Summary: GAO reviewed the pricing of spare parts for the C-17 aircraft and found that the Air Force paid higher prices for these items than was justified. GAO focused on a limited number of spare parts that experienced significant price increases when McDonnell Douglas decided to manufacture the parts at its St. Louis plant rather than buy them from outside vendors. For 33 selected spare parts formerly procured under subcontracts, the costs were from four to 56 times higher after McDonnell Douglas moved the work in-house. For example, McDonnell Douglas paid an outside vender $389 to machine a door hook that it later machined in-house at an estimated cost of $8,842. Costs for some spare parts were higher than justified because McDonnell Douglas used outdated pricing data that overstated its proposed prices. In developing the proposed costs of spare parts, McDonnell Douglas used outdated labor variance factors, which resulted in prices being overstated by 34 percent for 37 parts. Also, the profits awarded on some orders under contract-2109 appeared to be higher than warranted.
