Observations on Two Naval Nuclear Propulsion Program Procurement Practices

GAO reviewed certain procurement practices in the Naval Sea Systems Command's Nuclear Propulsion Directorate, focusing on: (1) the procurement of material used to manufacture reactor components from component manufacturers instead of subtier suppliers; and (2) split contract awards designed to maintain or increase the number of suppliers of a given item. Two prime contractors heavily support procurement activities under the Nuclear Propulsion Program.

GAO found that: (1) while the contractors believe that it is more economical to procure component material from manufacturers, neither has prepared a formal analysis to support its position; (2) the contractors could have saved from $4 to $8 million in fiscal year 1983 by procuring the material directly from suppliers; and (3) the contractors should determine, on a case-by-case basis, whether to procure component material from component manufacturers or subtier suppliers. GAO also found that the contractors could: (1) have saved about $6.1 million since fiscal year 1979 by better determining the minimum quantities necessary to maintain higher-priced suppliers as viable supply sources; and (2) determine the minimum award quantities necessary using data it already develops to ensure that suppliers remain viable.