Summary

GAO examined sole-source negotiated procurements for M1 tank spare components.

GAO found that, in its procurement of M1 tank spares, the Government incurred unnecessary costs because the contracting officer: (1) accepted ceiling prices for spares negotiated on a sole-source basis before obtaining cost or pricing data and then failed to change the ceiling prices once the cost data were received; (2) combined the sole-source spare ceiling prices with the one competitively established in the original contract; and (3) permitted inappropriate transfers of spares to other contracts. The last two actions resulted in decreasing the contractor's risk of exceeding the ceiling on the original contract price and in allowing the contractor an opportunity to recoup $5.6 million in costs to which it was not otherwise entitled. In addition, the contracting officer did not prepare and maintain memorandum records of negotiations as required by the Defense Acquisition Regulations (DAR).