Navy Ship Construction Contracts

T-NSIAD-87-30: Published: Apr 23, 1987. Publicly Released: Apr 23, 1987.

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GAO discussed the results of its review of selected Navy ship construction contracts, focusing on: (1) whether the Navy can execute recently awarded contracts within their funding limitations; (2) whether Navy ship contracts could result in future claims against the government; (3) actions that the Navy is taking to address current and anticipated claims; and (4) staffing levels at Navy contract monitoring activities. GAO noted that: (1) while competition for construction contracts has resulted in favorable prices, the Navy estimates cost overruns of about 15 percent on 17 of its 22 fixed-price incentive contracts; (2) overruns are primarily attributable to optimistic bidding fostered by the competitive environment; (3) the Navy anticipates requests for contract adjustments for several of the contracts, some of which could result in claims; (4) the Navy is attempting to reduce potential claims by documenting significant contract events and monitoring such contract aspects as delivery changes, differences in contract interpretation, contractor errors, and noncompliance; and (5) some Navy monitoring activities believe that they are understaffed.

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