Navy Shipbuilding: Need to Document Rationale for the Use of Fixed-Price Incentive Contracts and Study Effectiveness of Added Incentives

Abstract

DOD encourages the use of FPI contracts because they allow for equitable sharing of costs savings and risk with the shipbuilder. Under FPI contracts, the shipbuilders ability to earn a profit or a fee is tied to performance. After costs reach the agreed upon target cost, the shipbuilders profit decreases in relation to the increasing costs. A ceiling price fixes the governments maximum liability. A House Report on the Fiscal Year 2014 National Defense Authorization Act included a provision for GAO to examine the Navys use of FPI contracts for shipbuilding. This report examines (1) the extent to which the Navy has entered into FPI contracts over the past 10 years, (2) how FPI contracts apportion risk between the Navy and the shipbuilder, and (3) the extent to which FPI contracts led to desired cost outcomes. GAO selected a non-generalizable sample of six contracts (for 40 ships) awarded during the past 10 years, analyzed Navy contract documents, and interviewed program, contract, and shipbuilding officials. This is the public version of a sensitive but unclassified report issued in November 2016.

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Document Details

Document Type
Technical Report
Publication Date
Mar 01, 2017
Accession Number
AD1028372

Entities

Organizations

  • United States Government Accountability Office

Tags

Communities of Interest

  • Ground and Sea Platforms

DTIC Thesaurus Topics

  • Arleigh Burke Class
  • Boats
  • Congress
  • Contractors
  • Contracts
  • Department Of Defense
  • Destroyers
  • Guided Missiles
  • Littoral Combat Ships
  • Navy
  • Procurement
  • Submarines
  • United States
  • United States Government
  • Uss Arleigh Burke
  • Uss Rafael Peralta
  • Virginia Class

Readers

  • Defense Acquisition Program Management
  • Economics
  • Naval Engineering and Maritime Security