Defense Acquisitions
Navy Faces Challenges Constructing the Aircraft Carrier Gerald R. Ford within Budget Gao ID: GAO-07-866 August 23, 2007The Navy is investing over $3 billion to develop technologies for a new type of aircraft carrier--the Ford class--and it expects to spend almost $11 billion to design and construct the USS Gerald R. Ford (CVN 78)--the lead ship of the class. New technologies are to improve the carrier's performance and reduce crew size. The Navy requested authorization of CVN 78 in its fiscal year 2008 budget. GAO was asked to assess the Navy's ability to meet its goals for developing the new carrier. Specifically, this report assesses (1) the extent to which technology development could affect the capability and construction of CVN 78, (2) the status of efforts to achieve design stability, and (3) the challenges to building CVN 78 within budget. To accomplish this, our work includes analysis of test reports, development schedules, and ship progress reviews; interviews with Navy and other officials; and examinations of cost estimates and our own past work.
Delays in technology development may lead to increases in CVN 78's planned construction costs and potential reductions in the ship's capability at delivery. CVN 78's success depends on on-time delivery and insertion of fully mature and operational technologies in order to manage construction costs and enhance ship capabilities. Technologies that are highly integrated into the construction sequence or provide vital capabilities for the ship to carry out its mission are the most critical in achieving this goal. While the Navy has mitigated the impact of some technologies, such as the nuclear propulsion and electric plant, three systems--the electromagnetic aircraft launch system (EMALS), the dual band radar, and the advanced arresting gear--have faced problems during development that may affect the ship's construction costs. The Navy has made significant progress in maturing the ship's design. With about 70 percent of the ship design complete, design appears on track to support the construction schedule. A structured design approach and a lengthy construction preparation contract have enabled the program to perform more work prior to construction than on previous carriers. The program, however, may face challenges completing more detailed phases of design because of the tight schedule remaining for development of the ship's critical technologies, which in turn could impede the design process--and construction--of CVN 78. Costs for CVN 78 will likely exceed the budget for several reasons. First, the Navy's cost estimate, which underpins the budget, is optimistic. For example, the Navy assumes that CVN 78 will be built with fewer labor hours than were needed for the previous two carriers. Second, the Navy's target cost for ship construction may not be achievable. The shipbuilder's initial cost estimate for construction was 22 percent higher than the Navy's cost target, which was based on the budget. Although the Navy and the shipbuilder are working on ways to reduce costs, the actual costs to build the ship will likely increase above the Navy's target. Third, the Navy's ability to manage issues that affect cost suffers from insufficient cost surveillance. Without effective cost surveillance, the Navy will not be able to identify early signs of cost growth and take necessary corrective action.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Team: Phone:GAO-07-866, Defense Acquisitions: Navy Faces Challenges Constructing the Aircraft Carrier Gerald R. Ford within Budget
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Report to the Ranking Minority Member, Subcommittee on Seapower and
Expeditionary Forces, Committee on Armed Services, House of
Representatives:
United States Government Accountability Office:
GAO:
August 2007:
Defense Acquisitions:
Navy Faces Challenges Constructing the Aircraft Carrier Gerald R. Ford
within Budget:
Defense Acquisitions: Challenges Constructing CVN 78 within Budget:
GAO-07-866:
GAO Highlights:
Highlights of GAO-07-866, a report to the Ranking Minority Member,
Subcommittee on Seapower and Expeditionary Forces, Committee on Armed
Services, House of Representatives.
Why GAO Did This Study:
The Navy is investing over
$3 billion to develop technologies for a new type of aircraft
carrier”the Ford class”and it expects to spend almost $11 billion to
design and construct the USS Gerald R. Ford (CVN 78)”the lead ship of
the class. New technologies are to improve the carrier‘s performance
and reduce crew size. The Navy requested authorization of CVN 78 in its
fiscal year 2008 budget. GAO was asked to assess the Navy‘s ability to
meet its goals for developing the new carrier. Specifically, this
report assesses (1) the extent to which technology development could
affect the capability and construction of CVN 78, (2) the status of
efforts to achieve design stability, and (3) the challenges to building
CVN 78 within budget. To accomplish this, our work includes analysis of
test reports, development schedules, and ship progress reviews;
interviews with Navy and other officials; and examinations of cost
estimates and our own past work.
What GAO Found:
Delays in technology development may lead to increases in CVN 78‘s
planned construction costs and potential reductions in the ship's
capability at delivery. CVN 78‘s success depends on on-time delivery
and insertion of fully mature and operational technologies in order to
manage construction costs and enhance ship capabilities. Technologies
that are highly integrated into the construction sequence or provide
vital capabilities for the ship to carry out its mission are the most
critical in achieving this goal. While the Navy has mitigated the
impact of some technologies, such as the nuclear propulsion and
electric plant, three systems”the electromagnetic aircraft launch
system (EMALS), the dual band radar, and the advanced arresting
gear”have faced problems during development that may affect the ship‘s
construction costs.
The Navy has made significant progress in maturing the ship‘s design.
With about 70 percent of the ship design complete, design appears on
track to support the construction schedule. A structured design
approach and a lengthy construction preparation contract have enabled
the program to perform more work prior to construction than on previous
carriers. The program, however, may face challenges completing more
detailed phases of design because of the tight schedule remaining for
development of the ship‘s critical technologies, which in turn could
impede the design process”and construction”of CVN 78.
Figure: Artist's Rendition of CVN 78:
[See PDF for image]
Source: Navy.
[End of figure]
Costs for CVN 78 will likely exceed the budget for several reasons.
First, the Navy‘s cost estimate, which underpins the budget, is
optimistic. For example, the Navy assumes that CVN 78 will be built
with fewer labor hours than were needed for the previous two carriers.
Second, the Navy‘s target cost for ship construction may not be
achievable. The shipbuilder‘s initial cost estimate for construction
was 22 percent higher than the Navy‘s cost target, which was based on
the budget. Although the Navy and the shipbuilder are working on ways
to reduce costs, the actual costs to build the ship will likely
increase above the Navy‘s target. Third, the Navy‘s ability to manage
issues that affect cost suffers from insufficient cost surveillance.
Without effective cost surveillance, the Navy will not be able to
identify early signs of cost growth and take necessary corrective
action.
What GAO Recommends:
GAO recommends that the Department of Defense (DOD) take actions to
improve the realism of CVN 78‘s budget estimate, improve the Navy‘s
cost surveillance capability, and schedule carrier-specific tests of
the dual band radar. DOD partially concurred with our recommendations.
This report also contains matters for congressional consideration to
ensure that CVN 78 is budgeted at the likely cost of the ship.
[hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-07-866].
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Paul Francis at (202) 512-
4841 or francisp@gao.gov.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Remaining Work on Key Technologies Poses Risks to Ship Cost and
Capability:
The Navy Has Made Significant Design Progress, but Sustained Progress
Depends on Technology Development:
Costs for CVN 78 Will Likely Exceed Budget:
Conclusions:
Recommendations for Executive Action:
Matters for Congressional Consideration:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: GAO Contact and Staff Acknowledgments:
Tables:
Table 1: Major Events in the Development of Future Aircraft Carriers:
Table 2: CVN 78 Critical Technologies:
Table 3: Extent of Potential Impact on the Construction Sequence:
Table 4: Critical Technologies' Impact on Ship Capability:
Table 5: Matrix of the Impact of Critical Technologies:
Table 6: Schedule of Key Events Relating to EMALS:
Table 7: Challenges Faced by the EMALS Program in Meeting Program
Requirements:
Table 8: Schedule of Key Events Relating to Dual Band Radar:
Table 9: Schedule of Key Events Relating to Advanced Arresting Gear:
Table 10: Other Technologies That Affect the Construction Sequence:
Table 11: Other Technologies That Affect CVN 78's Planned Capability:
Table 12: Design Progress by Location on Ship:
Table 13: Construction Labor Hour Change:
Figures:
Figure 1: CVN 78 Aircraft Carrier Currently in Development:
Figure 2: CVN 78's Budgeted Cost:
Figure 3: Product Model Design Process:
Figure 4: Ship Design Status as of April 2007:
Figure 5: Knowledge of Carrier Material Costs Prior to Construction
Contract Award:
Abbreviations:
DOD: Department of Defense:
DCAA: Defense Contract Audit Agency:
DCMA: Defense Contract Management Agency:
EMALS: electromagnetic aircraft launch system:
JPALS: joint precision approach and landing system:
NAVSEA: Naval Sea Systems Command:
SAR: Selected Acquisition Report:
SUPSHIP: Supervisor of Shipbuilding, Conversion and Repair:
United States Government Accountability Office:
Washington, DC 20548:
August 23, 2007:
The Honorable Roscoe G. Bartlett:
Ranking Minority Member:
Subcommittee on Seapower and Expeditionary Forces:
Committee on Armed Services:
House of Representatives:
The Navy is developing the Ford-class nuclear-powered aircraft carrier,
which will serve as the future centerpiece of the carrier strike group.
The Ford class is the successor to the Nimitz-class aircraft carrier
designed in the 1960s. Until the establishment of the future aircraft
carrier program, the Navy had not invested significantly in research
and development to incorporate leading edge technologies into current
carriers. The new carrier was designed to include a number of advanced
technologies in propulsion, aircraft launch and recovery, and weapons
handling. These technologies, along with an expanded and improved
flight deck, are designed to increase operational efficiency and enable
higher sortie rates while at the same time reducing manpower
requirements for the ship and air wing as compared with current
aircraft carriers. The Navy is investing over $3 billion to research
and develop technologies for the new class of carriers, and it expects
to spend almost $11 billion to design the class and construct the lead
ship, USS Gerald R. Ford (CVN 78).
The Navy requested authorization of CVN 78 as part of its fiscal year
2008 budget and plans to fund the carrier in fiscal years 2008 and
2009. Given the carrier's sizable investment and the Navy's long-
standing problem of cost growth on shipbuilding programs, you asked us
to assess the Navy's ability to meet its goals for developing the CVN
78 aircraft carrier. Specifically, we assessed (1) the extent to which
technology development could affect the capability and construction of
CVN 78, (2) the status of efforts to achieve design stability, and (3)
the challenges to building CVN 78 within budget.
To address the first objective, we developed a matrix based on the
degree to which CVN 78's technologies could have an impact on the
optimum capability and construction of the ship. We categorized
technologies based on our analysis of key program documents, including
test reports, development schedules, and ship progress reviews. To
supplement our analysis, we visited contractors and test sites where
the ship's major technologies are being developed and tested. To assess
the Navy's progress in achieving design stability, we examined the
ship's design requirements and analyzed design maturity metrics
captured in the shipbuilder's integrated master schedule. Finally, we
examined the ship's estimated costs and identified cost challenges by
examining the ship's budget; Navy, independent, and shipbuilder cost
estimates; ship progress reviews; defense contract audit reports; and
GAO's past work on shipbuilding cost growth. To address all of the
above objectives, we held discussions and attended briefings with
Department of Defense (DOD), Navy, and CVN 78 program officials, as
well as the shipbuilder and developers of CVN 78's critical
technologies. We conducted our analysis from July 2006 to June 2007 in
accordance with generally accepted government auditing standards.
Results in Brief:
As a result of a substantial investment of time and money, the Navy has
reduced the risks associated with a number of essential technologies,
including the nuclear propulsion and electric plant. At this time,
several technical risks that could lead to increased construction costs
and potentially result in capability reductions still remain. In
particular, the electromagnetic aircraft launch system (EMALS), the
advanced arresting gear, and the dual band radar face key tests with
little margin for resolving problems before they begin to disrupt the
optimal CVN 78 construction schedule and increase ship costs. If key
systems arrive late, more labor cost may be incurred because of
inefficient work-arounds and schedule delays. EMALS and the advanced
arresting gear are vital to meeting key capabilities and must be
delivered to the shipyard on time to maintain the construction
schedule. The dual band radar enables a smaller island structure on the
deck of the carrier, facilitating the ship's increased sortie
generation rate. All three systems have experienced schedule delays
because of technical and other challenges. Demanding tests lay ahead
for all three systems:
* In November 2007, the EMALS program will begin testing a production-
representative system, including a critical generator component that
will be field-tested for the first time.
* Land-based testing of a dual band radar prototype is expected to
begin in December 2008, but will not demonstrate full power output
critical to meeting requirements. Specific testing has not yet been
planned for all carrier-unique capabilities, including a number of air
traffic control scenarios.
* Testing of the advanced arresting gear, including, for the first
time, the software control system, is scheduled to begin in 2008.
The Navy has made significant progress in maturing the ship's design.
The shipbuilder has completed about 67 percent of the ship's design,
and design efforts are on track to support the construction schedule. A
structured design approach and a lengthy construction preparation
contract have enabled the program to perform more work prior to
construction than on previous carriers. The program, however, may face
challenges completing more detailed phases of design because of delays
in the development of the ship's critical technologies, which in turn
could impede the design process--and construction--of CVN 78.
Costs for CVN 78 will likely exceed the budget for several reasons.
