General Dynamics Corporation and Subsidiaries - Page 9

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               The Air Force asked GENDYN to analyze the savings potential            
          by using multiyear contracts.  GENDYN surveyed its subcontractors           
          and suppliers to determine whether (and by how much) it could               
          negotiate lower prices for larger buys and higher production                
          rates.  GENDYN also evaluated potential savings in the areas of             
          labor and overhead.                                                         
               GENDYN and the Air Force anticipated that multiyear                    
          contracting would enable GENDYN to lower its material cost                  
          and result in labor cost savings.  Overhead cost savings were               
          expected, and GENDYN and the Air Force anticipated other benefits           
          from a multiyear procurement of F-16's.  Both GENDYN and the Air            
          Force had significant business purposes for entering into a                 
          multiyear contract instead of the single-year contracts to which            
          they were then committed.                                                   
               Under the military regulations governing multiyear                     
          contracts, sole source contracts may be awarded if a Government             
          department can demonstrate certain benefits and conditions.  In             
          order to meet the regulations, the Air Force, on January 22,                
          1981, issued a notice inviting GENDYN to submit comparative                 
          alternate proposals for the production of 480 F-16 aircraft                 
          applying either to a series of annual-buy contracts or a                    
          multiyear contract.                                                         
               GENDYN responded to the RFP on March 17, 1981.  In its                 
          comparative price proposals, GENDYN priced the aircraft using a             
          variety of assumptions.  As requested in the RFP, GENDYN                    

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