Review of Selected Defense Contracts Negotiated With Alcan Aluminum Corporation

Published by the Government Accountability Office on 1971-03-19.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                         REGIONAL OFFICE
                           ROOM       7068.    FEDERAL        i3UILDING
                          300 NORTH           LOS   ANGELES       STREEI-

                       LOSANGELES,CALIFORNIA                                90012

                                                                                         March 19, 1971

Mr. Alex Sol1
Regional Manager                                                          llllllllllllllllllllllllllllllllllllllllllllll
Los Angeles Region
Defense Contract Audit Agency
1340 West 6th Street, Second Floor
Los Angeles, California  90017
Dear Mr. Soil:
      As park of our review of the negotiation      of contract prices
under the provisions of Public Law 87-653, we have examined into
the prices proposed and negotiated for firm fixed-price        contracts
DWO9-68-C-0317, DAAAO9-69-C-0107, and N00104-69-C-0092 awarded
to Alcan Aluminum Corporation, Riverside,      California.    Contracts
-0317 and -0107 were issued by the U. S. Army Ammunition Procurement
and Supply Agency, Joliet,   Illinois,  in the amount of $1,191,970 and
$4,631,031, respectively,   for the production of Rocket Motors,
HE,66MM,M54,MPTS. Contract -0092 was issued by the U. S. Navy Ships
Parts Control Center, Mechanicsburg, Pennsylvania, in the amount of
$1,642,500 for the production of Zuni Rocket Motors, S.O",MK 16,
Mod. 1.
      The results of our review were discussed with your staff at
the Ontario Branch Office.    Enclosed for your information   are
copies of our letter reports to the Commanding Officer,     U. S. Army
Ammunition Procurement and Supply Agency, and the Commanding Officer,
U. S. Navy Ships Parts Control Center, which summarize the results
 of our review.
      During our recent coordination     meeting, we advised you that our
review indicated a need for improved coverage during preaward audits
at Alcan.     In addition to the examples cited in the enclosed letters,
we also found that the audit staff did not evaluate the reasonableness
of other proposed costs for these contracts.        Our review, however,
disclosed that these proposed costs appeared to be reasonable based
on our evaluation of the most current data at negotiations.          The
Branch Manager agreed that a need exists to more clearly document in
the working papers the scope of the audits and the rationale         for not
reviewing certain proposed costs.       He also agreed that, as a minimum,
the preaward audit reports should have been qualified        in those cases
where significant      proposed costs were not audited.

                 --   SOPi-I ANNIVERSARY                           1321-1971                             v
Mr. Alex Sol1                   -2-                     March 19, 1971

      We believe the results of our review indicate a need for
improvement in Alcan's cost estimating procedures.     While this
contractor may not meet your monetary criteria    for conducting a
formal estimating system survey, you may consider it advisable to
work with Alcan to improve its estimating process.
       Also, we would like to call your attention    to an observation
made during our initial    pricing survey at Alcan concerning postaward
audits performed by your Ontario Branch Office.       A postaward audit
involving    83 manhours was performed on contract N104-ll698A, a
formally advertised procurement.       You may want to review the selection
and screening process at this location to ensure compliance with
established agency criteria      in the performance of postaward audits.
      Your comments on the results of our review at Alcan will      be
appreciated.   We will be pleased to provide you or your staff      with
further details on the foregoing if you so desire.
                                            Sincerely   yours,

                                            H. L. KRIEGER
                                            Regional Manager

Enclosures:     2