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B-133170 1 (1972-03-15)

handle is hein.gao/gaobaagnu0001 and id is 1 raw text is: COMTROLLZ ( NRALFTHrU 1!TCD STA 1 0LM096638 AR 15 i72 Dear Mr. Chairman: ... .... - Pursuant to our letter to you of June 16, 1971, and in continuation of our evaluation of the disposition of ship- builders' claims for price increases on contracts awarded by I I the Department of the Navy, we haveexamined into the circum- stances surrounding the initiation, evaT-uti0n, and sIettle- '5 ment of five consolidated-claims made by the Lockheed Ship-- buildin -and Construction Company. The claims amounted to c// $40.9 million as of August 22, 1969, and this amount was eval- uated by Navy technical personnel. Subsequent to August 22, 1969, Lockheed informally revised 'the claims, which increased the total to $46.3 million. In May 1970 the Navy negotiated a settlement in the amount of $17.9 million. The enclosure to this letter contains information on five Lockheed contracts, including the types of vessels in- volved, contract prices, delivery dates, and claim settlement amounts. The contracts were awarded on a fixed-price basis in the total amount of $83.5 million. The final amount paid, however, including additional amounts for escalation clauses, change orders, and claim settlements, was about $121 million. LOCKHEED'S DEVELOPMENT OF CONSOLIDATED CLAIMS A company official advised us that Lockheed, upon real- izing that it was getting into a serious loss position on its Navy contracts, decided in 1966 to develop claims and to sub- mit them to the Naby for the recovery of additional costs. Lockheed believed that the losses had been cau-sed by actions for which the Government was at fault. During 1967 Lockheed established a team to develop claims for reimbursement of costs above those normally resulting from formal change or- ders or other written directions from the Navy. The claims were based on a number of underlying causes, such as late and defective Government-furnished material, de- fective or impossible Government specifications, late and de- fective lead-yard plans (working plans and other design data prepared by the contractor that had constructed the first ship BEST DOCUMENT AVAILABLE

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