Summary: Since 1879, virtually all paper purchased by the Bureau of Engraving and Printing for U.S. currency production has come from one supplier--Crane & Co. Although Crane has consistently provided quality paper, the Bureau at times was forced to pay prices it was unable to determine were fair and reasonable because it had no other U.S. source for paper. The Bureau's assessment of Crane's proposed prices were hampered by several factors, including the lack of market prices for currency paper and the limited analyses of proposed costs and prices it performed, especially on earlier contracts in GAO's sample. In addition, some Bureau practices, such as understating the quantities of currency paper needed, caused the government to pay more for currency paper than it should have. The Bureau is responsible for ensuring that the government's supply of paper is not disrupted. Although no disruptions have occurred, the Bureau for many years did not maintain a reserve inventory of paper to provide for contingencies. As a result, it was more vulnerable to adverse consequences if a disruption had occurred and it was at a disadvantage in its contract negotiations because it lacked an alternative source for currency paper. The Bureau recently has been purchasing paper to build a three-month reserve supply and, under the law, could buy paper from a foreign source if no domestic source exists.
