The 1978 Navy Shipbuilding Claims Settlement at Litton/Ingalls Shipbuilding--A Final Report

Pursuant to legislative requirements, GAO presented its fourth and final report on the status of two modified shipbuilding contracts awarded by the Navy to Litton Systems, Inc., Ingalls Shipbuilding Division. During its review, GAO: (1) updated a prior review of procedures and controls and attempted to determine whether contract costs were properly charged; (2) determined the combined profit and loss status of the contracts; and (3) examined contract payments and related costs to ensure that funds provided under P.L. 85-804 were used only on the two contracts.

GAO found that contract closeout negotiations between Litton and the Navy have been concluded. These negotiations resulted in the establishment of a tentative combined total final price for the two contracts and a final price for one contract. GAO found no evidence that funds provided under P.L. 85-804 were not used on the two contracts and calculated a final combined profit of $13 million. In accordance with a negotiated settlement, the combined profit was not paid to Litton and the combined price established represents a break-even profit and loss position for the contractor. In addition, agreements were reached pertaining to withdrawal of pending claims by Litton, contract payments, and ownership of residual materials. The Department of Defense agreed with the GAO conclusions, but Litton maintained that the settlement agreements resulted in a combined loss of $19 million on the contracts.