Navy Maintenance:

Competing Vessel Overhauls and Repairs Between Public and Private Shipyards

NSIAD-88-109: Published: Mar 25, 1988. Publicly Released: Mar 25, 1988.

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Pursuant to a congressional request, GAO assessed the Navy's program to increase competition between public and private shipyards for its naval vessel overhaul and repair contracts, focusing on whether: (1) inherent differences between public and private shipyards precluded realistic and fair competition; (2) public shipyard bids included all direct and indirect costs; and (3) mechanisms existed to ensure the integrity of the competitive process.

GAO found that the Naval Sea Systems Command (NAVSEA), which oversees the competitive process, awarded: (1) $656 million, or 80 percent of total competitive repair contracts from 1985 through 1987, to public shipyards; (2) $166 million in repair contracts to private shipyards; and (3) all repair contracts involving nuclear ballistic missile submarines to public shipyards. GAO also found that private shipyards: (1) typically lacked the qualifications to perform submarine repairs; (2) successfully competed with public shipyards for surface vessel repair contracts; and (3) faced greater financial risk than public shipyards, since they accomplished repair work through fixed-price contracts while public shipyards accomplished work through project orders, which were analogous to cost-reimbursement type contracts. In addition, GAO found that: (1) public shipyards' addition of certain discretionary costs increased cost estimates for submarine repairs and decreased estimates for surface vessel repairs; (2) NAVSEA cost comparisons did not incorporate some indirect costs in public shipyards' bids; (3) NAVSEA awarded contracts on the basis of proposed prices rather then comparisons; and (4) the Navy could not substantiate its estimate that private and public shipyard competition saved about $200 million. GAO believes that, while the Navy attempted to treat private and public shipyards as equitably as possible, certain inherent differences precluded complete comparability and equity.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The Navy instruction requires including civilian retirement and military personnel costs as factors during the evaluation of public shipyard price proposals. It is too early to assess impacts of this action. A detailed assessment is expected in February 1990.

    Recommendation: The Secretary of Defense should direct the Secretary of the Navy to base the certifications of public and private shipyard competitive proposals on all reasonably identifiable and objectively quantifiable costs to the federal government.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: Civilian retirement and military personnel costs are required to be included as factors during evaluation of public shipyard price proposals. It is too early to assess impacts of this action. A detailed assessment will not be available until February 1990.

    Recommendation: The Secretary of Defense should direct the Secretary of the Navy to solicit and evaluate proposals and award competed work on that basis.

    Agency Affected: Department of Defense

 

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