Potential Savings by Streamlining Grumman's Computer Operations Supporting Navy Contracts

PSAD-79-111: Published: Oct 5, 1979. Publicly Released: Oct 5, 1979.

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Grumman Aerospace Corporation buys data processing services from Grumman Data Systems Corporation to support manufacturing and testing operations performed in fulfillment of Navy contracts. Both corporations are subsidiaries of the Grumman Corporation. The cost and storage capacity of the system used was compared to the capacity required for storage and processing of the necessary information. The methods used for computing charges to the Navy were also evaluated.

It was determined that the Navy could save approximately $335,000 if the excess capacity in the data processing and computer operations were eliminated. Since the Navy paid the cost of data processing through the overhead accounts of Grumman Aerospace Corporation, any system capacity not utilized for other accounts was paid for by the Navy. Recommendations were made to the contractor for equipment changes, substitution of less expensive but adequate materials, and reduction of computer capacity. In addition, a review of the methods used for computing charges to the Navy showed the potential for inaccurate allocation of costs to government work. In one case it was revealed that the Navy was undercharged and in another case maintenance work was charged to the Navy that GAO felt should have been charged to a commercial account.

Recommendation for Executive Action

  1. Status: Closed

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

    Recommendation: The Secretary of the Navy should: (1) declare as unallowable for Navy work any cost incurred by Grumman Aerospace as a result of excess data storage and computer capacity maintained by Grumman Data; and (2) request the Defense Contract Audit Agency to determine whether Grumman Data's cost allocation methods used to distribute the Calverton computer center costs to projects are equitable.

    Agency Affected:


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