Navy Maintenance

In response to a congressional request, GAO reviewed: (1) the estimated and actual costs to overhaul Navy ships at private shipyards; (2) selected contract modifications to determine their effect on contract costs; (3) the size of price increases in fixed-priced contracts in contrast with those in cost-type contracts; and (4) Navy policies for geographically distributing the work.

GAO found that: (1) overhaul costs increased 63 percent on the fixed-price contracts and 30 percent on the cost-type contracts it reviewed between the times of contract award and contract completion; (2) 71 of the 75 fixed-price contracts were awarded at prices 31 percent below the government estimates; (3) 24 of the 30 cost-type contracts were awarded at prices 21 percent below the government's estimates; (4) increased contract costs were the result of modifications for growth and new work; (5) the Navy paid more than the government's estimated cost for modifications for 25 fixed-price contracts due to sole-source procurement, overtime payments, and contractor reimbursement for delays and disruptions caused by the modifications; (6) the Navy has changed its policy governing the geographic distribution of overhaul work to require the completion of regular overhauls and other major planned maintenance actions coastwide, while minor maintenance actions can continue to be done in the homeport area; and (7) this policy change may not have a significant impact because the Navy has been decreasing the number of regular overhauls and increasing the number of short, labor-intensive maintenance actions.