United States General Accounting Office

GAO Report to the Honorable Charlie Rose

House of Representatives

April 1996 C-17 AIRCRAFT

Cost of Spare Parts

Higher Than Justified

G O A

years

1921 - 1996

GAO/NSIAD-96-48

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-259369 

April 17, 1996

The Honorable Charlie Rose

House of Representatives

Dear Congressman Rose:

As you requested, we reviewed the pricing of selected spare parts for the

C-17 aircraft. Our review concentrated 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 buying

them from outside vendors. The results of our work cannot be projected to

the universe of spare parts being procured for C-17 aircraft. However, DOD

officials acknowledge that the issues we identified are not limited to the

specific parts we reviewed, but may have broader applicability.

Background The C-17 is being developed and produced by McDonnell Douglas. The

Congress has authorized procurement of 40 C-17 aircraft through fiscal

year 1996. As of October 1, 1995, McDonnell Douglas had delivered 

22 production aircraft to the Air Force. In November 1995, the Department

of Defense (DOD) announced plans to buy an additional 80 C-17 aircraft.

In addition to procuring the aircraft, the Air Force is purchasing spare

parts to support the C-17. The Air Force estimates the total cost for initial

spares—the quantity of parts needed to support and maintain a weapon

system for the initial period of operation—for the first 40 C-17s to be about

$888 million.

In January 1994, we reported that the Air Force had frequently ordered

C-17 spare parts prematurely.1

 We noted that premature ordering occurred

because the Air Force used inaccurate and outdated information, bought

higher quantities than justified, or did not follow regulations governing the

process. As a result, DOD revised its guidance to limit the initial

procurement of spares, and the Air Force canceled orders for millions of

dollars of C-17 parts.

Initial spares for the C-17 are being procured under two contracts. Some

are being provided under the C-17 development contract through interim

contractor support. That support, which started in mid-1993, involves

1

C-17 Aircraft Program: Improvements in Initial Provisioning Process (GAO/NSIAD-94-63, Jan. 21,

1994).

Page 1 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

providing spares and technical support for two C-17 squadrons through

June 1996. As of May 31, 1995, the Air Force had spent about $198 million

for interim contractor support.

The remaining initial spares are being procured under contract

F33657-81-C-2109 (referred to in this report as contract-2109). Under this

contract, the Air Force, as of May 31, 1995, had obligated $120 million for

initial spares, but negotiated prices for only about $29 million of the

spares. The $91 million balance was the amount obligated for parts

ordered on which prices had not been negotiated.

McDonnell Douglas produces some spare parts in its facilities at the

Transport Aircraft Division at Long Beach, California, where the C-17 is

being produced, or at other locations, such as its Aerospace-East Division

at St. Louis. It also subcontracts for the production of parts. The

subcontractors may be responsible for all aspects of part production or

McDonnell Douglas may furnish materials or complete required work.

Results in Brief Our review indicates that the Air Force paid higher prices for spare parts

than is justified. First, for 33 selected spare parts formerly procured under

subcontracts, we found that costs are from 4 to 56 times higher after

McDonnell Douglas moved the work in-house. For example, McDonnell

Douglas paid an outside vendor $389 to machine a door hook that it

subsequently machined in-house at its St. Louis Division at an estimated

cost of $8,842.

Second, costs for some spare parts are higher than justified because

McDonnell Douglas used outdated pricing data that overstated its

proposed prices. We found that in developing the proposed costs of

selected spare parts, McDonnell Douglas used outdated labor variance

factors, which resulted in prices being overstated by 34 percent

($117,000) for 37 parts.

Third, the profits awarded on some orders under contract-2109 appear

higher than warranted. The contracting officer used Defense Federal

Acquisition Regulation Supplement (DFARs) guidelines to calculate profit

objectives and negotiate profit rates with the contractor that are

documented in a memorandum of agreement. The contracting officer

developed the government’s objectives based on the risks of a fixed-price

contract. However, most costs were known when the order prices were

negotiated; therefore, the contractor’s risks were lower than in a

Page 2 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

fixed-price environment. Also, the contracting officer used a higher

performance risk factor than appears appropriate when McDonnell

Douglas is buying spare parts from subcontractors. Based on profit rates

that our calculations suggest could have been justified, McDonnell

Douglas would have received less profit.

