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Excess Navy Ships Sold to Foreign Countries at Understated Prices

NSIAD-84-7 Published: Apr 12, 1984. Publicly Released: Apr 12, 1984.
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Highlights

GAO reviewed Navy policies and procedures for selling excess ships to foreign countries.

Recommendations

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Secretary of Defense should require the Secretary of the Navy to adhere to the established pricing instructions, which require pricing ships at the higher of fair value or scrap value. Specifically, when computing the sale prices for ships being sold to foreign countries, the Navy should include conversion costs to determine fair value.
Closed – Implemented
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Defense The Secretary of Defense should require the Secretary of the Navy to provide Congress, for ship sales which require specific legislation because they are less than 20 years old or over 3,000 tons, with information on: (1) a proposed sale price based on the higher of scrap or fair value; and (2) Navy proposals to sell a ship for less than this amount, how the amount was calculated, and the justification for the proposed sale price.
Closed – Not Implemented
DOD stated that the procedures by which ships are priced for specific legislation are already subject to review by four congressional committees. The Navy, in seeking legislation authorization to sell ships, should specifically disclose to Congress either that the proposed sales price is the higher of scrap or fair value or provide the rationale for the sale price.
Department of Defense The Secretary of Defense should direct the Secretary of the Navy to revise pricing guidance to require that the Board of Inspection and Survey, in addition to determining whether a ship is fit or unfit for further U.S. Navy service, also determine the overall condition of the ship.
Closed – Implemented
The Navy has prepared draft instructions which address this issue, but has not yet formally issued the instructions.
Department of Defense The Secretary of Defense should direct the Secretary of the Navy to revise pricing guidance to require that the Chief of Naval Operations use the fitness of a ship in deciding what fair value rate to apply in computing the fair value price.
Closed – Implemented
When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Department of Defense The Secretary of Defense should direct the Secretary of the Navy to revise pricing guidance to require that ship overall costs be prorated based on their recommended schedule for overhaul and such prorated costs be included in the sale price.
Closed – Not Implemented
DOD will not change its policy; however, Navy stated that recent overhaul costs will be included in sales prices.

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Topics

Foreign military assistanceForeign military salesInternational relationsMilitary vesselsStatutory lawMilitary forcesShipsNavy shipsNaval operationsExport control