the original or new vendors and often obtain prices lower than those submitted to the government and used to negotiate prime contract prices. As a result, the prime contracts are excessively priced by millions of dollars. The remedy for this practice is knowledge - knowledge of what the prime contractor actually pays, not what is quoted.
Document Details
- Document Type
- Technical Report
- Publication Date
- Mar 01, 1991
- Accession Number
- AD1123040
Entities
People
- David E. Cooper
- John Zugar
- Neil Lloyd
- Paul F. Math
- Ruth-ann Hijazi
Organizations
- United States Government Accountability Office