As we discussed our findings with DOD officials during our review, they

began taking actions to address those findings. For example, the Defense

Contract Management Command’s (DCMC) Defense Plant Representative

Office (DPRO) at McDonnell Douglas calculated that the overpricing of

spare parts was $182,000 and recovered that amount from McDonnell

Douglas in December 1995. Also, DOD stated that other actions are being

taken to prevent these overpricing problems on other spare parts.

Higher Costs for Parts

Made In-House

The Air Force paid higher prices for 33 spare parts than appears

reasonable when compared to McDonnell Douglas’ historical costs. The 

33 spare parts were ordered under contract-2109 and manufactured by

McDonnell Douglas’ St. Louis Division. The Long Beach Division had

previously purchased them from subcontractors for production aircraft at

much lower costs. The St. Louis Division’s estimated costs were from 4 to

56 times greater than the prices that Long Beach had paid outside vendors

several years earlier. The parts were in sections of the C-17 assembled by

the Long Beach Division for the first four aircraft, but assembled by the 

St. Louis Division for subsequent aircraft. For 10 parts, McDonnell Douglas

had previously purchased the complete part from a subcontractor. For the

other 23 parts, it had furnished material to a subcontractor that

manufactured the part.

While our examination of price increases was limited to 33 spare parts, an

Air Force-sponsored should-cost review2

 identified potential savings of

$94 million for the C-17 program if work is moved from McDonnell

Douglas’ St. Louis Division to outside vendors or other McDonnell Douglas

facilities. Air Force officials said that the $94 million savings related only

to components for production aircraft. They said that the savings would be

higher if spare parts were included.

Parts Purchased Complete We identified 10 parts—7 hinges on the air inlet door to the C-17’s air

conditioning system, 2 cargo door hooks, and a door handle on the C-17’s

2

A specialized cost review designed to promote improvements in contractor’s operations by

challenging such things as existing workforce, methods, materials, and facilities and quantifying their

impact on price proposals.

Page 3 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

vertical stabilizer access door—that McDonnell Douglas had previously

purchased complete from a subcontractor at much lower costs.

Information on previous purchase costs, McDonnell Douglas’

manufacturing costs, and the price that the Air Force paid for each of

these spare parts are included in appendix I. Details on one of the hinges

follow.

The Air Force paid $2,187 for one hinge on the air inlet door to the C-17’s

air conditioning system. The hinge (see fig. 1) is aluminum, about 4 inches

long, 2 inches wide, and ranges from about 1/16 of an inch to 1-3/8 inches

thick.

Figure 1: Hinge

Source: McDonnell Douglas.

The Long Beach Division, which assembled the air conditioning inlet door

for initial production, purchased 14 of these hinges from a subcontractor

in 1988 for use on production aircraft at $30.60 each. It had also paid the

vendor $541 for first article inspection and $2,730 for reusable special

tooling. These costs, however, would not have been incurred on future

orders.

Page 4 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

In 1992, McDonnell Douglas transferred the air conditioning inlet door

assembly work to its St. Louis Division and that division made the hinge

for production aircraft and for the spare part order. The estimated cost for

the spare hinge was $1,745, and, with overhead, profit, and warranty

factors, the Air Force paid $2,187 for it. The fact that the subcontractor

had made the hinge from a special casting while the St. Louis Division

machined the hinge from bar stock could be one cause of the higher price.

Parts Where McDonnell

Douglas Furnished

Material

We identified 23 parts—21 different cargo door hooks and 2 different

hinge assemblies—where McDonnell Douglas had previously furnished

material to a subcontractor who produced the parts at much lower costs.

Information on previous purchase costs and McDonnell Douglas

manufacturing costs are included in appendix II. Details on one of the

door hooks follow.

The Air Force paid $12,280 for one of the hooks. The hook (see fig. 2) is

made of steel and is about 7 inches high, 3-1/2 inches wide, and about 

4-1/2 inches thick.

Page 5 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

Figure 2: Hook

Source: McDonnell Douglas.

