FINAL PRICE FOR SP-1926

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP67B00820R000300120033-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 1
• Document Creation Date: November 17, 2016
• Document Release Date: February 29, 2000
• Sequence Number: 33
• Publication Date: June 8, 1966
• Content Type: MEMO

Approved For Release 2000/08/23 : CIA-RDP67B00820R000300120033-4
OSA
8 June 1966
Subject:
FINAL PRICE FOR SP-1926
Reference:
(A)
Final Cost Statement and Proposal Letter dated
(B)
14+ March 1966
Letter on Overhead Rates dated 20 October 1965
25X1A
We received your letter of 19 April 1966 that proposes a reduction of
$27,926.00 to the final contract price of which we had
suggested in reference (A). Study of your proposal and reference (B)
letter indicates a possible misunderstanding concerning the intent of
our agreement on overhead rates set forth in reference (B). We ex-
pected to use the 1965 rates attached to reference (B) for forward
pricing of proposals to be submitted during the remainder of 1965. It
was not our intent to establish rates based on estimates that would con-
tinue to be used subsequent to the time when rates based on actual costs
became available.
In the case of SP-1926, we planned to deliver the last airplane in Nov-
ember 1965 and to submit the final price proposal shortly thereafter.
However, the work was delayed and the last airplane was not delivered
until January 1966. As a consequence, our proposal in reference (A)
was submitted later than we had expected and this made it possible to
obtain actual overhead costs for 1965 to use in determining the total
contract cost.
We believe that the distinction between forward pricing and determining
contract costs is required in this type of situation. To establish a
redetermined price, the final costs are allowed generally if they are
reasonable and properly allocable to the contract and these actual costs
then become the basis for measuring Contractor performance and profit.
Using estimates, when actuals are available, would provide an incorrect
level from which to negotiate the final contract price. In view of these
factors, we believe that our agreement to your proposed reduction would
establish a uestionable precedent. Accordingly, we request that you re-
instate the to the cost base for SP-1926.
Approved For Release 2000/08/23 : CIA-RDP67B00820R000300120033-4