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difference between actual cost and target cost. If the actual
cost was higher than the target cost, GENDYN would receive its
total final costs and target profit less 40 percent of the
difference between actual and target cost. Under no
circumstances would GENDYN receive an amount greater than the
ceiling price, regardless of its actual cost.
The negotiated target cost, ceiling price, and sharing ratio
implicitly defined an amount above which GENDYN bore 100 percent
of all additional cost. Above this point, called the point of
total cost assumption, GENDYN's profit declined dollar-for-dollar
with every dollar of additional cost. The negotiated contract
values and the formula by which the final contract price would be
determined were set out in the Incentive Price Revision clause,
which was added to Contract 2034 by Modification P00080 (POO 80),
dated July 31, 1983. Consequently, a single target cost, target
price, ceiling price, and sharing ratio were established for the
entire quantity of 480 aircraft.
The final price for the aircraft delivered pursuant to
Contract 2034 was to be determined upon the delivery of the last
aircraft, based upon a comparison of GENDYN's total costs with
the contract's target cost. Contract 2034 did not prescribe a
mechanism by which price and profit could be separately computed
for any program year. As of the beginning of 1993, a final price
determination had not been made for Contract 2034 and related
modifications.
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