First, the Navy's cost estimate that underpins the budget is
optimistic. For example, the Navy estimates that CVN 78 will be built
with fewer labor hours than were needed for the previous two carriers.
Second, the Navy's target cost for ship construction may not be
achievable. The Navy established a cost target for the shipbuilder
based on the budget. The shipbuilder's initial cost estimate for
construction was 22 percent higher than the Navy's cost target. The
Navy and the shipbuilder are working to reduce costs by incentivizing
capital improvements, removing noncritical capabilities to save costs,
and introducing other production efficiencies. However, experience on
other shipbuilding programs suggests that actual construction costs
will increase above the cost target as a result of labor inefficiencies
and late material deliveries. Third, the Navy may not have the
management tools necessary to identify and react to early signs of cost
growth because current contractor cost performance reports do not have
meaningful performance measurements, the Navy's on-site Supervisor of
Shipbuilding, Conversion and Repair (SUPSHIP) does not have an
independent cost surveillance capability. Given CVN 78's magnitude,
managing cost growth will be essential to the Navy's ability to execute
its 30-year shipbuilding plan. Decisions the Navy makes on CVN 78's
budget this year and next year will determine whether and to what
extent overruns will require offsets in the budgets for future fiscal
years.
We are making several recommendations to the Secretary of Defense aimed
at ensuring that the budget for CVN 78 is executable and at improving
technology development efforts. We are also making recommendations to
improve the Navy's management of shipyard performance and early
recognition of issues that may affect cost. DOD agreed with most of our
recommendations, but did not agree with all recommended actions aimed
at ensuring that the budget for CVN 78 is executable. Therefore, future
cost growth beyond the budget remains likely. As a result, this report
also contains matters for congressional consideration to ensure that
CVN 78 is budgeted at the likely costs of the ship.
Background:
The Ford-class nuclear aircraft carriers are intended to replace the
USS Enterprise--the Navy's first nuclear-powered aircraft carrier--and
the Nimitz-class carriers. The Ford class will serve as the premier
forward asset for crisis response and early decisive striking power in
a major combat operation. The first Ford-class carrier--CVN 78--is
scheduled for delivery to the fleet in September 2015. Figure 1 depicts
an artist's rendition of CVN 78.
Figure 1: CVN 78 Aircraft Carrier Currently in Development:
[See PDF for image]
Source: Navy.
[End of figure]
Delivery of CVN 78 is an important step in maintaining the Navy's force
of operational carriers. The Navy outlined its strategy of sustaining a
force of 11 operational carriers and achieving a force of 313 ships in
its long-range shipbuilding plan.[Footnote 1] This plan outlines future
ship construction rates, fiscal constraints, and force structure
requirements that the Navy envisions over the next 30 years. In the
near term, the Navy plans to significantly increase its rate of
construction and introduce several new classes of ships, including the
Ford class. The Navy recognizes that the success of the plan will
depend on its ability to control shipbuilding costs.
Starting with the lead ship, the Ford class features a number of
improvements over existing aircraft carriers that the Navy believes
will improve the combat capability of the carrier fleet while
simultaneously reducing acquisition and life cycle costs. Some of the
improvements include the following:
* increased sortie generation rates,
* a near three-fold increase in electrical generating capability,
* increased operational availability, and:
* increased service life margins (e.g., weight and stability) to
support future changes.
These improvements are made possible through a number of design
features, including an enlarged flight deck; a smaller, aft-positioned
island with fewer rotating radars; and a flexible ship infrastructure
to accommodate future changes to the ship.
The Navy's strategy for acquiring a new class of carriers has changed
since the initial concept was determined. The Navy established the
CVN(X) program in 1998 after deciding that the next class of carriers
would be nuclear-powered and feature a large deck, with over 75
aircraft. Initially, the Navy employed an evolutionary acquisition
strategy, with technology improvements introduced gradually with each
successive carrier. In 2002 the Navy established the CVN 21--or 21st
century--aircraft carrier program and decided to use a Nimitz hull on
all carriers, but accelerate the introduction of new technologies on
the first lead ship. Follow-on ships will largely repeat the lead ship
design, with some modifications. In 2006 the Navy decided to delay
awarding a contract for construction of the first two ships by 1 year
in order to meet other Navy priorities, thereby shifting lead ship
delivery. This delay will reduce the Navy's inventory to 10 aircraft
carriers in 2013 and 2014--1 below its force requirement.
The Navy requested authorization of CVN 78 in its fiscal year 2008
budget request, with funding split over 2 years. Table 1 outlines the
major events in the development of future aircraft carriers.
Table 1: Major Events in the Development of Future Aircraft Carriers:
Year: 1993;
Events:
* Navy establishes a carrier working group to investigate the
requirements and available technologies and systems for a new class of
aircraft carriers.
Year: 1998;
Events:
* CVN(X) evolutionary design approach established.
Year: 2000;
Events:
* Integrated process and product development contract awarded to
Northrop Grumman Newport News;
* Design begins on the new propulsion system;
* CVN(X) program reaches Milestone 1.
Year: 2002;
Events:
* CVN(X) changes to the CVN 21 program following the Navy's decision to
eliminate an evolutionary strategy.
Year: 2003;
Events:
* Construction contract award date shifted from 2006 to 2007.
Year: 2004;
Events:
* CVN 21 program receives approval for Milestone B, the point for entry
into the system development and demonstration phase of the DOD
acquisition system;
* Navy awards a construction preparation contract to Northrop Grumman
Newport News.
Year: 2005;
Events:
* Fabrication of the lead ship (CVN 78) begins.
Year: 2006;
Events:
* Construction contract award date shifted from 2007 to 2008;
* Construction preparation contract extended by 1 year until 2008;
* Secretary of the Navy names CVN 78 USS Gerald R. Ford-- initiating
the Ford class;
* Congress establishes a cost cap of $10.5 billion for CVN 78
procurement in the Defense Authorization Act for Fiscal Year 2007 (Pub.
L. No. 109-364§122 (2006)).
Year: 2007;
Events:
* Navy requests authorization of CVN 78 construction in its 2008 budget
request;
* Defense Acquisition Board program review (expected). Updated Navy and
DOD independent cost estimates were expected in support of the review.
Year: 2008;
Events:
* CVN 78 construction contract award to Northrop Grumman Newport News.
Year: 2010;
Events:
* CVN 78 keel lay.
Year: 2012;
Events:
* Construction contract award for CVN 79.
Year: 2015;
Events:
* CVN 78 delivery.
Source: Navy data.
[End of table]
CVN 78 Critical Technology Development:
A number of new technologies will be installed on CVN 78. These
technologies will enable CVN 78 to achieve its capability enhancements.
