Torpedo Procurement

In response to a congressional request, GAO reviewed the Navy's procurement of MK-50 torpedo propulsion components, to determine: (1) whether the Navy would save money if it procured the propulsion components separately and provided them to the prime contractor as government-furnished equipment (GFE); (2) when the Navy should implement such a strategy; and (3) whether providing prime contractors with the components would affect the torpedo warranty.

GAO found that: (1) although it would be possible to test an alternative procurement strategy before full-rate production, such a substantive change could delay production with no assurance of cost savings; (2) the Navy believed that its procurement strategy was the most cost-effective, since the prime contractors would buy parts from their suppliers, the Navy would procure the spare parts separately, and technology transfer was expected to continue through initial production; (3) the component suppliers would have to warrant components supplied as GFE, but the prime contractors would have to warrant installation and modification of GFE; and (4) the most appropriate time for the Navy to choose a procurement strategy would be the beginning of competition for full-rate production.