Navy Contracting

In response to a congressional request, GAO reviewed allegations concerning mismanagement and questionable practices in the Trident submarine construction program, specifically: (1) excessive progress payments in submarine construction; (2) advance procurement of long-lead-time material; (3) unwarranted cost escalation on the lead Trident; (4) destruction of Navy records; (5) inappropriate task authorization and funding of engineering services contracts; (6) elimination of a financial monitoring procedure; and (7) violations of standards of conduct.

GAO found that: (1) the contractor inflated contruction progress reports to qualify for more early progress payments; (2) the contractor's budgeting practices raised questions about the accuracy of data and reports it submitted to the Navy; (3) a Navy contracting practice provides, through special clauses in some submarine contracts, additional progress payments, which are normally paid under standard payment clauses; (4) there were increases in funding for advance procurement for long-lead-time material for Trident submarines; (5) a general records disposal effort did not eliminate specified documentation; (6) an increase in escalation authorization in October 1981 for the lead Trident submarine did not result in any additional payment to the contractor; (7) the official who issued the transaction on an engineering services contract had the authority to approve and issue task assignments; (8) the Navy utilizes a contract-required cost report to enable it to financially monitor contract tasking; and (9) the Navy did not violate any laws when it purchased a used boat at fair market value from the contractor.