For the early production aircraft, the Long Beach Division had furnished

material valued at $715 to an outside vendor in 1992 who manufactured

this hook for $389 (exclusive of the material value). After initially using

hooks for production aircraft provided from the Long Beach Division’s

inventory, the St. Louis Division made them starting with production

aircraft number 12. For the spares order under contract-2109, the 

St. Louis Division estimated “in-house” manufacturing costs (exclusive of

material costs) at about $8,842.

McDonnell Douglas officials said that the primary reason for moving

various work from the Long Beach Division to the St. Louis Division was

to recover from being behind schedule and that sufficient time was not

available to procure parts from vendors. McDonnell Douglas officials also

said that now that production deliveries are on schedule, they will be

reviewing parts to identify the most affordable and effective

Page 6 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

manufacturing source and that 17 of the 33 parts have been identified as

candidates to move out of St. Louis to achieve lower C-17 costs.

DOD advised us that DPRO officials at McDonnell Douglas had estimated the

cost difference between production by McDonnell Douglas versus

subcontractors for the 33 parts to be $141,000 and, after further analysis,3

had determined that $65,000 was excessive. McDonnell Douglas refunded

that amount in December 1995.

Data for Pricing Spare

Parts

Our review of the data submitted to support the pricing of selected spare

parts orders showed that McDonnell Douglas’ St. Louis Division used

outdated pricing information when proposing costs under intercompany

work orders with the Long Beach Division for the C-17 spares. The St.

Louis division used labor variance factors based on the second quarter of

1992 for proposing labor hours required for items produced in 1994. Most

of these orders were negotiated with DCMC in mid-1994.

As of May 31, 1995, DCMC had negotiated prices for 95 contract items made

by the St. Louis Division with a total negotiated value of about $966,000.

We reviewed data for 37 of these items with a negotiated total value of

$347,000. We reviewed only labor variance factors and did not address

other rates and factors such as the miscellaneous production factor. We

found that the selected items were overpriced by $117,000, or about

34 percent of the negotiated value of the items reviewed.

For example, McDonnell Douglas, in developing the basic production

labor hours estimate for a hinge assembly multiplied machine shop

“target” hours by a variance factor of 2.33 and sheet metal target hours by

a variance factor of 2.5. Data for the first quarter of 1994 showed a

conventional machine shop variance of 1.26 and a sheet metal variance of

1.60. Because most work for this item took place in the first half of 1994

and the prices were negotiated in June 1994, the 1994 variance rates

should have been used for pricing the item. Instead, McDonnell Douglas

used rates based on the second quarter of 1992, which were higher. A price

of $42,587 was negotiated based on the 1992 data. Using the data for the

first quarter of 1994, the price would have been $26,458, a difference of

$16,129, or about 38 percent lower than the negotiated price.

3

DOD’s further analysis included (1) eliminating an amount to be refunded because of another of our

findings and (2) adjusting the earlier purchase prices used in our cost comparison to reflect what

DPRO believed are more realistic outsourcing prices for McDonnell Douglas.

Page 7 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

After we brought these issues to the attention of DOD officials, they

acknowledged that more current labor variance data should have been

used and sought a refund. McDonnell Douglas made a refund of $117,000

in December 1995.

Profit Under Spare

Part Orders

Our review indicated that the profits awarded for some orders under

contract-2109 appear higher than warranted. DFARs requires the use of a

structured approach for developing a government profit objective for

negotiating a profit rate with a contractor. The weighted guidelines

approach involves three components of profit: contract type risk,

performance risk, and facilities capital employed. The contracting officer

is required to assess the risk to the contractor under each of the

components and, based on DFARs guidelines, calculate a profit objective

for each one and, thus, an overall profit objective. As a general matter, the

greater the degree of risk to the contractor, the higher the profit objective.

For example, the profit objective for a fixed-price contract normally would

be higher than that for a cost-type contract because the cost risk to the

contractor is greater under the former. Consequently, in its subsequent

price negotiations, the government normally will accept a higher profit

rate when a contractor is accepting higher risks.

