Summary

GAO presented its fifth report on the status of two submarine contracts that were awarded to the General Dynamics Corporation and were modified in 1978. The report covers the period from December 27, 1981, through July 2, 1983.

GAO found that, as of July 2, 1983: (1) the funds provided under the claims settlement with the shipbuilding firm were being used only on the specified contracts; (2) the Electric Boat Division of General Dynamics continued to project an overall loss, and the firm had written off losses on these contracts since the claims settlement in June 1978 amounting to $487 million; (3) the firm had delivered 14 of the required 19 submarines under the contracts; and (4) the firm has overrun these contracts' ceiling prices by more than $100 million, presently is absorbing 100 percent of any cost overrun, and has absorbed 95 percent of the loss required by the claims settlement. Even with the losses on these two contracts, overall submarine construction at Electric Boat is profitable for General Dynamics.