GAO reports on Navy ship repair contracting strategy

NOVEMBER 22, 2016 — In 2015 the U.S. Navy introduced a new contracting strategy for ship repair, called Multiple Award Contract, Multi Order (MAC-MO).

A report to Congress by the GAO finds the MAC-MO strategy offers a number of potential benefits compared to the former Multi Ship, Multi-Option (MSMO) contracting strategy, including increased competition.

A key difference is that the MAC-MO strategy intends to control costs through the use of firm-fixed price contracts and the use of third-party planners, which could be cost-effective if the planner produces clearly defined work specifications for the repair contractor to price and execute.

Prior to implementation of the new strategy, the Navy conducted market research and pilot-tested attributes of the strategy with pilot maintenance periods for a number of ships.

The Navy recognized several lessons learned from its pilot maintenance periods and has made subsequent process changes to address key lessons and support MAC-MO. These include a longer time frame for the planning process for finalizing work requirements. According to the Navy, this additional time is needed to promote stable requirements and, therefore, pricing.

The Navy is assessing outcomes of individual maintenance periods; however, says GAO, it lacks a systematic process involving the fleet- and shore-based maintenance communities to assess overall implementation of MAC-MO. This is inconsistent with federal standards for internal control, which state that management should evaluate its response to risks and evaluate progress made toward program objectives.

Not ensuring progress is systematically assessed—particularly in light of the many stakeholders involved—could undermine the Navy’s ability to obtain the improved outcomes it seeks with the MAC-MO strategy.

The MAC-MO strategy will increase competition opportunities and set aside work for small businesses, but, says GAO, it is too soon to determine how these changes will impact the ship repair industrial base. Industry viewpoints GAO collected on MAC-MO varied both by shipyard location and contractor size. However, former MSMO contract holders reported that the uncertainty associated with the need to continually compete for work could result in decisions to reduce their workforce and facilities. Small businesses GAO spoke with have in the past mostly performed work as subcontractors to MSMO contract holders, but many expressed interest in competing as prime contractors under MAC-MO.

GAO recommends the Navy assign responsibility to a single entity to systematically assess implementation of the MAC-MO strategy. DOD agreed with GAO’s recommended action and plans to report biennially on strategy implementation.

Read the report HERE

http://www.gao.gov/assets/690/681175.pdf