Navy Maintenance:

Assessment of the Public and Private Shipyard Competition Program

NSIAD-94-184: Published: May 25, 1994. Publicly Released: Jun 1, 1994.

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Pursuant to a congressional request, GAO provided information on competition between public and private shipyards, focusing on: (1) the disbursement of repair and maintenance contracts between public and private-sector bidders; (2) whether the Navy's procurement procedures afford public or private bidders a competitive advantage; and (3) the effectiveness of the Navy's public-private competition program in reducing costs.

GAO found that: (1) public shipyards are not competitive with private shipyards for ship maintenance and modernization services; (2) since 1988, public shipyards have won less than 14 percent of the competitively-procured surface ship contracts; (3) nuclear-capable public shipyards have not been awarded any of the 17 surface ship repair contracts that have been solicited since the inception of the competition program; (4) private shipyards have won 89 percent of the submarine repair competitions since fiscal year 1993; (5) public shipyards are not competitive with private-sector shipyards because they are required to include proportional overhead costs in their bids, their bids are not evaluated for cost realism, and they are required to submit full-cost bids; (6) private shipyards have a significant competitive advantage because they are allowed to submit below-cost bids as long as they are found to be responsible; (7) public shipyards are able to perform submarine repair work more cost-effectively than private-sector shipyards; (8) although the Navy's public-private competition program has been useful in improving the efficiency of public shipyards and decreasing the cost of depot maintenance work, the program may not be cost-effective or viable in the current economic environment; and (9) although there are no compelling reasons to discontinue the public-private competition program, many issues related to program implementation and work allocation need to be resolved.

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