Transfer of Toolmaking, Toolcutting, and Grinding Functions at the Portsmouth Naval Shipyard

A review was conducted of the transfer of certain machine functions at the Portsmouth Naval Shipyard in response to charges that the transfer increased costs, necessitated outside procurement, and resulted in an organizational structure contrary to a Navy instruction. The organizational control of these functions was transferred from the Central Tool Room (Shop 06) to the Inside Machine Shop (Shop 31).

Since the workers were located in Shop 31 even before the transfer, and the transfer was merely organizational, the effective cost of the work was not changed. The allegation that the cost of work more than doubled due to increased overhead cost was based on an incorrect comparison of the average hourly direct labor cost of Shop 06 with the average hourly total costs including overhead of Shop 31. The overhead was more than 100 percent of direct labor, and this accounted for most of the difference. It was ascertained through an interview that purchases from outside contractors were made because of delivery time and cost considerations and not because of the transfer. Although the organizational structure did not comply with a Navy instruction which states that Shop 06 will be charged with toolcutting and grinding functions, and the transfer was made without requesting approval from the Commander, Naval Ship Systems Command, as required, it appeared that the Commander ratified the transfer.