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submitted a firm price for all 480 aircraft to be delivered at
the rate of 8 per month assuming, on the one hand, a single
multiyear contract spanning 5 program years and, on the other
hand, a series of 5 annual buys. GENDYN also submitted
comparative price proposals for a multiyear contract and a series
of 4 annual procurements assuming a delivery rate of 10 per
month. GENDYN's comparative price proposals demonstrated that
the price for the aircraft would be significantly lower if
purchased under a multiyear contract rather than under a series
of annual buys. Savings would inure whether the delivery rate
was assumed to be 8 or 10 aircraft per month. Assuming a
delivery rate of 10 per month, GENDYN estimated cost savings to
the Air Force of approximately $325 million, or 11.2 percent of
the total contract price.
From its point of view, GENDYN was unwilling to commit to a
single 1982 program-year contract and fixed-price options for
program years 1983-1985 because that would have exposed GENDYN to
all of the risks of cost overruns in prior program years while
allowing GENDYN none of the potential rewards of cost underruns.
GENDYN believed that if costs were overrun, the Air Force would
exercise the options at the predetermined price and thus avoid
having to share in the overrun; and that if the costs were
underrun, the Air Force would decline to exercise the options and
simply negotiate new, lower prices for subsequent program years.
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