The price of spare orders under contract-2109 were to be negotiated

individually. However, rather than calculate separate profit objectives and

negotiate profit rates for individual orders, DPRO and McDonnell Douglas

negotiated two predetermined profit rates, documented in a memorandum

of agreement, that would apply to subsequent pricing actions. The profit

rates were 10 percent for parts that McDonnell Douglas purchased from

subcontractors, and 15 percent for spare parts that McDonnell Douglas

manufactured. Our review indicates that the use of these rates for many

later-priced spares resulted in higher profits for the contractor than would

have been awarded had objectives been calculated and rates negotiated

when the orders actually were priced. Based on profit rates of 6 percent

for purchased parts and 13 percent for parts made in-house, both of which

could have been justified according to our calculations, McDonnell

Douglas would have received less profit. For example, applying these

lower profit rates to the $29 million of negotiated spare part orders as of

May 31, 1995, would have reduced the company’s profit by $860,000.

After we presented our information in October 1995, DCMC directed that

the memorandum of agreement, which was scheduled to either expire or

be extended on November 1, 1995, be allowed to expire and that future

Page 8 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

profit objectives be established on an order-by-order basis. DOD officials

agreed that a single profit analysis should not be used for C-17 spare parts.

Contract Type Risk In developing a profit objective for contract-2109, the contracting officer

assigned a value for contract type risk based on firm, fixed-price contracts.

However, negotiations of prices for spare part orders were conducted, in

many cases, after the vendor or McDonnell Douglas had incurred all costs

and delivered the spares. These conditions lowered the contractor’s risk

for those parts far below what normally would be expected for a firm,

fixed-price contract. The risks were more like those that exist for cost-type

contracts, for which the weighted guidelines provide lower profit objective

values.

Of the 40 parts made in-house that we reviewed, McDonnell Douglas had

delivered 25 (63 percent) of the parts at the time of price negotiations with

the government. Five of the remaining 15 items were delivered during the

month of price negotiations, and all were delivered within 3-1/2 months of

price negotiations. Of the 55 “buy” spare parts we reviewed, McDonnell

Douglas had established prices with its vendor for 45 (82 percent) of the

parts. Using one order as an example, McDonnell Douglas (1) negotiated

spare parts prices with its subcontractor on January 25, 1993;

(2) negotiated prices with the government on April 11, 1994; and

(3) scheduled the parts for delivery on May 27, 1994. Thus, for both make

and buy items, a substantial portion of the contractor’s costs had been

known at the time of the price negotiations.

Section 217.7404-6 of DFARs requires that profit allowed under unpriced

contracts reflect the reduced risk associated with contract performance

prior to negotiations. Consistent with this requirement, the weighted

guidelines section (215.971-3) requires the contracting officer to assess the

extent to which costs have been incurred prior to definitization of a

contract action and assure profit is consistent with contractor risk. In fact,

the guidelines provide that if a substantial portion of the costs has been

incurred prior to definitization, the contracting officer may assign a

contract type risk value as low as zero, regardless of contract type.

A DPRO representative said that, in negotiating the memorandum of

understanding, DPRO knew that the two profit rates for later application

would not be perfect in every case. He said, however, that they were

expected to be off in one direction as often as in the other, creating an

overall fair agreement. The representative noted, for example, that while

Page 9 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

deliveries for the orders we reviewed were near the negotiation dates, the

memorandum’s rates also would apply to orders with deliveries more than

2 years in the future, where minimal costs have been incurred. In addition,

the representative stated that a significant number of parts would be

undergoing design changes because a baseline configuration for the C-17

did not exist. The representative explained that McDonnell Douglas is

responsible for replacing spares affected by design changes until 90 days

after reliability, maintainability, and availability testing, which was

completed on August 5, 1995, and that any additional cost for such

replacements would have to be absorbed by McDonnell Douglas. Finally,

the representative noted that the minimal cost history on C-17 spares

would indicate a higher than normal contract type risk.

We have no evidence to support the DPRO official’s view that profits based

on the rates in the memorandum of agreement would balance out over

time. In fact, DCMC let the agreement lapse and will calculate profit

objectives and negotiate profit rates on an order-by-order basis. In

addition, we noted that McDonnell Douglas initially received a 2-percent

warranty fee on contract-2109 orders to cover both the risk of design

changes and provide a standard 180-day commercial warranty.

