GAO: Navy pays for builders’ defects

WASHINGTON – A General Accountability Office report claims the Navy’s use of fixed-price incentive contracts are profiting ship-building companies to fix their on construction mistakes. “The shipbuilder earns the same level of profit for correcting defects as it does for building the ship,” the GAO report claimed, despite contract guarantees to the contrary. Additionally, according to GAO, “the award of follow-on, cost-reimbursement arrangements to correct remaining defects – under which the contractor also (profits) - creates an apparent disincentive for quality ship construction.” Shipbuilders paid 11 percent of the cost to fix five of six ships in the study, GAO said, while the government picked up the tab on 89 percent. GAO praised the Coast Guard for its use of warranties on the Fast Response Cutter (FRC) program where shipbuilders bore the brunt of the costs – 59 percent. (Source: Defense News 03/03/16. View the GAO report) Gulf Coast Maritime Note: Among the GAO’s six-ship contracts studied were three Gulf Coast shipbuilders: Amphibious transport dock Somerset (LPD 25) delivered from Ingalls Shipbuilding in Pascagoula, Miss., in 2013; Littoral Combat Ship Coronado (LCS 4) delivered by Austal USA of Mobile, Ala. in 2013; CG National Security Cutter Hamilton (WMSL 753) delivered by Ingalls in 2014; and the CG Fast Response Cutter Paul Clark delivered in 2013 from Bollinger (La.) Shipbuilding. None of the ships were first in their class, which initially have more defects and cost more than follow-on ships.