Shipbuilders' Claims--Problems and Solutions

PSAD-77-135: Published: Aug 9, 1977. Publicly Released: Aug 9, 1977.

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Navy procedures to ensure that shipbuilders' claims are reasonably settled have generally been adequate.

Claims are usually made when government changes or delays cause a contractor to incur higher costs because the work was different from, or in addition to, that specified in the contract. Contractors also claim increased costs for disruptions when government changes cause unchanged contract work to be inefficient. Contractors must demonstrate a cause and effect relationship between a government act and resulting increased costs. The settlement of claims is aggravated because the exact value is hard to pinpoint. In two of four claims reviewed, contractors overstated their claims, and settlement was delayed due to inadequate documentation.

Recommendation for Executive Action

  1. Status: Closed

    Comments: Please call 202/512-6100 for additional information.

    Recommendation: The Navy should: (1) provide specific instructions in future ship construction contracts to contractors on the minimum documentation required to be submitted or to be readily available in support of claims; (2) develop standard guidelines to be used in settling claims for disruption; (3) determine a contractor's entitlement to interest as early as possible, allow prompt temporary payment on individual line items, and settle each claim line item wherever possible after it is analyzed; and (4) analyze the underlying causes of each claim after settlement to make sure that corrective measures in contracting practices are working to prevent future claims.

    Agency Affected:


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