The Navy identifies 16 critical technologies--technologies that it
defines as new or novel that the ship depends on to meet development,
production, employment, and operations[Footnote 2] (see table 2). The
number of critical technologies changes when the Navy decides to remove
a technology from the ship or if it determines that a technology
warrants additional attention. The Navy recently removed a dynamic
armor protection system from the CVN 78 design, deferring this
technology to follow-on ships and is currently considering identifying
CVN 78's electronic warfare and command and control systems as critical
technologies.
Table 2: CVN 78 Critical Technologies:
Technology: 1,100-ton air-conditioning plant;
Capability improvement: Greater cooling capability with fewer units
than the legacy system.
Technology: Advanced arresting gear;
Capability improvement: Recovers current and future aircraft, lighter
than the legacy system, software controls reduce manning.
Technology: Advanced weapons elevator;
Capability improvement: Elevators that use moving electromagnetic
fields instead of cabling. Allows elevator shaft to use horizontal
doors to close off magazines. Reduces manning and maintenance costs.
Technology: Aviation data management control system;
Capability improvement: Optimizes weapons inventory and arrangement.
Interfaces new technologies such as EMALS and the advanced arresting
gear for operation and management purposes.
Technology: Dual band radar--multifunction radar and volume search
radar;
Capability improvement: Integrates two radars operating on different
frequency bands:
* volume search radar: long-range searches to detect small targets;
* multifunction radar: horizon/surface search and tracking.
Technology: Evolved Sea Sparrow missile for CVN 21;
Capability improvement: Supports raid requirement with a data link
between combat systems and missiles.
Technology: EMALS;
Capability improvement: Replaces steam catapult. Uses an electrically
generated, moving magnetic field to propel aircraft to launch speed.
Technology: Heavy underway replenishment;
Capability improvement: Quicker shipboard replenishment through
reinforced steel beams that increase ship separation (180 to 300 ft.)
and load transport (5,700 lbs to 12,000 lbs).
Technology: High-strength low-alloy steel 65 and 115;
Capability improvement: Lightweight steel reduces ship weight.
Technology: Joint precision approach and landing system (JPALS);
Capability improvement: Global positioning system technology allows for
all-weather, day-night landings.
Technology: Nuclear propulsion and electric plant;
Capability improvement: Converts energy into electricity. Provides 2.8
times more electrical generating capacity than previous carrier class.
Technology: Plasma arc waste destruction system;
Capability improvement: Uses extreme temperatures to convert 6,800
lbs/day of paper, cardboard, plastic, cloth, wood, incidental food,
metal, and glass into gaseous emissions.
Technology: Reverse osmosis desalination system;
Capability improvement: Desalinates water without requiring a steam
distribution system and creates potable water.
Technology: Shipboard weapons loader;
Capability improvement: Self- powered, self-charging munitions loader
intended to lift up to 3,000 lbs in sea states 5 or 6.
Source: Navy data.
[End of table]
The Navy tracks the status of critical technologies through quarterly
integrated product team meetings with the various program offices and
developers responsible for systems that will be installed on the ship.
CVN 78 Acquisition Costs:
CVN 78's current total acquisition cost is estimated at $13.9 billion,
including funding for research and development, and design of the ship
class. The Navy is spending approximately $3.4 billion over several
years on research and development of technologies and ship design. Of
this amount, approximately $1.8 billion is to develop the ship's
propulsion system. To date, the Navy has received almost $3.7 billion
in advanced procurement funding. The Navy estimates a total
shipbuilding budget of $10.5 billion, including $8.1 billion for CVN 78
construction and $2.4 billion for ship class design. The Navy requested
$2.7 billion in fiscal year 2008 and plans to request $4.1 billion in
fiscal year 2009, thereby fully funding construction of the ship.
Figure 2 outlines CVN 78's budgeted costs.
Figure 2: CVN 78's Budgeted Cost:
[See PDF for image]
Source: GAO analysis of Navy data.
[End of figure]
The Navy's budget for CVN 78 is based largely on an initial life cycle
cost estimate developed in 2004 to support the Milestone B acquisition
decision. An independent DOD cost estimate performed that same year
estimated the cost of CVN 78 at $13.8 billion, $1.3 billion higher than
the Navy estimate. DOD leadership approved an amount between the two
estimates, establishing a Milestone B cost estimate of $13.1 billion
for a fiscal year 2007 ship procurement. The Navy's fiscal year 2008
budget request of $13.9 billion is based on the Milestone B estimate,
adjusted upward to include inflation, additional funding for government-
furnished equipment, and the 1-year delay in the program.[Footnote 3]
Unlike previous carriers, which were budgeted for in the first year of
construction, funding for CVN 78 construction is split over 2 fiscal
years. By funding the ship over multiple years, the Navy hopes to
mitigate potential disruptions to other programs that can be caused by
a large budget outlay in a single year. In the event that CVN 78's
costs grow above the budget for fiscal years 2008 and 2009, the Navy
will need to seek additional funding. Funds will be transferred from
other programs or obtained through a prior year completion request, a
mechanism used to fund cost growth for ships budgeted in prior years.
Remaining Work on Key Technologies Poses Risks to Ship Cost and
Capability:
Delays in technology development may lead to increases in CVN 78's
planned construction costs and potential reductions in the ship's
capability at delivery. CVN 78's success depends on on-time delivery
and insertion of fully mature and operational technologies in order to
manage construction cost and enhance ship capabilities. Technologies
that are highly integrated into the construction sequence or provide
vital capabilities for the ship to carry out its mission are the most
critical in achieving this goal. While the Navy has mitigated the
impact of some technologies, such as the nuclear propulsion and
electric plant, three systems--EMALS, the dual band radar, and the
advanced arresting gear--have faced problems during development that
may eventually affect the ship's construction costs. Upcoming critical
tests must be executed as planned in order for these systems to remain
on schedule.
The Ship's Optimum Construction Sequence and Capability Depend on
Technologies Being Delivered as Planned:
In order for CVN 78 to deliver with its promised capability and within
construction cost, the ship's technologies must be delivered as
planned--on schedule, fully mature, and operational. EMALS, the dual
band radar, and the advanced arresting gear warrant the most concern at
this point because they have a high impact on both ship capability and
construction schedule, have had difficulties during development that
have absorbed much of their schedule margin, and have a significant
amount of work to complete before they can demonstrate full maturity.
Other technologies are either further along in development or have less
impact on capability and construction. The Navy has been actively
managing technical risks on CVN 78 and has mitigated the risk on
several technologies, such as the propulsion and electric plant, that
have a high impact on both capability and construction.
