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B-154258 1 (1974-04-03)

handle is hein.gao/gaobaafry0001 and id is 1 raw text is: Y COMPTROLLER GENERAL OF THE UN/T// - WASHINGTON. D.C. 20548 B-154258 APR 3 1974 The Honorable Les Asp in ~House of Representatives LM095925 Dear Mr. Aspin: Your letter of October 2, 1973, asked us to examine the cost growth on the Department of the Navy's .2gcont with the - Newport News Shipbuilding and Dry Dock Company, Newport News, Virginia, for the Nimitz and Eisenhower aircraft carriers (CVANs 68 and 69). This cost growth, appearing in the Selected Acquisition Report (SAR), was projected at $56 mil- lion. You noted that this amount included a $28 million increase in overhead and a $5 million increase related to other variables; you specifically asked us to determine (1) what items were considered overhead, (2) what caused the overhead increase, (3) whether charging this contract with increased overhead was justified, and (4) what the other variables were and whether they too were a proper c!arge to the contract. A Navy audit, late in 1973, projected a cost growth of $75.2 million at MIarch 31, 1973, of which $64.1 million was overhead. As agreed with your office, we are addressing the $75.2 million cost growth rather than the $56 million figure cited above. It should also be noted that the contractor, in its September 1973 quarterly report to the project manager, projected a cost growth (before adjustment of the incentive fee) of about $40 million greater than that projected by the Navy auditors. This difference is largely the result of (1) differences in the method used to project direct labor, in- cluding applicable overhead, accountinq. for 29 million, (2) overhead charges which the Navy anticipated would be dis- allowed in subsequent Government audits, accounting for another $2 million, and (3) differences in projected mate- rial cost, accounting for $9 millioo. In view of the considerable audit wnrk done by both the Defense Contract Audit Agency Ilud the Navy iii each of BEST MIT MVA!LAULE

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