Summary

A fixed-price incentive contract was awarded without price competition to General Dynamics Corporation for the development and production of F-16 aircraft. The contract provided for a full-scale development program and firm-priced production options. The development program is currently valued at $442 million, and three production options are priced at about $1,130 million.

Indications are that the F-16 program costs will increase. Contracting officers are required to obtain cost or pricing data from contractors to support proposed prices for negotiated noncompetitive contracts, and contractors are required to certify that the cost or pricing data used as a basis for negotiating contract prices is accurate, current, and complete. The Aeronautical Systems Division of the Air Force Systems Command did not strictly follow Department of Defense regulations which provided that a cost analysis be prepared to assure the reasonableness of the price proposed. Instead of conducting a cost analysis of the contractor's data, the Air Force relied heavily on its own cost estimate to determine that the offer was fair and reasonable. Such an independent analysis cannot identify inconsistencies or duplications between the contractor's cost elements or errors in his estimates. Overpricing of $20.5 million was identified. This amount related to costs included for government-furnished aeronautical equipment.