General Dynamics Corporation and Subsidiaries - Page 17

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          1983, that an agreement on price was reached and July 31, 1983,             
          that the agreement was formalized in an amendment to Contract               
               In late 1981 GENDYN became aware that 300 of the 480 F-16              
          aircraft to be produced under Contract 2034 were to be                      
          technologically advanced models.  Accordingly, GENDYN submitted             
          revised cost estimates consistent with the technological                    
          upgrades.  After a revision of the initial submission, the Air              
          Force accepted GENDYN's proposal for negotiation.                           
               The Air Force conducted extensive “fact-finding” with                  
          respect to the assumptions underlying GENDYN's proposals.  For              
          example, the Air Force reviewed purchase orders accounting for at           
          least 90 percent of GENDYN's material and subcontract costs to              
          confirm their prices, terms, and conditions.  It also reviewed              
          the learning curves on which GENDYN's labor hour estimates were             
          based to ensure that GENDYN was performing and could continue to            
          perform at the levels indicated in the proposal.                            
               Because Contract 2034, was to be a fixed-price incentive,              
          firm-target contract, the Air Force and GENDYN did not negotiate            
          the contract price itself but instead negotiated the formula by             
          which the final price would be determined upon completion of the            
          contract.  Specifically, the Air Force and GENDYN agreed upon the           
          target cost, target profit, target price, ceiling price, and                
          sharing ratio to be included in the contract.  Target cost is the           
          negotiated estimated cost at completion.  Target price is the               

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