Furthermore, the profit agreement stated that McDonnell Douglas could

submit additional warranty substantiation at any time and, if the data

supported a different percent for warranty, the government would

consider adjusting the percentage. Thus, the warranty fee is the contract

mechanism the parties agreed to use to address the risks of replacement

parts because of design changes.

Performance Risk for Buy

Orders

The contracting officer, in developing a profit objective for buy orders

(complete spare parts purchased from an outside vendor) under

contract-2109, used a higher rate for performance risks than was

warranted.

The DFARs’ weighted guidelines provide both standard and alternate ranges

for the contracting officer to use in calculating performance risk, which is

the component of profit objective that addresses the contractor’s degree of

risk in fulfilling the contract requirements. The standard range applies to

most contracts, whereas the higher alternate is for research and

development and service contracts that involve low capital investment in

buildings and equipment. The guidelines provide that if the alternate range

is used, the contracting officer should not give any profit for the remaining

Page 10 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

component, facilities capital employed, which focuses on encouraging and

rewarding aggressive capital investment in facilities that benefit DOD.

DCMC officials said that the alternate range was used in calculating the

performance risk component on contract-2109 because McDonnell

Douglas’ system could not provide an estimate to be used for purposes of

calculating the facilities capital component. DPRO officials said that since

the negotiation, McDonnell Douglas has developed the means to estimate

facilities capital employed on its spares proposals. They said that using the

standard range for performance risk and including facilities capital

employed for spares orders yields a profit objective that is substantially

the same as the profit objective calculated using the alternate range for

performance risk. DOD concurred that DPRO should not have utilized the

alternate range for performance risk, but repeated the DPRO’s assertion

that using the standard range and including facilities capital employed

yields essentially the same results.

We reviewed DCMC’s data and found that using the alternate range for the

performance risk component does not result in a substantially similar

profit objective to that calculated by applying a factor for facilities capital

employed. The contracting officer’s use of the alternate range for

performance risk, combined with the use of a fixed-price value for

contract type, led to the negotiation of a profit rate of 10 percent for the

buy orders; in contrast, we calculated that using a cost-type contract risk

factor, the standard range for performance risk, and McDonnell Douglas’

estimate of facilities capital employed would have resulted in an overall

profit objective of 6 percent for the buy orders.

Agency Comments

and Our Evaluation

In commenting on a draft of this report, DOD said that it had taken

appropriate action to address our finding of overpricing. In addition to

recovering $182,000, DOD indicated that DPRO at McDonnell Douglas will

now screen all spares orders containing items to be made in-house to

(1) look for possible conversion to buy items and (2) ensure that labor

data is correct for all items made in the St. Louis Division. Moreover, DOD

stated that DPRO no longer relies on a single profit analysis and, by

completing a separate analysis for each order, DPRO will address the

contract risk associated with each order.

DOD acknowledged that it is possible to take issue with the contracting

officer’s selection of risk factors and that DPRO should not have used the

alternative range for performance risk in its profit analysis. However, DOD

Page 11 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

asserts that it would be misleading to infer that unjustified profits were

paid to the contractor. We do not infer that the contractor received

$860,000 in unjustified profits. Determining the appropriate amount of

profits is a matter to be negotiated between DPRO and the contractor.

However, we noted that (1) lower rates were justified under the weighted

guidelines and (2) rates of 6 percent for purchased parts and 13 percent

for parts made in-house could be justified. While the results of our review

cannot be be projected to all C-17 spare parts, using the lower profit rates

for the $29 million of negotiated spare parts orders as of May 31, 1995,

would have reduced the company’s profit by $860,000.

