Cost Growth and Delivery Delays in Submarine Construction at Electric Boat Are Likely To Continue

MASAD-82-29: Published: Apr 19, 1982. Publicly Released: Apr 19, 1982.

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GAO was asked to evaluate the ability of the General Dynamics Corporation's Electric Boat Division to build submarines in a timely and cost-effective manner. GAO was also asked to review other aspects concerning Electric Boat and its submarine construction program.

GAO noted that it was too early to accurately assess Electric Boat's upgraded quality assurance program, but the new procedure could provide greater assurance that quality submarines are constructed by Electric Boat. Weaknesses in implementing inspection procedures and in obtaining and verifying timely corrective actions could lead to quality-related problems similar to those experienced in the past. The Naval Sea Systems Command has identified weaknesses in the quality assurance program which should ensure that contractual requirements are met, and these weaknesses have not been entirely corrected by actions which were intended to remedy them. Cost growth will continue at Electric Boat because the direct labor budgets, despite revisions, do not reflect all the hours needed to complete the SSN-688 and the Trident submarine programs. The Navy believes that the pricing structures and target costs for these contracts are reasonable. Six SSN-688's and one Trident were delivered in 1981. In achieving these deliveries, the company concentrated its labor force on these submarines at the expense of the remaining submarines under construction. Unless Electric Boat takes immediate action to reverse unfavorable productivity trends, some scheduled SSN-688 and Trident delivery dates may not be met. In the Navy's testimony before a congressional subcommittee, Electric Boat was criticized for its shoddy construction and poor quality control and was held responsible for high costs and delivery delays. Electric Boat defended its position by refuting the Navy's criticisms.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should require the Navy to accelerate its reviews of Electric Boat's quality assurance procedures, and the Navy, and Electric Boat should work closely to improve its existing management control systems to ensure that: (1) inspection procedures are being effectively implemented, (2) corrective actions are taken on a timely basis, and (3) preventive measures are properly implemented before quality problems become widespread. Intensive management attention must be directed to ensure that established quality assurance guidelines in place are implemented. This attention enables management to identify potential problems early and permits management to identify potential problems early and permits steps to be taken to keep programs on track.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: GAO is dropping the recommendation as it now appears that the estimates for the most recent contracts are more realistic.

    Recommendation: The Secretary of Defense should direct that realistic estimates for contracts at Electric Boat be developed and reported to the Office of the Secretary of Defense and concerned congressional oversight committees. These estimates should be prepared by those intimately involved in the two submarine programs and objectively verified by an independent organization within Defense. A good candidate for this verification would be the Cost Analysis Improvement Group within the Office of the Secretary of Defense. Actual experience acquired on submarines already delivered or substantially completed offers a good starting point for preparing these estimates.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should direct the Navy to maintain close surveillance over the contractors' activities to identify progress being made or indications of unfavorable trends. If problems are indicated, corrective measures must be taken to minimize potential problems. If unfavorable trends, such as labor and skill shortages and other economic influences, are the result of factors beyond the control of the Navy or the contractor at least the problems will be recognized and surprises to the public and Congress will be avoided.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

    Recommendation: The Secretary of Defense should periodically apprise Congress of progress being made at Electric Boat and the impact any unfavorable trends may have on costs and schedule deliveries.

    Agency Affected: Department of Defense

 

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