Contracting for Navy Ship Repairs and Overhaul, Need for Change

PSAD-77-47: Published: Dec 10, 1976. Publicly Released: Dec 10, 1976.

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The regulations, policies, procedures, and practices used for procuring overhaul of (SUBSHIPS) were reviewed. The emphasis was on the extent of competition obtained and on the determination of fair and reasonable prices. The Navy relies on formal advertising to assure that contract prices are fair and reasonable, but such reliance may be imprudent.

Among the conditions which eliminate or reduce competition are: the Navy's policy of having ships overhauled at or near home ports, the limited physical capacity and technical capability of private shipyards, and the Navy's inability to provide complete and accurate descriptions of the work to be done before the contract is awarded. The prices of the initial formally advertised contracts were frequently increased by 50 percent or more through numerous modifications. The SUBSHIPS districts generally did not obtain adequate cost or pricing data when negotiating prices of modifications, and had difficulty conducting such negotiations in a timely manner. Of these modifications, 38 percent were caused by incomplete or inaccurate specifications.

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