Our subsequent analysis raises some questions about the DOD statement

that DPRO, by making a separate profit analysis for each order, will address

the contract type risk associated with each order. Our review of an order

negotiated in January 1996 based on a separate profit analysis indicated

that the DPRO’s profit analysis continues to not reflect the reduced risk

when most costs have been incurred prior to price negotiations. While the

negotiated profit rate was 8.6 percent, or 1.4 percent lower than the

previously negotiated rate, the amount of profit allowed for contract type

risk continues to appear higher than justified by the weighted guideline

and DFARs. In this regard, DPRO noted that McDonnell Douglas’ cost

“amounts to only 46 hundreths of one percent” and “you are being paid all

your costs and the parts have already been shipped, thereby reducing your

risk to a very low degree.” However, the contract risk factors were at the

midpoint range and higher for a firm, fixed-price contract. The stated

reason for this was that the design could change, necessitating a recall.

While DPRO discontinued using the memorandum of understanding profit

rates, we remain concerned that the negotiated profit rates may not reflect

the reduced contract type risk when essentially all costs have been

incurred.

DOD’s comments are reprinted in their entirety in appendix III.

Scope and

Methodology

To select spare parts for our review, we analyzed reports developed by

McDonnell Douglas’ data system that included historical and current

information on spare parts orders—for example, the negotiation date,

negotiation amount, and delivery date on current/previous orders. For our

review, we only considered spare parts orders for which prices had been

negotiated as of May 31, 1995. As of that date, prices for orders involving

696 spare parts had been negotiated, with a value of about $29 million.

Page 12 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

We selected spare parts for a more detailed review based on

current/previous cost, intrinsic value, and nomenclature. Our selection of

parts was judgmental and our results cannot be projected to the universe

of C-17 parts. We reviewed the contractor’s and the DPRO’s contract and

pricing files, and discussed the pricing issues with selected contractor and

DCMC officials. As a result of rather significant cost increases for a number

of spare parts that had the manufacturing/assembly effort transferred to

the contractor’s plant in St. Louis, we obtained additional documentation

from the contractor’s plant in St. Louis and DPRO.

We reviewed the DFARs guidance relating to the use of weighted guidelines

in establishing a profit objective. We also reviewed the memorandum of

agreement that was negotiated by DPRO for contract-2109 and discussed

the basis for the negotiated profits with DOD and DPRO officials. In

assessing the value assigned to contract type risk, we reviewed data on

95 spare parts with a total negotiated price of about $3 million out of

696 spare parts with a total negotiated price of about $29 million, or about

14 percent of the parts. Our review of selected spare parts cannot be

projected to all C-17 spare parts. However, to illustrate the potential effect

of lower profit rates, we calculated a potential reduction using spare parts

orders negotiated as of May 31, 1995.

We conducted our review between November 1994 and September 1995 in

accordance with generally accepted government auditing standards.

As agreed with your office, unless you publicly announce its contents

earlier, we plan no further distribution of this report until 30 days after its

issue date. At that time, we will send copies to the Secretaries of Defense

and the Air Force; the Director, Office of Management and Budget; and

other interested parties. We will make copies available to others upon

request.

Page 13 GAO/NSIAD-96-48 C-17 Aircraft
B-259369 

If you or your staff have any questions about this report, please contact me

on (202) 512-4841. The major contributors were David Childress, Larry

Aldrich, Kenneth Roberts, and Larry Thomas.

Sincerely yours,

Louis J. Rodrigues

Director, Defense Acquisition Issues

Page 14 GAO/NSIAD-96-48 C-17 Aircraft
Page 15 GAO/NSIAD-96-48 C-17 Aircraft
Contents

Letter 1

Appendix I 

Comparison of Costs

and Price for Parts

Previously Purchased

Complete From

Subcontractor

18

Appendix II 

Comparison of Costs

for Parts With

Material Furnished by

McDonnell Douglas

19

Appendix III 

Comments From the

Department of

Defense

20

Figures Figure 1: Hinge 4

Figure 2: Hook 6

Abbreviations

DCMC Defense Contract Management Command

DFAR Defense Federal AcquisitionRegulation Supplement

DOD Department of Defense

DPRO Defense Plant Representative Office

Page 16 GAO/NSIAD-96-48 C-17 Aircraft
Page 17 GAO/NSIAD-96-48 C-17 Aircraft
Appendix I 

