Navy Contracting

Pursuant to a congressional request, GAO reviewed the Military Sealift Command's (MSC) chartering practices, focusing on: (1) the status of two protested tanker charters to replace one carrier's ships; (2) whether MSC considered special features on the carrier's ships during proposal evaluation which might improve their military usefulness; (3) whether MSC considered the possibility of the carrier defaulting on government loans when it awarded the charters to other companies; and (4) MSC chartering policies.

GAO found that: (1) the carrier originally constructed the ships for MSC to charter them; (2) the carrier successfully protested to GAO, but MSC cancelled the charters because of insufficient funding; (3) MSC subsequently reinstated the charters and requested new offers from the competing carriers, but the awardee believed that MSC had no legal basis for cancelling the awarded contract; (4) consideration of military ship features in awarding charters should be left to MSC, as the procuring agency; (5) the Maritime Administration believed that MSC should consider government loan defaults in the award process, since the carrier's vessels were uniquely designed for military use and were not otherwise commercially useful; and (6) overall, MSC was properly awarding time and spot charters.