The first key impact on the ship is the construction sequence. Ships
are designed and constructed with an optimal sequence--that is, the
most cost-efficient sequence to construct the ship. This includes
designing and building the ship from the bottom up and maximizing the
work completed in shipyard shops and minimizing tasks performed when
the ship is already in the water, which tends to be costlier than tasks
on land. This sequence is outlined in the shipbuilder's integrated
master schedule, which links all of the detailed construction tasks
based on key event dates. The plan for installing CVN 78's critical
technologies takes advantage of construction efficiencies. If a
technology does not arrive on time, the shipbuilder will have to work
around the missing technology. Additional labor hours may be needed
because spaces will be less accessible and equipment may require more
time for installation. Certain technologies have an increased potential
to affect the optimum construction sequence--and, consequently, are
more likely to increase costs. Similarly, if areas of the ship require
redesign, costs can increase and can significantly delay construction.
The degree to which technologies can affect construction and increase
costs depends on the interrelationship of several factors--including
the following:
* The date that technologies are first needed in the yard for
installation. Technologies that are located low in the ship have
earlier installation dates.
* The degree to which a technology is embedded in the ship's design.
CVN 78's design is divided into 423 separate zones (75 for the
propulsion plant and 348 for the platform). Although each zone is a
separate design unit, there are dependencies among them, including
technologies that cross multiple zones. Changes to one design zone must
be applied to all dependent design zones. Problems with technologies
that affect several zones can have a cascading effect on other areas of
the ship.
* The extent of integration. For example, the dual band radar is highly
integrated in the design of the island and enables the smaller island
design. CVN 78 cannot install legacy radars without major redesign of
the ship.
Table 3 shows the degree to which CVN 78's technologies can affect the
ship's construction sequence.
Table 3: Extent of Potential Impact on the Construction Sequence:
Technology: High-strength low-alloy steel 65;
In-yard date: 2005;
Total design zone impact: 348;
Deck location: All decks.
Technology: Nuclear propulsion and electric plant;
In-yard date: 2006;
Total design zone impact: 75;
Deck location: Below third deck.
Technology: Reverse osmosis desalination system;
In-yard date: 2008;
Total design zone impact: 10;
Deck location: Below third deck.
Technology: 1,100-ton air-conditioning plant;
In-yard date: 2009;
Total design zone impact: 9;
Deck location: Below third deck.
Technology: Advanced weapons elevator;
In-yard date: 2010;
Total design zone impact: 68;
Deck location: All decks.
Technology: High-strength toughness steel 115;
In-yard date: 2010;
Total design zone impact: 15;
Deck location: Flight deck.
Technology: EMALS;
In-yard date: 2011;
Total design zone impact: 48;
Deck location: Flight deck and above main deck.
Technology: Advanced arresting gear;
In-yard date: 2011;
Total design zone impact: 18;
Deck location: Above main deck.
Technology: Heavy underway replenishment;
In-yard date: 2011;
Total design zone impact: 6;
Deck location: Main deck.
Technology: Plasma arc waste destruction system;
In-yard date: 2011;
Total design zone impact: 4;
Deck location: Main deck.
Technology: Dual band radar (multifunction radar and volume search
radar);
In-yard date: 2012;
Total design zone impact: 9;
Deck location: Island.
Technology: Evolved Sea Sparrow missile for CVN 21;
In-yard date: 2012;
Total design zone impact: 0;
Deck location: Flight deck.
Technology: JPALS;
In-yard date: 2013;
Total design zone impact: 2;
Deck location: Island.
Technology: Aviation data management control system;
In-yard date: 2013;
Total design zone impact: 0;
Deck location: Not applicable (N/A) (software).
Technology: Shipboard weapons loader;
In-yard date: 2015;
Total design zone impact: 1;
Deck location: Flight deck.
Source: GAO analysis of Navy data.
[End of table]
The second key impact of CVN 78's critical technologies is on the
ship's planned capability. CVN 78's capability is predicated on
technologies meeting requirements. The ship's capability is based on
technologies meeting five key performance parameters: sortie generation
rates, manpower reduction, electric generation capacity, service weight
and stability allowance, and interoperability. Table 4 describes the
impact of critical technologies on the ship's capability.
Table 4: Critical Technologies' Impact on Ship Capability:
Technology: 1,100-ton air-conditioning plant;
Sortie generation rate enabler: None;
Manpower reduction (in billets)[A]: Maintenance reduction;
Other capability impact: N/A.
Technology: Advanced arresting gear;
Sortie generation rate enabler: High;
Manpower reduction (in billets)[A]: 41;
Other capability impact: 50 tons lighter than the legacy system.
Technology: Advanced weapons elevator;
Sortie generation rate enabler: Moderate to high;
Manpower reduction (in billets)[A]: Over 20;
Other capability impact: N/A.
Technology: Aviation data management control system;
Sortie generation rate enabler: Low;
Manpower reduction (in billets)[A]: 6;
Other capability impact: N/A.
Technology: Dual band radar: multifunction radar and volume search
radar;
Sortie generation rate enabler: High[B];
Manpower reduction (in billets)[A]: 28;
Other capability impact: Projected weight reduction, interoperability.
Technology: EMALS;
Sortie generation rate enabler: High;
Manpower reduction (in billets)[A]: 32;
Other capability impact: N/A.
Technology: Evolved Sea Sparrow missile for CVN 21;
Sortie generation rate enabler: None;
Manpower reduction (in billets)[A]: 0;
Other capability impact: Interoperability.
Technology: Heavy underway replenishment;
Sortie generation rate enabler: High;
Manpower reduction (in billets)[A]: Decrease manpower surge time;
Other capability impact: N/A.
Technology: High-strength low-alloy steel 65;
Sortie generation rate enabler: None;
Manpower reduction (in billets)[A]: 0;
Other capability impact: 700-ton projected weight reduction.
Technology: High-strength toughness steel 115;
Sortie generation rate enabler: None;
Manpower reduction (in billets)[A]: 0;
Other capability impact: 175-ton projected weight reduction.
Technology: JPALS;
Sortie generation rate enabler: Low;
Manpower reduction (in billets)[A]: Maintenance reduction;
Other capability impact: Interoperability.
Technology: Nuclear propulsion and electric plant;
Sortie generation rate enabler: Low;
Manpower reduction (in billets)[A]: 220 (includes reverse osmosis
desalination system);
Other capability impact: 1350-ton projected weight reduction (includes
reverse osmosis desalination system), electric generation.
