Navy Payments for Katrina Loss Questioned

From the Washington Post - Navy Payments for Katrina Loss Questioned

WASHINGTON -- A Navy plan to pay Gulf Coast shipbuilders about $1.7 billion for losses related to damages and construction delays from Hurricane Katrina may overstate the actual costs and could dampen efforts to collect insurance payments, according to a Congressional report.

The nonpartisan Congressional Research Service said Northrop Grumman may be able to collect insurance claims for future increased costs related to labor and overhead. If the government pays now, the report said, the company will have little incentive to negotiate with insurers for those payments.

The Northrop Grumman shipyards in question seem to include those with a recent record of poor performance as I noted here and CDR. Salamander noted here and here. The amounts requested appear to have been all over the place - from the same article:

Navy Assistant Secretary John Young initially requested $2.7 billion to restore the shipyards, replace lost material and get workers back on the job. The Pentagon later asked for a total of $6.6 billion, including $2 billion for shipbuilding. Congress cut the Defense Department funding back to about $5.8 billion in the bill.

The congressional researchers took issue with the Navy's argument that the money is needed immediately, and suggested the government should wait for more accurate cost estimates. Delaying the request, the report said, could also allow insurance negotiations to proceed.

Could the billions requested be to prop up failed shipyards and shipbuilding programs in the form of economic relief that insurance will pay a fair portion of anyway?