Navy Ship Construction Contracts

GAO discussed the Navy's ship construction contracts to determine the extent to which those contracts: (1) experienced cost overruns; (2) resulted in claims against the government; and (3) stayed within their appropriate limits. GAO found that: (1) more contracts experienced overruns and were at or close to their ceiling prices than a year ago; (2) as of February 1988, the Navy projected cost overruns of about $2.1 billion for 21 contracts involving 60 vessels; and (3) since the Navy shared a portion of the overruns with its contractors, it was potentially liable for about $1 billion. GAO also found that: (1) the Navy is conducting a review to determine whether it has funds available to cover its potential overrun liability; (2) due to the cost overruns, contractors filed claims against the government totalling $110 million as of December 1987; and (3) the Navy settled five claims during 1987 totalling $28 million.