Thank you all for the input. The item is an electrical component that goes on an aging aircraft. I wish we could allow the marketplace to redevelop this item but due to data restrictions and the Special Programs Office (SPO) desire not to reverse engineer this we are left with one vendor. So I understand that the contractor has leverage and can offer whatever price they want. It is still my responsibility to determine the price fair and reasonable (i.e. maybe we pay a premium because of the risk, or because the contractor is going out of there way to supply the item, but the fact still remains I need to understand why we are paying that price). My main concern is with the NRE as I feel I can support the production costs. I have looked to see if I could separate the NRE out as Non-commercial as stated in the above posts but upon reflection and consideration of the regs I don't believe the NRE efforts can be considered non-commercial. The more I have looked into this and talked with others in my office I believe the contractor is trying to hide the fact they have some exorbitant overheads and profit built in. Vern - I liked the idea about sending a letter to a Sr. Executive. At this point I believe that is all I can do. Thanks again to all of you!