The U.S. Government Accountability Office (GAO) has released a report, Navy Surface Ships: Maintenance Funds and Actions Needed to Address Ongoing Challenges (GAO-25-106990), which examines how the Navy develops its sustainment budget for combat surface ships, the funds requested and expended from fiscal years 2020 to 2023, and the long-standing maintenance challenges these ships continue to face. The findings highlight the persistent obstacles confronting Navy surface ship maintenance and their implications for operational readiness, workforce sustainability, and the broader defense contracting industry.

The report underscores that the Navy requested approximately $24.9 billion for surface ship maintenance between 2020 and 2023, with Congress appropriating nearly $25.9 billion—about $1 billion more than requested. Of this, approximately $25.8 billion was obligated, meaning the funds were committed to maintenance contracts and projects. Despite these significant investments, the GAO report reveals that expended funds—actual payments made—fell short of the obligated amounts by about $5.8 billion, a common occurrence in government budgeting due to the lag between obligation and actual expenditure. However, this gap raises concerns about how effectively funds are being utilized to sustain fleet readiness.

A critical issue highlighted in the report is the Navy’s ongoing struggle with spare parts shortages. Nearly three-quarters of executive officers surveyed indicated that it was moderately to extremely difficult to complete sailor-led maintenance due to a lack of available parts. In response, the Navy has introduced the Endurance Supply initiative, designed to improve operational resilience by ensuring critical systems have adequate spare parts to sustain operations, even in conflict scenarios where resupply may be disrupted. Yet, previous GAO reports indicate that the Navy has been slow to implement recommendations aimed at addressing systemic deficiencies in spare parts management, further exacerbating maintenance delays.

Personnel shortages compound the Navy’s maintenance challenges. The GAO found that the Navy consistently assigns fewer sailors than required to ships, limiting their ability to perform necessary repairs. A lack of trained maintenance personnel at both shipyards and aboard ships has contributed to longer maintenance periods and increased reliance on private contractors for ship sustainment. Despite efforts to improve recruitment and retention, including a request to the Office of Personnel Management for higher compensation for shipyard workers, the Navy has struggled to close the workforce gap. This situation presents an opportunity for federal contractors specializing in ship maintenance and workforce training programs to support the Navy in mitigating these challenges.

Deferred maintenance remains a pressing concern. The GAO found that in 2021, the Navy’s backlog of deferred maintenance for surface ships alone reached $1.7 billion, rising to $2.3 billion in 2022 before declining slightly to $2 billion in 2023. Deferred maintenance can significantly impact fleet readiness, leading to costlier repairs, reduced ship service life, and diminished operational capabilities. The GAO previously recommended that the Navy publish annual reports detailing the estimated risks and costs associated with deferred maintenance, but many of these recommendations remain unimplemented. The Navy has acknowledged the issue and is working on updating maintenance prioritization guidelines, but without systemic reform, the backlog will likely continue to grow.

For federal contractors, the findings in the GAO report signal both challenges and opportunities. The report highlights the increasing reliance on private sector partners to supplement government-owned shipyards, particularly through procurement-funded maintenance at privately owned facilities. This shift aligns with broader trends in defense acquisition, where public-private partnerships are playing a more prominent role in sustaining military assets. Contractors with expertise in ship repair, maintenance workforce training, and supply chain management may find expanding opportunities within Navy sustainment programs.

However, navigating these opportunities requires an understanding of the Navy’s budgeting and execution processes. The report outlines the four key components of the Navy’s maintenance budget cycle: budget development, budget submission to Congress, execution (obligation and expenditure of funds), and results reporting. Contractors seeking to position themselves effectively within the Navy’s maintenance ecosystem must align their capabilities with these budget cycles and anticipate shifts in funding priorities. Additionally, given the Navy’s history of budget reprogramming to address emergent needs—such as increased fuel costs or maintenance for next-to-deploy ships—contractors must remain agile in responding to shifting requirements.

The GAO report also serves as a reminder of the importance of transparency and accountability in federal contracting. The report details numerous unimplemented GAO recommendations aimed at improving the Navy’s maintenance practices, including better tracking of spare parts, workforce planning, and deferred maintenance reporting. Contractors working with the Navy must be prepared for increased scrutiny regarding contract performance and execution. Firms that proactively adopt best practices in sustainment planning, data tracking, and compliance with federal oversight requirements will be better positioned to secure long-term contracts.

Overall, the GAO’s findings reinforce the need for a more strategic and responsive approach to Navy surface ship maintenance. While funding has been robust, persistent challenges in personnel, spare parts availability, and deferred maintenance continue to hinder operational readiness. Federal contractors have an opportunity to play a crucial role in addressing these gaps, but success will require a deep understanding of the Navy’s budgeting and execution processes, as well as a commitment to operational efficiency and accountability.

This blog post is based on Navy Surface Ships: Maintenance Funds and Actions Needed to Address Ongoing Challenges (GAO-25-106990), published by the U.S. Government Accountability Office. The information provided is for general informational purposes only and does not constitute legal or financial advice. Accuracy is not guaranteed, and readers should refer to the original GAO report for full details.