Navy Shipbuilding

Cost and Schedule Problems on the DDG-51 AEGIS Destroyer Program Gao ID: T-NSIAD-90-14 January 24, 1990

GAO discussed the cost and schedule status of the DDG-51 class Arleigh Burke guided missile destroyer. GAO found that: (1) the contractor for the lead ship encountered design and construction problems which resulted in contract requirements changes and substantial cost increases, and delayed the expected delivery schedule by 17 months; (2) although the contractor estimated that about 50 percent of the lead ship was completed, it still had to install, integrate, and test the combat system and other technical components; (3) because the Navy has already awarded contracts for the seven follow ships, it could have as many as 17 ships under construction before delivery of the lead ship; (4) the Navy expected the design costs to more than double from the original contract costs of $111 million, to $247 million, and construction costs to grow more than 60 percent, from $157 million to $253 million; (5) the Navy modified the contract to resolve outstanding contractual issues, which could increase Navy compensation as much as $71.7 million and eliminate the contractor's projected losses; and (6) the modification could establish an inappropriate precedent, since many of the Navy's fixed-price-incentive shipbuilding contracts experienced cost overruns. GAO believes that the Department of Defense should either provide assurances on the development and affordability of the DDG-51 program or delay award of the additional follow ships.

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