Navy Maintenance:

Improved Labor Estimates Can Reduce Shipyard Costs

NSIAD-93-199: Published: Jul 22, 1993. Publicly Released: Jul 22, 1993.

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GAO reviewed the Navy's methods for managing and controlling direct labor costs at its naval shipyards, focusing on whether labor estimates: (1) for ship repairs were reliable and effective in helping managers to control labor costs; and (2) reflected the benefits from labor-saving improvements and new equipment.

GAO found that: (1) shipyard planners overestimate labor 3 to 23 percent per ship, which causes overstated repair prices, erroneous labor efficiency data, and overstaffing; (2) excessive labor estimates are caused by planners not consistently applying estimating policies and procedures, the lack of internal controls to ensure that labor estimates are properly developed and supported, and the failure to keep labor standards current; (3) the Naval Sea Systems Command (NAVSEA) has not fully implemented its initiatives to correct the problems; (4) although the shipyards have identified and implemented labor-saving and equipment improvements, the Navy does not ensure that the benefits from the improvements are incorporated into ship repair planning; (5) planners often base labor estimates on processes and equipment no longer used; and (6) the shipyards do not update labor standards to reflect new labor processes and equipment.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: All naval shipyards have established milestones to implement the new training program. The scope and intent of this training has been integrated and accomplished as part of the higher priority Advanced Industrial Management program training.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSEA, to establish milestones for implementing the new training program to ensure that all planners are well-trained in estimating policies and procedures.

    Agency Affected: Department of Defense: Department of the Navy

  2. Status: Closed - Implemented

    Comments: Each shipyard has a process to audit labor estimates, as required by the Advanced Industrial Management program. The program process manual requires a thorough review of the clearly defined work and the completed labor and material estimates by several different functional organizations.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSEA, to ensure that each shipyard conducts periodic, independent audits of labor estimates to assess accuracy and compliance with estimating policies.

    Agency Affected: Department of Defense: Department of the Navy

  3. Status: Closed - Implemented

    Comments: The Navy stated that it would implement an initiative to ensure that frequently performed repair tasks would be covered by current, independently developed labor standards. Also, work will be broken down by component/task, providing a more discrete basis for accurate labor estimating. In addition, one shipyard is revising the labor standards for 85 percent of the nonnuclear production work. These actions are steps in the right direction but a follow-on review would be required to determine if the recommendation was fully implemented.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSEA, to establish a labor standards improvement initiative to ensure that frequently performed repair tasks are covered by current, independently developed labor standards.

    Agency Affected: Department of Defense: Department of the Navy

  4. Status: Closed - Implemented

    Comments: A job summary review process has been implemented as part of the Advanced Industrial Management program. The review specifically addresses new, revised, or standard processes for accomplishing the work, as well as the associated labor estimates. Engineers/planners, production resources, and operations/project personnel all participate in the job summary reviews.

    Recommendation: The Secretary of the Navy should direct the Commander, NAVSEA, to establish a procedure ensuring that shipyard planners are informed of all new production processes, methods, and equipment that improve worker efficiency.

    Agency Affected: Department of Defense: Department of the Navy

 

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