Technology: Plasma arc waste destruction system;
Sortie generation rate enabler: None;
Manpower reduction (in billets)[A]: Decrease trash sorting time;
Other capability impact: Reduction of trash and equipment weight.
Technology: Reverse osmosis desalination system;
Sortie generation rate enabler: None;
Manpower reduction (in billets)[A]: See nuclear propulsion plant
reduction;
Other capability impact: See nuclear propulsion plant, weight
reduction.
Technology: Shipboard weapons loader;
Sortie generation rate enabler: Moderate;
Manpower reduction (in billets)[A]: 4-5 per loader;
Other capability impact: N/A.
Source: GAO analysis of Navy data.
[A] CVN 78's total system manpower requirements reflect a manpower
billet reduction of 500 (threshold) and 900 (objective) compared to the
last class of carriers.
[B] The dual band radar does not directly affect sortie generation
rates, but it enables the smaller island design, which greatly affects
sortie generation rates.
[End of table]
Technologies That Greatly Affect both Capability and Construction Will
Have the Greatest Impact on the Ship if They Are Not Delivered as
Planned:
We categorized CVN 78's technologies according to the degree they can
affect the construction and capability of the ship (see table 5).
Technologies in quadrant 1 affect both the construction sequence and
capability of the ship--and would present the greatest risk to the cost
and capability of the ship if not delivered as planned. Of the
technologies in quadrant 1:
* The Navy has largely retired the risk posed by the nuclear propulsion
and electric plant, the reverse osmosis desalination system, and the
high-strength low-alloy steel 65.
* The design of the weapons elevator has been developed--but full-scale
testing, scheduled for later this year, is needed to demonstrate a
shipboard representative system.
* Significant risks remain in the development of EMALS, the dual band
radar, and the advanced arresting gear.
Table 5: Matrix of the Impact of Critical Technologies:
High impact on ship construction;
Quadrant 2: Medium: 1,100-ton air- conditioning plant;
Quadrant 1: High: Advanced arresting gear Dual band radar: volume
search and multifunction radars EMALS Advanced weapons elevator High-
strength low-alloy steel 65 Nuclear propulsion and electric plant
Reverse osmosis desalination system.
Low impact on ship construction;
Quadrant 4: Low: Aviation data management control system Evolved Sea
Sparrow missile for CVN 21 High- strength toughness steel 115 Plasma
arc waste destruction system;
Quadrant 3: Medium: Heavy underway replenishment JPALS Shipboard
weapons loader.
Low impact on ship capabilities;
High impact on ship capabilities.
Source: GAO.
[End of table]
Early planning and testing of several CVN 78 critical technologies have
mitigated risk, including some technologies with the highest impact on
construction and capability. The Navy fully demonstrated:
* Nuclear propulsion and electric plant. Development began in 1998 and
the overall design is complete. The Navy tested and qualified the
system generator in 2005, and fabrication and installation of
components are under way.
* Reverse osmosis desalination system. In 2003 units were successfully
tested at a land-based test facility. The Navy is currently evaluating
units aboard an amphibious assault ship. The design is complete and the
system is currently being manufactured.
* High-strength low-alloy steel 65. After testing finished in 2002, the
Navy certified its use on naval ships in 2003. Steel is currently being
used to fabricate the ship.
* Plasma arc waste destruction system. System is currently in use on a
commercial cruise ship.
The Navy can also still choose not to install a number of the low-
impact technologies, if they do not mature as planned, without
significantly affecting the ability of the ship to meet minimum
performance requirements. For example, the new weapons management
system is a software upgrade; the Navy can opt to use legacy software-
-and the ship will still achieve threshold performance requirements.
Similarly, the Navy is considering the use of new high-strength steel
on the flight deck to reduce weight if ballistic testing proves
successful. Steel currently scheduled for use on the ship is an
acceptable backup.
EMALS, Dual Band Radar, and Advanced Arresting Gear Have Experienced
Schedule Delays That Could Disrupt CVN 78's Construction Schedule:
EMALS, the dual band radar, and the advanced arresting gear are each
critical to realizing CVN 78's planned capability--and the Navy has
committed to installing these technologies on the ship. Upcoming system
testing of each technology is expected to demonstrate its capability.
The ship's construction sequence, however, is at risk. While progress
has been made in developing components, EMALS, the dual band radar, and
the advanced arresting gear have encountered difficulties during
development that have led to delays. Difficulties include achieving
needed performance in key components, as well as reaching agreement
with the Navy on systems engineering and other requirements. While each
technology has passed critical design milestones, they now face
demanding test and production schedules with little or no margin to
address problems discovered in testing or manufacturing. If problems
occur, EMALS and the advanced arresting gear will be hard pressed to
meet their schedule for delivery to the shipyard. Problems with the
dual band radar could have an immediate impact on the next generation
destroyer (DDG 1000) program, but delays in producing radars for the
first two DDG 1000 ships could cascade down to CVN 78--affecting
delivery to the shipyard.
EMALS is critical to meeting sortie generation rates and reducing
manpower on the ship. The contractor has demonstrated the feasibility
of using magnetic fields to launch aircraft on a land-based test bed
designed to simulate a flight deck--but at half the length. Land-based
tests are scheduled to begin in February 2008 will demonstrate a ship-
ready system. Table 6 outlines EMALS' schedule.
Table 6: Schedule of Key Events Relating to EMALS:
2003: Developmental testing of competing systems on a half-length test
bed;
2004: Preliminary design competition completed, contractor begins
system development;
2006: Follow-up testing and evaluation;
2007: Construction of a land-based test facility completed;
Critical design review held;
2008: High-cycle and land-based developmental testing on a full-length
test bed;
2009: Production start;
2011: EMALS required in yard for carrier construction.
Source: Navy data.
[End of table]
The EMALS program finished its system integration phase over 15 months
behind schedule and substantially above budget. Delays resulted from
technical challenges, as well as difficulties meeting detailed Navy
requirements.
Although progress has been made on many of EMALS' components, the
system has faced technical challenges, largely because of failures with
the prototype generator that stores the high power needed to propel the
launchers. The prototype generator malfunctioned during integrated and
follow-on testing. The contractor believes that the problem has been
resolved through redesign of the prototype generator. The first tests
of the redesigned generators are scheduled for 2008 at the contractor's
facility, followed by full-scale testing of the EMALS prototype.
The contractor also faced challenges meeting the requirements involved
with Navy ships. Ships, especially carriers, have complex requirements,
largely because they operate at sea and must meet unique survivability
requirements. The contractor has never produced a shipboard system--
particularly one as highly integrated into the ship as EMALS--and
underestimated the effort needed to meet Navy requirements.
