Summary: In August 1976 the Navy awarded a $153 million contract to Avondale Shipyards, Inc., to construct two auxiliary oilers, and in January 1977 exercised an option for a third oiler at a cost of $63 million. By August 1977, 54 changes to the contract had been proposed, and Avondale had submitted proposals for changes exceeding $5 million.
An examination of six of these changes showed that four resulted from defective specifications, plans, and data provided by the Navy. The other two resulted from basic design changes that the Navy was considering at the time the contract was awarded. According to cognizant Navy personnel, the defects were not identified before contract award because oiler design was not as extensively reviewed as higher priority combat ships. The Navy issued a request for proposal in August 1977 for construction of two additional oilers and since this time has issued four amendments and taken corrective action on design defects. The critical potential risk areas are those where the shipbuilder translates the contract specifications and preliminary drawings into detailed drawings and specifications. As of September 30, 1977, about 60% of basic design drawing work was complete in three areas, but a great deal of design work remains for six other areas. Although the Navy believes that there were no high-risk areas remaining in the major ship systems, GAO questioned whether the overall risk of additional major problems was low enough to warrant proceeding with the proposed procurement.
