On the Money

Profiting from the Navy

Admiral Hyman Rickover may be in retirement, but his torpedo-like salvos against shipbuilders who rip off American taxpayers are still exploding. About six months before he finally left the Navy in January 1982 after 59 years of cantankerous service, Rickover, now 83, blasted four contractors in particular for making what he called "excessive profits" on their work for the Navy. A House committee asked the General Accounting Office, which is the investigative arm of Congress, to find out whether Rickover was right.

Last week a GAO report declared that the admiral's numbers were essentially on target. Not even the contractors seriously disputed his statistics. The GAO's only quibble was that it could not flatly call the profits "excessive" because "there are no generally accepted criteria as to what constitutes excess profits." The four in stances cited by Rickover and verified by the GAO:

> Boston's Cabot Corp. had supplied special material used in making large valves for nuclear-propelled ships. Rickover had claimed that the firm made a 66% profit on this contract. The GAO estimate was only slightly lower, 61.3%.

> Pittsburgh's U:S. Steel Corp. had supplied high-pressure air flasks for Trident submarines under contracts that carried built-in profits of between 27% and 38%, according to both Rickover and the GAO.

> New York State's Carborundum Co. had sold the chemical boron carbide to two prime contractors that were building nuclear reactor cores. Rickover said the company had made a 25% profit on these sales. The GAO agreed.

> Virginia's Newport News Shipbuilding & Dry Dock Co. had done repair work on seven nuclear-powered attack submarines. The GAO agreed with Rickover that the company's profits had reached as high as 37% on one job and averaged 21.7% for all seven.

The companies insisted that special factors, such as stringent Government specifications and inspections and the heavy investment required to produce items in limited demand, had justified their high return. Rickover had contended that a 1934 law that limits profits on renegotiated Government contracts to 10% for ships, but that does not cover various supplies, was a proper gauge of a generous profit.

Navy Secretary John Lehman suggested that both Rickover and the GAO were wrong. "This Administration disagrees with Admiral Rickover's idea that there is something wicked about profits," he said. "We want our contractors to make a nice solid profit." This file is automatically generated by a robot program, so viewer discretion is required.