ADVISORY REPORT ON EVALUATION OF REVISED PROPOSAL FOR ADDITIONAL WORK

• Document Type: CREST
• Collection: General CIA Records
• Document Number (FOIA) /ESDN (CREST): CIA-RDP69B00279R000200130024-4
• Release Decision: RIPPUB
• Original Classification: K
• Document Page Count: 2
• Document Creation Date: December 14, 2016
• Document Release Date: August 22, 2002
• Sequence Number: 24
• Publication Date: March 9, 1967
• Content Type: MEMO

Approved For Release 2002/09/03 : CIA-RDP69B00279R000200130024-4
DEFENSE CONTRACT AUDIT AGENCY
CAMERON STATION
ALEXANDRIA, VIRGINIA 22314
STATINTL
SUBJECT: Advisory Report on Evaluation of
Revised Proposal for Additional Work
Lockheed Aircraft Corporation
(Lockheed-California Company)
Burbank, California
Contract No. SP-1928
TO Contracting Officer
OSA-0986-67
1-67-29-7o
REPLY TO:
Audit Liaison Office
P.O. Box 8155
S.W. Station
Washington, D.C. 2002+
9 March 1967
REF : Contractor's 27 December 1966 Revised Proposal
1. Per request, an evaluation has been performed of the
reference proposal.
This evaluation relates generally to the revised estimated
costs of Items 1 and 2 (modification of 7 units and 4 sets conversion parts)
but specifically to the proposed estimated costs for modifying three additional
airplanes. It included (1) verifying that the contractor computed appro-
priate midpoints of labor effort, (2) verifying that the midpoint direct
labor rates used were those negotiated in May 1966, (3) verifying that the
overhead and G&A rates used were those negotiated and approved in December
1966, and (!) comparing proposed material costs with those recorded and
committed through 29 January 1967.
2. As a result of our evaluation, none of the proposed costs
applicable to modifying the three additional airplanes is questioned. The
proposed revised total estimated contract cost/price are summarized below.
The auditor's equivalent recommendation with pertinent comments follows:
Estimated Estimated Ceiling
Contractor Cost Profit Price Price
Initial seven air-
planes/four sets
of parts
Three additional
airplanes
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STATINTL
STATINTL
STATINTL
Auditor
STATINTL
3. This contract is a FPR-type contract with limited upward
and unlimited downward adjustment provision at completion. The contract
does not specify the estimated cost and rate of profit. However, har
TATINTL
using the initial profit claimed for Items 1 and 2 of IJ th
initial estimated price of and the initial ceilinc`.- TINTL
it appears that the contemplated profit rate was e
is no incentive or formal sharing arrangement on costs to determine profit
on a FPR type contract. Therefore, the auditor's profit computati aifINTL
above paragraph 3, is based upon the use of a I profit rate. T `3
a preliminary computation of total price at completion for funding purposes
as the final redetermination is only after completion of the contract. At
completion and upon receipt of the contractor's final claim, this audit
report will be issued.
4. The auditor recommends that technically qualified personnel
evaluate the proposed hours, material costs, and other direct charges.
This recommendation is made in view of the substantial decreases in proposed
labor hours and material costs between the initial and revised estimated
STATINTL proposal for Items 1 and 2, approximating espectively. It is
recommended that these costs applicable to the three airplanes be evaluated
for a determination of reasonableness.
ARTHUR G. HANLEY
DCAA Representative - APL
Approved For Release 2002/09/03 : CIA-RDP69B00279R000200130024-4