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Comparing Working-Capital Funding and Mission Funding for Naval Shipyards: An Interim Report

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The Navy currently owns and manages four shipyards the Norfolk Naval Shipyard in Portsmouth, Virginia the Portsmouth Naval Shipyard in Kittery, Maine the Puget Sound Naval Shipyard in Bremerton, Washington and the Pearl Harbor Naval Shipyard in Pearl Harbor, Hawaii. Each of those facilities operates under one of two distinct financial systems. The Norfolk and Portsmouth shipyards are financed through the Navy Working Capital Fund NWCF, a revolving-fund mechanism under which Navy units pay for maintenance and repair services at a shipyard out of their appropriated funds, at prices that are intended to cover the shipyards full operating costs. The Puget Sound and Pearl Harbor shipyards, which had been under the NWCF, are now funded through direct appropriations, an approach known as mission funding. Naval shipyards have operated under some form of revolving-fund financial system for decades. As part of the Navys ongoing Regional Maintenance Plan, however, Pearl Harbor was shifted from working-capital funding to mission funding on October 1, 1998, and Puget Sound on October 1, 2003. The Navy intends to move the Norfolk and Portsmouth shipyards to mission funding at the earliest possible date. At the request of the House Committee on Armed Services, the Congressional Budget Office CBO is studying the advantages and disadvantages of working-capital funding and mission funding in general and as they apply to naval shipyards in particular. Critics have expressed concern that mission funding makes shipyards costs and operations less visible and reduces shipyards ability to obtain capital to replace equipment and make improvements. This document is an interim report on CBOs study. The Navy continues to respond to requests for information and data on the costs and operations of the shipyards. Once CBO has that information and data, it will be able to more fully address all of the issues associated with shipyard funding mechanisms, which will be incorporated into a fin

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  • Economics and Cost Analysis
  • Marine Engineering

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