SECNAV Del Toro to Hold Contractors Accountable for ‘Poor Performance and Misconduct’

February 15, 2024 8:52 PM - Updated: February 16, 2024 5:27 PM
Secretary of the Navy Carlos Del Toro speaks with Marines, sailors, and civilians from U.S. Army Garrison Stuttgart during a visit to U.S. Army Garrison Panzer Kaserne, Stuttgart, Jan. 22, 2024. US Marine Corps Photo

SAN DIEGO – Secretary of Navy Carlos Del Toro took a hard line with Department of the Navy suppliers, promising a campaign of accountability actions for contractors that could target individuals.

Speaking at the WEST 2024 conference, co-hosted by the U.S. Naval Institute and AFCEA, Del Toro chided contracts for a culture that values profits instead of infrastructure-building.

“You can’t be asking for the American taxpayer to make greater public investments while you continue to goose your stock prices through stock buybacks, deferring promised capital investments, and other accounting maneuvers that – to some – seem to prioritize stock prices that drive executive compensation rather than making the needed, fundamental investments in the industrial base at a time when our nation needs us to be all ahead flank,” Del Toro.
“We need to work together, government and industry, to develop the shipbuilding industrial base.”

Apart from the admonition on culture, Del Toro said the Department of the Navy would empower its Office of the Counsel – led by John Coffey – to seek out contractors “for poor performance and misconduct.”

“I’ve directed a deep dive into holding individuals accountable for chronic poor performance or misconduct as well. Not just to hold personnel responsible for their own actions, but to deter those who even consider taking similar actions,” Del Toro said.
“Through initiatives like the Taxpayer Advocacy Project, I have directed our contract community and Office of General Counsel to ensure that we will leverage all legal means at our disposal to ensure that the American people are getting what they paid for.”

Del Toro did not mention specific companies, give specifics on the scope of the effort and the consequences of the investigations, nor did he speak with reporters after the speech. A request for more information and clarification from the Navy was acknowledged, but not immediately answered.

Del Toro’s remarks come several weeks after shipbuilder HII upped its future buyback authority by $600 million.

“This action demonstrates continued confidence in HII’s free cash flow generation and supports our commitment to return free cash flow to our shareholders,” Chris Kastner, HII’s chief executive officer, said in a Jan. 31 company news release.

In announcing its 2023 financial results last month, General Dynamics said it bought back $434 million of shares last year.

Del Toro’s comments come as the shipbuilding industry is struggling with industrial issues, including supply chain gaps and workforce shortages.

In particular, General Dynamics Electric Boat and HII’s Newport News Shipbuilding are delivering Virginia-class attack boats at 1.3 submarines per year, short of the 2.33 needed to meet the goal of supporting the U.S. commitment to the AUKUS agreement with the U.K. and Australia.

Last month, USNI News reported that Fincantieri Marinette Marine would deliver the first Constellation-class guided-missile frigate (FFG-62) a year late.

Del Toro addressed delivery delays in general during his address.

“I need you to deliver platforms and capabilities on time and on budget without excuses,” he said. “Yes, COVID had a negative impact on the supply chain, but we need to move beyond that now.”

Sam LaGrone and Mallory Shelbourne

Mallory Shelbourne and Sam LaGrone are USNI News staff writers.

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