Review of contract and termination costs claimed by Navy, Marshall and Gordon under contract no. AID/afr-C-1406

Audit report covers the period 6/80-4/81 and is based on document review and discussions with NMG personnel. The two-phased, 5-year project was originally scheduled to terminate in FY81, but due to various complications the project encountered serious delays and the construction component, which should have begun in 1981, did not begin on schedule. The construction delay was due to two factors. Construction firms tendered excessively high bids, necessitating renegotiation for substantially lower bids. Second, A.I.D."s and NMG"s initial funding estimates, particularly for construction, proved too low given costly local contracting conditions and the risks arising from non-control over materials procurement. Following an audit of 8/18/80 which questioned the allowability of $101,357 in contract costs, A.I.D. terminated the NMG contract as of 12/22/80. On 4/3/81 NMG submitted a termination claim of $1,077,357. In the current audit, $16,394 of the $172,976 in contract costs claimed by NMG from 7/1/80 to 12/23/80 were questioned or suspended. Questioned were costs billed but not incurred, fixed fee costs billed in excess of the contract maximum, and an upward adjustment of overhead. Suspended costs were expenditures unsupported by proper documentation. Of the $1,077,357 claimed in termination costs, a total of $1,039,110 were questioned or suspended. Questioned were $1,006,027 claimed by NMG for damages to its reputation. Suspended were overhead costs of $32,279 due to a lack of proper documentation required by Federal Procurement Regulations. It is recommended that A.I.D. take appropriate action to ensure settlement of all questioned and suspended costs.