Additionally, the contractor received requirements after much of the
system had already been designed. Specific challenges are summarized in
table 7. According to the contractor, the company has taken action to
address these problems, including hiring experts familiar with the
Navy's processes.
Table 7: Challenges Faced by the EMALS Program in Meeting Program
Requirements:
Weight requirement;
The contractor initially designed and tested EMALS in a configuration
that minimized the system's weight. After the Navy defined the ship's
survivability requirements, the system was reconfigured, separating
EMALS components and increasing the use of cabling. EMALS weight
increased above its margin, resulting in a reallocation of weight
elsewhere on the ship and the redesign of a subsystem. EMALS is now
within its revised weight allocation.
Electromagnetic environmental effects requirement[A];
Due to the effects of electromagnets, EMALS may interfere with the
operations of shipboard systems or ordnance--and potentially harm the
ship or personnel. After EMALS' design was stable, a number of
electromagnetic effect issues emerged. The program has now taken steps
to examine potential interference by hiring an expert and creating an
integrated product team to analyze electromagnetic effects. However,
tests to understand potential electromagnetic effects have not yet
started and the effort required to mitigate these effects remains
unclear.
Shipboard requirements;
Shipboard requirements evolved during EMALS' design process as the
design of the ship became better known. The contractor designed one
subsystem component, the power conversion system, to generic shock and
vibration requirements while waiting for the Navy's final determination
of requirements. The subsystem may need to be reconfigured in order to
meet final shock and vibration requirements, but the redesign will not
occur until production. According to the contractor, limited
coordination with the shipyard contributed to delays in meeting
requirements. Initially, requirements were communicated via the Navy,
creating a lag in delivery time. The contractor now believes that
coordination issues have been resolved through direct communication
between the shipyard and the EMALS program.
Systems engineering[B];
The contractor underestimated the extent that systems engineering is
needed to integrate EMALS into other shipboard systems The contractor
had not previously worked on shipboard systems and lacked the necessary
staff to address the Navy's systems engineering requirements. The
contractor has now hired additional systems engineers to manage the
requirements process.
Source: GAO analysis of EMALS contractor and Navy data.
[A] Electromagnetic environmental effects refer to the impact of the
electromagnetic environment on the operational capability of military
forces, equipment, systems, and platforms. System electromagnetic
effects can interfere with other systems, specifically causing
undesirable responses, malfunctions, degradation of performance, or
premature and undesired location, detection, or discovery by enemy
forces.
[B] Systems engineering is a technical management tool that provides
the knowledge necessary to translate requirements into specific,
achievable capabilities. Tasks include defining what the customer
wants, turning the requirements into specific functions, and
identifying technical and design solutions to achieve system
functionality.
[End of table]
Challenges to date have led to schedule delays and cost growth. Without
the 1-year delay in the ship's schedule, it would have been unlikely
that EMALS would have met the ship's installation date. Even with an
additional year of development, it may be difficult to deliver EMALS
components. To meet ship installation dates for EMALS' components, the
contractor eliminated all schedule margin, normally reserved for
addressing unexpected issues. As a result, the schedule cannot
accommodate unanticipated testing or production problems. While the
contractor believes that problems during system integration have been
resolved and EMALS' delivery schedule can be met, challenges remain:
* Demonstrating shipboard-ready system. Demanding tests lay ahead. An
integrated full-scale prototype will undergo over 4 months of testing.
These tests will be the first demonstrations of the redesigned
prototype generator and the first time the system will be tested with
actual aircraft. With no margin for delays, any problems encountered
during testing will likely prevent an on-time delivery to the shipyard.
* Demonstrating program requirements. In order to stay on schedule, the
program shifted a number of key test events, including maintainability
testing, to the production phase. This introduces additional risk to
EMALS production if problems are discovered during testing.
Additionally, tests of electromagnetic interference and shock and
vibration could lead to redesign of some components--which may result
in additional delays.
* Producing a shipboard-ready system. EMALS' contractor has
traditionally been involved in projects aimed at research and
development--not producible systems. Converting EMALS design into
producible, affordable components, with established test and quality
controls, may prove challenging. The contractor recently opened a new
production facility in Mississippi to control production costs. The
contractor acknowledges the risk associated with manufacturing EMALS
components at a new facility inexperienced with production, but
believes it has taken steps to mitigate the risks through training and
manufacturing automation.
Dual Band Radar:
The dual band radar, composed of two systems (the multifunction and
volume search radars), is being developed and tested as part of the DDG
1000 program. The Navy initially intended to install the dual band
radar on CVN 77--the last carrier of the Nimitz class. When it was
clear that the radar would not mature in time for ship delivery, the
Navy chose to use legacy radars on CVN 77 and delay initial
installation until CVN 78. Use of legacy radars, however, necessitated
the redesign of CVN 77's island structure. Key events in the
development of the dual band radar can be seen in table 8.
Table 8: Schedule of Key Events Relating to Dual Band Radar:
2006: Multifunction radar completes at-sea testing;
2007: Preliminary volume search radar "string" testing complete;
Volume search radar begins land-based testing;
2008: Volume search radar completes land- based testing;
Dual band radar begins integrated testing;
2009: Dual band radar completes integrated testing;
Dual band radar integrated with power system;
2010: First dual band radar delivered to DDG 1000;
2011: Second dual band radar delivered to DDG 1000;
2012: Third dual band radar required in yard for carrier construction.
Source: Navy data.
[End of table]
Development and testing of the multifunction radar have progressed
further than the volume search radar. Land-based and at-sea testing of
the multifunction radar prototype demonstrated the radar's key
functions--clutter rejection and firm tracking range.
The volume search radar has encountered difficulties developing key
components of the transmit-receive units, the individual radiating
elements that are the essence of the radar. Specifically, critical
circuit technology experienced failures during testing and could not
reliably operate at the radar's voltage needed to meet requirements.
The contractor believes it has identified a solution, and is currently
pursuing two design iterations that it believes will improve the
reliability of the circuit while also achieving greater affordability.
However, the redesigned circuit technology has not been included in
testing of the volume search radar. In an effort to maintain schedule,
the contractor is only testing the radar at a reduced voltage. Upcoming
land-based testing of the volume search radar prototype and integrated
testing of the dual band radar will not demonstrate the higher-voltage
output necessary to meet ship requirements. The contractor does not
anticipate testing the complete radar system, with the redesigned
circuit technology, until production unit testing in 2010--shortly
before the dual band radar is required for DDG 1000 installation.
Moreover, the volume search radar will not be fully demonstrated until
operational testing on DDG 1000 in 2013. Problems discovered during
testing may not only affect DDG 1000, but may affect installation on
CVN 78 scheduled to begin in 2012.
