Rear Mr. Chairman: We were requested by your office to determine whether the GrummanAerospace Corporation managementinformation system is capable of providing the Navy and the contractor with information necessary to maintain visibility over the costs of the F-14 air- craft, program. In addition, we were asked to determine whether data from them could be used. to project the---.contractor's + __._-..--- Li estimated costs of production _--..-,I . for options not yet exercisedo j-&3 OCs-"' Cur work was performed at the GrummanAerospace Corporation, Bethpage, New York. We interviewed officials responsible for maintaining the managementinformation system and reviewed the method by which the contractor maintains its budget under the system, Documentson labor hours and projections of labor hours and material costs for aircraft on order and those under option were also examined. Under the terms of its contract with the Navy for the F-14 air- craf%,Grumman Aerospace Corporation is required to maintain its managementinformation system in accordance with the criteria set forth in Department of Defense Instruction '7OCC.2titled Performance Measurementfor Selected Acqtisitions. Performance measurement is a term given to a set of criteria relating to the cost and to the schedule to which a contra&ores managementinformation system must adhere, After Grummanwas awarded the contract, the Navy performed a review of the contractorus managementinformation system and upon cor- rection of several discrepancies approved the system in January 1971. According to the terms of the contract, Grummanis required to submit monthly reports to the Navy> the format and contents of which were developed as a result of negotiations between the contractor and the Navy. The major month3.y report on costs submitted to the Navy by Grummanfor the 38 F-14 aircraft on order is the Cost Account Summary Status Report. This report shows the actual costs incurred, the . *budgeted costs of work completed, a& the bu@eted costs of work scheduled to tite, In additim, few the options exercised the report shows the estimated costs the contractor expects to incur at completion and the e&-ted cost overrun or underrun. This report to the Navy covers aircraft. on order only, The Navy does not obtain information from Grunnnanas to the effect costs increases expected for aircraft on order may have on the cysts of aircraft for wkkh options have not yet been exercisedo For example, GXXBXTWI was experiencing Jtncreasing labor rates and advised the Navy in Jantrary 1970 that it anticipated cos%s of $22 million in excess of those it accepted during nego-tiations with the Navy for the first 6 aircraft. In May lfl0 Grummanreported to the Navy that procurement costs of airframe components were expected to increase by $21.5 million for the first 6 aircraft. However, the Navy did not obtain from G~WEUUU the effect that the increased labor rates and procurement costs could be expected to have on the remainder of the F-14 aircraft the Navy plays to purchase under the contract options. Grummanusmanagementinformation system provides the contractor with data by which it can maintain visibility over the cost of the program. In this regard, the contractor prepares for its own use an estimate of the total costs at completion for aircraft under option and those on order. This type of estimate has been prepared by Grumman about every 3 or 4 months since November1969, The Navy should obtain from as part of its monthly report, the contractorBs estimated costs ce aircraft under option as well as those on order, Weunderstand that the Ma is currently con- sidering obtaining from G this type of info tion for management purposes. Information of this nature would furnish arisibility as to the costs the contractor estpects to incur in relation to the prices that have been established for the program, This would give the Navy, the Department of Defense, and the C ttees of the Congress current information as to cost growths being experienced and anticipated by the contractor in the performance of the eontracto Comptroller General of the United States The Honorable John C, Skennis, Chairman Committee of Armed Services United States Senate -2-
Grumman Corporation's Capability of Providing the Navy and the Contractor With Information on the Costs of the F-14 Aircraft Program
Published by the Government Accountability Office on 1971-06-01.
Below is a raw (and likely hideous) rendition of the original report. (PDF)