The Naval Air Systems Command Did Not Obtain Fair and Reasonable Prices on Scan Eagle Spare Parts (Redacted)

Objective

We determined whether the Naval Air Systems Command purchased sole-source spare parts at fair and reasonable prices from Insitu, Inc. for the ScanEagle Unmanned Aircraft System.

Finding

Naval Air Systems Command contracting officials did not obtain fair and reasonable prices on sole-source spare parts. Although contracting officials received lower prices than the contractor proposed, contracting officials did not substantiate the analysis used to determine price reasonableness. In addition, contracting officials did not take advantage of quantity discounts when determining fair and reasonable prices for sole-source spare parts because program office personnel did not define spare-part requirements.

After analyzing our statistical sample, we determined that Naval Air Systems Command overpaid on 207 sole-source spare parts by $2.1 million of the $67.5 million spent. Additionally, Naval Air Systems Command will overpay on the remaining value of $42.6 million for ScanEagle spare parts if contracting officials continue using the current negotiated spare part prices. Naval Air Systems Command may also overpay on future ScanEagle contracts if officials do not substantiate their analysis to determine price reasonableness or quantify the spare-part requirements.

Recommendations

1. We recommend that the Naval Air Systems Command, Assistant Commander for Contracts:
   1. validate that contracting officials substantiate fair and reasonable price analysis performed in accordance with acquisition regulations on future contracts and
   2. determine whether overpayments on spare parts were or will be made and pursue available options to recover the funds.
2. We also recommend that the Program Manager, Navy and Marine Corps Small Tactical Unmanned Aircraft System Program Office define spare-part requirements for contracting officials’ use in negotiating more advantageous prices on future contracts

Management Comments and Our Response

As a result of management comments, we revised our finding and Recommendation 1.a; redirected Recommendations 1.a and 1.b to the Naval Air Systems Command, Assistant Commander for Contracts; and renumbered Recommendation 1.c as 2. Comments from the Deputy Assistant Secretary of the Navy (Acquisition and Procurement), responding for the Program Manager, Navy and Marine Corps Small Tactical Unmanned Aircraft System Program Office, did not address the specifics of Recommendation 1.a, partially addressed the specifics of Recommendation 1.b, and addressed all specifics of Recommendation 2. We request that the Naval Air Systems Command, Assistant Commander for Contracts, provide comments in response to this report.

This report is a result of Project No. D2015-D000AT-0210.000.