Excess Navy Ships Sold to Foreign Countries at Understated Prices

GAO reviewed Navy policies and procedures for selling excess ships to foreign countries.

GAO found that the 11 ships sold during 1981 and 1982 were not priced in accordance with Navy guidelines which require that ships be sold at the higher of fair or scrap value. By using scrap value to set prices for eight of the sales, the Navy did not: (1) include the amount spent to upgrade the ships while they were in service; (2) charge overhaul costs to foreign countries; (3) determine the condition of the ships at the time of sale; or (4) include incidental costs. GAO also found that, in the three cases where fair value was used, conversion and incidental costs were excluded from the sales price. While the Navy believes that political and diplomatic considerations often outweigh approved pricing guidelines, the decision to sell a ship at a lower price rests with Congress rather than with the Navy. GAO found that, if the Navy had used appropriate prices for the 11 sales, it would have totalled $36.4 million rather than the $5.2 million actually charged.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

Director: Joan M. McCabe Team: General Accounting Office: National Security and International Affairs Division Phone: (202) 275-4128