Summary: Pursuant to a congressional request, GAO reviewed the Navy's efforts to address an anonymous source's allegations of improper charges and other contractual issues at the Bath Iron Works Corporation (BIW), a Navy shipbuilding contractor.
GAO found that: (1) the Navy's oversight of BIW contracts was ineffective and contributed directly to the improper charges and problems found; (2) the Navy inadequately reviewed allegations regarding cruiser program mischarges, charges for ripout and rework on cruisers that did not occur, and questionable pricing and negotiation of destroyer contract modifications; (3) the Navy did not resolve contractual disputes for over 2 years and maintained no data on ripout and rework BIW actually performed in the construction of cruisers; (4) BIW improperly charged some costs to a cost-reimbursable contract rather than a fixed-price contract; (5) BIW incorrectly charged engineering labor hours to the destroyer-service instead of the destroyer-construction contract, costing the Navy about $2.5 million; (6) Navy investigations reported that improper charges were due to mistaken interpretations of contract requirements; (7) BIW records lacked sufficient detail to accurately audit whether labor charges were proper; (8) the Navy had difficultly quantifying the adjustment due BIW, as BIW presented no evidence of its attempt to quantify the adjustment to which it believed it was entitled; (9) the Navy was responsible for ensuring that the ultimate impact of the restructuring was fair and reasonable, but there is no documentation to illustrate how the Navy decided to increase payments by about $37 million; and (10) the Naval Inspector General's investigative reports had significant factual errors and misleading statements and no supporting working papers.
