Navy Maintenance

Improved Labor Estimates Can Reduce Shipyard Costs Gao ID: NSIAD-93-199 July 22, 1993

Navy reviews done between 1989 and 1991 and later GAO tests found that labor estimates for ship repairs often were overstated. In addition to increasing repair prices, overstated labor estimates caused the reporting of erroneous labor efficiency data. Without accurate labor efficiency data, managers could not measure labor performance and identify areas needing attention. This problem arose because shipyard planners did not always follow estimating policies, internal controls were absent, and labor standards were not always current to help planners prepare accurate estimates. The shipyards did devote considerable effort to implementing labor-saving improvements, such as more efficient production methods and equipment. The benefits from these improvements, however, were not always incorporated into labor estimates for repairs because planners were not told of new processes and equipment. Consequently, labor savings stemming from improvements often were not reflected in reduced benchmarks for efficiency measurement or in lower repair prices.

GAO found that: (1) shipyard planners overestimate labor 3 to 23 percent per ship, which causes overstated repair prices, erroneous labor efficiency data, and overstaffing; (2) excessive labor estimates are caused by planners not consistently applying estimating policies and procedures, the lack of internal controls to ensure that labor estimates are properly developed and supported, and the failure to keep labor standards current; (3) the Naval Sea Systems Command (NAVSEA) has not fully implemented its initiatives to correct the problems; (4) although the shipyards have identified and implemented labor-saving and equipment improvements, the Navy does not ensure that the benefits from the improvements are incorporated into ship repair planning; (5) planners often base labor estimates on processes and equipment no longer used; and (6) the shipyards do not update labor standards to reflect new labor processes and equipment.

Recommendations

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