The Navy Is Not Adequately Protecting the Government's Investment in Materials Furnished to Contractors for Ship Construction and Repair

The Navy provides billions of dollars of Government-furnished materials (GFM) to contractors for use in constructing, overhauling, and repairing Navy ships. GFM includes parts, components, assemblies, raw and processed materials, and supplies that are attached to or incorporated into ships. Various Navy commands either own or acquire the materials and issue them to the contractors as part of the contractual agreement. Responsibility for monitoring these materials is highly fragmented among Naval Sea Systems Command (NAVSEA) activities in Washington, D.C., and local Supervisors of Shipbuilding, Conversion, and Repair (SUPSHIP's) located throughout the United States.

The Navy does not know how much GFM is in its contractors' possession because there are no overall financial or other management systems to account for these materials. No person or office is either responsible or accountable for overall protection of the Government's investment in GFM which the Navy provides to contractors. Further, the NAVSEA focal point for SUPSHIP operations has not ensured that SUPSHIP's carry out their responsibilities for managing GFM in accordance with Defense and Navy policies and regulations. Of the four SUPSHIP's visited by GAO, no two were carrying out the basic regulations and instructions for GFM management in the same manner. As a result, SUPSHIP management of GFM varied widely in effectiveness. The one SUPSHIP that had the most effective management of GFM used an in-house computerized monitoring system and forced contractors to follow Defense Acquisition Regulations. The failure of the other three SUPSHIP's to fully enforce regulations led to inaccuracies and inefficiencies in contractors' GFM control systems, caused excess items to be held for extended periods of time, and inadequately protected the Government's interest.

Recommendations

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