Summary

Pursuant to a congressional request, GAO provided information on the estimated cost for the Air Force's C-17 lot III production contract, focusing on: (1) the Defense Plant Representative Office's (DPRO) basis for modifying its original cost estimate; and (2) whether C-17 contract costs will exceed the contract ceiling price. GAO found that: (1) DPRO originally estimated that the C-17 contract would exceed the contract ceiling price; (2) DPRO has revised its original cost estimate and reallocated disputed engineering costs from the production contract to the development contract; (3) the DPRO modification is reasonable and consistent with its position that engineering costs should be charged to the development contract; (4) C-17 contract costs are likely to exceed the contract ceiling price due to inadequate contract performance; and (5) DPRO is concerned about several contract practices that could obscure and delay the timely reporting of negative cost performance data.