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B-170269 1 (1973-10-11)

handle is hein.gao/gaobabkid0001 and id is 1 raw text is: RESTRICTED - Not to be released outside the eneral X Ac,oLlUf g Opfice exaept on the basis of specifi v by the Office of Congressional Relatons, a reco WASHINGTON. D.C. g0o=8 B-170269 RELEASED OCT 111973 The Honorable Les Aspin House of Representatives K Dear Mr. Aspin: In your letter of August 8, 1973, you asked about the escal4tion provisions in the Navy's, L4A and. .rDD 963. c.o~tracts wit Litonjn1gMtie You asked GAO to determine the actual changes in labor costs and compare this to labor escalation payments which are being made on the basis of changes in Bureau of Labor Statistics, Department of Labor, indexes. In our letter to you on July 21, 1972 (see enclosure), we explained the methodology the Navy and Litton used to compute escalation on the DD-963 contract. The LHA contract provisions are basically the same. Because many factors other than the changes in the indexes are to be considered, we believe that a comparison of increases in actual labor costs with increased payments to Litton resulting from these changes may not produce meaningful results. METHODOLOGY OF COMPUTING ESCALATION These ri nentive contracts state that, regard- less of actual changes in the cost of labor or materials dur- ing the performance of the contracts, adjustments for escala- tion will be made in accordance with specific contract provi- sions for labor and material compensation adjustments. Each contract specifies a percent of initial target cost which constitutes the labor cost subject to adjust- ment for escalation and a percent which constitutes material cost subject to adjustment for escalation. Each contains tables showing how labor cost is apportioned over the life of the contract and the percent of target cost subject to adjustment for changes in labor cost apportioned to each