Navy Maintenance

Competition between public and private shipyards has been the subject of considerable debate during the past 10 years. Legislation enacted since 1985 has tried to increase competition between the two sectors for defense maintenance work and ensure that the competitions are fair to both sectors. This report assesses the results of these competitions and analyzes related issues, such as the costs included in competitive bids and factors considered in the bid evaluation process. GAO also includes background information on the Navy's public-private competition programs for surface ships and submarine repair.

GAO found that: (1) public shipyards are not competitive with private shipyards for ship maintenance and modernization services; (2) since 1988, public shipyards have won less than 14 percent of the competitively-procured surface ship contracts; (3) nuclear-capable public shipyards have not been awarded any of the 17 surface ship repair contracts that have been solicited since the inception of the competition program; (4) private shipyards have won 89 percent of the submarine repair competitions since fiscal year 1993; (5) public shipyards are not competitive with private-sector shipyards because they are required to include proportional overhead costs in their bids, their bids are not evaluated for cost realism, and they are required to submit full-cost bids; (6) private shipyards have a significant competitive advantage because they are allowed to submit below-cost bids as long as they are found to be responsible; (7) public shipyards are able to perform submarine repair work more cost-effectively than private-sector shipyards; (8) although the Navy's public-private competition program has been useful in improving the efficiency of public shipyards and decreasing the cost of depot maintenance work, the program may not be cost-effective or viable in the current economic environment; and (9) although there are no compelling reasons to discontinue the public-private competition program, many issues related to program implementation and work allocation need to be resolved.