Survey of Defense Contracting Activities at Ingersoll Products Division

Published by the Government Accountability Office on 1971-02-08.

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

                                   REGIONAL      OFF ICE
                 ROOM   403   U S CUSTOMHOUSE     610 SOUTH   CANAL    STREEb-

                                CHICAGO,    ILLINOIS    60607

Captain E. E. Kenfro
Commander, Defense Contract Administration
  Services Region (DCASR)
O'Hare International    Airport
P.O. Box 66475
Chicago, Illinois    60666

Dear Captain   Renfro

        We recently   completed a survey of defense contracting
activities     at Ingersoll   Products Division   (IPD), Borg-Warner
Corporation,     Chicago, Illinois.     The purpose of our survey was
to inquire into certain management practices          of the contractor
as well as those of the Department of Defense agencies
responsible     for procurement and administration.       The DCASR,
Chicago is responsible       for contract administration    and maintains
a resident Quality Assurance Representative          (QAR) at the
contractor's     plant.

       Generally, we found the areas surveyed to be managed in a
satisfactory       manner. We observed, however, that IPD (1) deviated
from a Government drawing without approval and (2) did not follow
specific     instructions  relating  to the acceptance of repaired bomb
bodies.     These matters are discussed in more detail in this

      During 1968 and 1969, IPD and the U. S. Navy Ships Parts
Control Center (SPCC), Mechanicsburg, Pennsylvania,     negotiated
three firm fixed-price  contracts totaling    about $32 million   for
production of MK82 GP bomb bodies.    Delivery under these
contracts began in January 1969 and are scheduled to continue
through May 1971.

Drawing deviation without
Government approval

      IPD negotiated contracts N00104-69-C-0003 and -0342, on the
basis of purchasing the bomb body adapter, part number 1252606,
one of the major components, rough machined in accordance with
the dimensions shown on the Government drawing.      IPD requested
three deviations    from the Government drawing which were approved
contingent on meeting final machining requirements.

                        SOTH ANN                                      971
       In January 1969, shortly after negotiation     for contract
-0003, IPD revised the drawing, incorporating       several changes
which affected the final machined dimensions of the body adapter.
Government   approval    for these changes was not requested.    As a
result of these drawing changes IPD changed its manufacturing
process and negotiated a cost reduction with its subcontractors.
This reduction,     including   IPD's general and administrative   over-
head and profit,      amounted to about $89,000.

      We believe that IPD should have requested Government approval
when it revised the drawing and changed the manufacturing      process.
At that time, the Government, in accordance with the contract
clause relating  to waivers and deviations,    would have had the
option of either accepting the deviation     and participating  in any
cost savings or rejecting   the deviation   request.

Instructions not followed for
acceptance of repaired bomb bodies

       IPD was responsible for repairing  bomb bodies rejected during
production.    SPCC, in a message dated August 19, 1969, imposed a
mandatory procedure for repairing bomb bodies that contained
defective   adapters.   This message, in addition to including  the de-
tailed repair procedure, required that bomb bodies repaired in this
manner would be accepted on a waiver basis only with a certification
that the required procedure had been followed.      Further, SPCC re-
quired that an offer of a price reduction of at least 5 percent
should accompany    the waiver.

      IPD implemented the repair     procedure on October 1, 1969, but
did not submit waivers, certifications,       or an offer for reduction
in price.   There was no evidence in the records to indicate         that
DCASR representatives    initiated   action to obtain the required
waivers, certifications,      or the price reduction.    Further, at the
time of our review, information      was not readily available    to
ascertain  the number of bomb bodies that might have been subject to
the 5 percent price reduction.

      We discussed this matter with DCASR and SPCC representatives.
These officials   could not explain why waivers were not required
prior to Government acceptance of repaired bomb bodies nor why a
price reduction was not obtained from the contractor.

      We discussed these matters with the contractor, SPCCand
DCASRofficials    and furnished them with details as requested.
Written commentswere not solicited.      While contractor officials
did not agree that a request for a drawing deviation or a waiver
to the specifications was required, Government officials     informed
us that the contractor should have requested a deviation and that
the resident QARshould have required waivers in accordance with
SPCCrequirements, prxor to acceptance of repaxred bombbodies.
     We recommendthat DCASR(1) review the matters discussed in
this report to determine if existing procedures are adequate to
prevent recurrence and (2) initiate action to determine if the
Government is entitled to a price adjustment under terms of the
      Wewill appreciate being advised of actions taken on the
matters discussed in this report.  Our staff will be made
available should you require any further details.
     Copies of this report are being sent to the Comptroller of
the Navy, the Commander,Ships Parts Control Center, and to the
Secretary-Treasurer, Ingersoll Products Division.
                                      Sincerely yours,

                                      ’ I   J1’   .LJa   *-’
                                      M. R. Wolf on
                                      Regional P nager