Comparison of Costs and Price for Parts

Previously Purchased Complete From

Subcontractor

Part name

Cost to buy from

subcontractor

McDonnell Douglas’

estimated cost

Price to

Air Force

Hinge, inlet door $31 $1,745 $2,187

Hinge, access door 31 1,716 2,151

Hinge, access door 47 862 1,091

Hinge, access door 45 1,169 1,447

Hinge, access door 45 1,498 1,855

Hinge, access door 82 1,339 1,664

Hinge, access door 90 1,421 1,783

Hook, cargo door 1,763 6,992 9,937

Hook, cargo door 1,763 7,003 9,951

Handle, door 60 946 1,206

Page 18 GAO/NSIAD-96-48 C-17 Aircraft
Appendix II 

Comparison of Costs for Parts With Material

Furnished by McDonnell Douglas

Part name

Cost to manufacture

by subcontractora

Cost to manufacture

by McDonnell Douglasa

Hook, cargo door $369 $1,356

Hook, cargo door 369 1,553

Hook, cargo door 369 1,512

Hook, cargo door 369 1,595

Hook, cargo door 369 1,471

Hook, cargo door 369 3,286

Hook, cargo door 369 2,420

Hook, cargo door 369 2,507

Hook, cargo door 369 1,553

Hook, cargo door 369 1,553

Hook, cargo door 369 1,575

Hook, cargo door 369 1,471

Hook, cargo door 269 3,305

Hook, cargo door 269 1,463

Hook, cargo door 269 3,677

Hook, cargo door 269 3,677

Hook, cargo door 389 8,630

Hook, cargo door 389 8,842

Hook, cargo door 200 1,424

Hook, cargo door 389 2,493

Hook, cargo door 369 2,256

Hinge assembly, spoiler 4,998 22,638

Hinge assembly, spoiler 4,998 21,661

aExcludes cost of material.

Page 19 GAO/NSIAD-96-48 C-17 Aircraft
Appendix III 

Comments From the Department of Defense

Page 20 GAO/NSIAD-96-48 C-17 Aircraft
Appendix III 

Comments From the Department of Defense

Page 21 GAO/NSIAD-96-48 C-17 Aircraft
Appendix III 

Comments From the Department of Defense

Page 22 GAO/NSIAD-96-48 C-17 Aircraft
Appendix III 

Comments From the Department of Defense

Page 23 GAO/NSIAD-96-48 C-17 Aircraft
Appendix III 

Comments From the Department of Defense

Page 24 GAO/NSIAD-96-48 C-17 Aircraft
Appendix III 

Comments From the Department of Defense

Page 25 GAO/NSIAD-96-48 C-17 Aircraft
Appendix III 

Comments From the Department of Defense

Page 26 GAO/NSIAD-96-48 C-17 Aircraft
Appendix III 

Comments From the Department of Defense

(705082) Page 27 GAO/NSIAD-96-48 C-17 Aircraft
Ordering Information

The first copy of each GAO report and testimony is free.

Additional copies are $2 each. Orders should be sent to the

following address, accompanied by a check or money order

made out to the Superintendent of Documents, when

necessary. VISA and MasterCard credit cards are accepted, also.

Orders for 100 or more copies to be mailed to a single address

are discounted 25 percent.

Orders by mail:

U.S. General Accounting Office

P.O. Box 6015

Gaithersburg, MD 20884-6015

or visit:

Room 1100

700 4th St. NW (corner of 4th and G Sts. NW)

U.S. General Accounting Office

Washington, DC

Orders may also be placed by calling (202) 512-6000 

or by using fax number (301) 258-4066, or TDD (301) 413-0006.

Each day, GAO issues a list of newly available reports and

testimony. To receive facsimile copies of the daily list or any

list from the past 30 days, please call (202) 512-6000 using a

touchtone phone. A recorded menu will provide information on

how to obtain these lists.

For information on how to access GAO reports on the INTERNET,

send an e-mail message with "info" in the body to:

info@www.gao.gov

PRINTED ON RECYCLED PAPER
United States

General Accounting Office

Washington, D.C. 20548-0001

Official Business

Penalty for Private Use $300

Address Correction Requested

Bulk Rate

Postage & Fees Paid

GAO

Permit No. G100