Dual band radar testing must occur as planned in order to meet the
radar production schedule. Testing of the volume search radar at a land-
based test facility is now currently planned to begin in September
2007, followed by integration with the multifunction radar and testing
as the dual band radar now scheduled to begin in December 2008.
Further, the construction of the land-based test facility is over 8
months behind schedule. In order to maintain the current test schedule,
the Navy moved testing of the volume search radar to a different site.
The dual band radar is scheduled to complete integrated testing at the
land-based test site in 2009--after production of the radars is
scheduled to begin in 2008. This concurrency introduces additional risk
if problems are discovered during testing. Upcoming land-based testing
will not include tests designed to demonstrate all carrier-specific
capabilities. The dual band radar was initially designed to meet both
destroyer and aircraft carrier requirements, including air traffic
control. Although the contractor is obligated to meet air traffic
control requirements, the prototype for the volume search radar--the
key component in air traffic control--is not designed to demonstrate
air traffic control in short ranges. The Navy decided to waive minimum
requirements for the volume search radar prototype as long as the CVN
78 production unit radar satisfied these requirements. Testing to
verify all aspects of the air traffic control capability, however, has
not yet been planned, but the Navy anticipates that the radar will
demonstrate this capability by the end of fiscal year 2012. This leaves
little to no time to incorporate any necessary upgrades into CVN 78's
air traffic control capabilities prior to the radar's delivery date to
the shipyard.
Additionally, electromagnetic effects with the dual band radar and
other major electronic systems involved in aircraft operations are not
yet fully understood. In particular, if the multifunction radar is not
restricted during flight landings, it could interfere with an aircraft-
landing radar during aircraft approach and could result in a major
accident on the flight deck. The Navy has identified this as the
highest risk of electromagnetic interference. Any interference between
the multifunction radar and aircraft landing systems will be engineered
to remove the threat of flight deck accidents. The Navy plans to
conduct studies to further evaluate electromagnetic effects, but has
not yet determined how it will address these concerns. It may be
necessary to relocate antennas or make other changes to the ship's
topside to isolate interference of the radars.
Further development of CVN 78's integrated warfare system is needed to
ensure its operation with the dual band radar. The warfare system is
composed of the ship's command and control, mission planning, air
traffic control, and self-defense systems. The dual band radar is a
critical element of CVN 78's warfare system because it provides the
ship's surveillance and air traffic control capability. Available
carrier electronic warfare and command and control systems, however,
cannot function on CVN 78 because they were not designed to interface
with the dual band radar. The Navy plans to modify the current carrier
command and control system by integrating modules from the DDG 1000
total ship computing system, which was designed to function with the
dual band radar. While the Navy has developed a plan for upgrading the
command and control system, a solution for the electronic warfare
system has not yet been identified. The electronic warfare system used
on existing carriers cannot operate effectively with the dual band
radar. The electronic warfare system being developed for the DDG 1000
can operate with the dual band radar, but is designed only to meet the
destroyer's surveillance requirements--not CVN 78's electronic attack
requirements. The Navy is currently drafting a plan to develop an
electronic warfare system for CVN 78.
Advanced Arresting Gear:
The Navy plans to install the advanced arresting gear on not only Ford-
class carriers, but anticipates retrofitting the system on current
carriers. The advanced arresting gear successfully completed early
verification tests that proved the system's concept, and tested a
number of components. Integrated testing of simulated aircraft loads is
scheduled to begin in 2008, and is expected to demonstrate aircraft
arresting capability on a land-based test site. See table 9 for key
events in the development of the advanced arresting gear.
Table 9: Schedule of Key Events Relating to Advanced Arresting Gear:
2003: Arresting gear contract awarded to begin technology development;
2007: Complete design of hardware and software components;
2008: Complete system testing of simulated aircraft loads;
2010: Complete testing of live aircraft landings;
2011: Arresting gear required in the yard to begin CVN 78 installation;
2012: Arresting gear scheduled for backfit into a Nimitz-class carrier
for operational testing.
Source: Navy data.
[End of table]
Similar to the EMALS program, the contractor faced difficulties meeting
the Navy's requirements for the system, a fact that contributed to
program schedule delays.[Footnote 4] The Navy and the contractor
disagreed on the necessary format of design drawings to meet the Navy's
requirements. The contractor underestimated the number of drawings
required at critical design review. The schedule slipped due to late
delivery of drawings, and critical design review was delayed by over 5
months. Additionally, changes in the Navy's requirements in shock and
vibration led to redesign of a major subsystem.
While components have been tested, future tests are critical for
demonstrating system performance, including software functionality.
Unlike the legacy landing system, the advanced arresting gear uses a
software control system to regulate the arresting process and prepare
the system for incoming aircraft. The contractor recently completed
software system design, but the software system has not yet been
tested. Upcoming land-based testing is expected to demonstrate the
ability of the software control system using simulated aircraft loads
as well as live aircraft.
Even if testing is successful, the advanced arresting gear may not meet
its delivery date to the shipyard. Schedule delays have slipped the
program's production decision and delivery for CVN 78 by 6 months.
Timely delivery of the arresting gear is necessary to save shipyard
labor hours. Unlike with previous carriers, the shipbuilder plans to
install the arresting gear prior to laying the flight deck. If the
arresting gear is delivered after installation of the flight deck, the
shipbuilder will expend additional labor hours lowering the system into
place through a hole cut in the deck and welding the deck back
together. The Navy believes that the delivery schedule can be met if
the system is delivered to the shipyard in pieces and test events are
consolidated. Specifically, the Navy will increase the rate of test
cycles during testing to eliminate schedule margin. Compressing test
events, however, introduces additional risk because there will be
limited time to address any failures that may occur during testing
prior to the start of production.
Other Technologies May Disrupt the Ship's Construction Sequence or May
Not Be Fully Capable at Ship Delivery:
Additional testing is necessary to ensure that other technologies
needed early in construction will operate as intended. Technologies
responsible for achieving future carrier capabilities such as heavy
underway replenishment and JPALS may not be fully available at ship
delivery, requiring the installation of additional legacy technologies
or increasing expected ship manpower.
Some technologies with early installation dates still require testing
to demonstrate a shipboard-ready system. Table 10 highlights two
technologies developed by the shipbuilder--the advanced weapons
elevator and air-conditioning plant--that have not yet demonstrated a
full prototype but are required in the yard early in ship construction.
Table 10: Other Technologies That Affect the Construction Sequence:
Advanced weapons elevator;
Elevators that use moving magnetic fields and no cabling is a new
technology--never previously used in any application. In 2005, the
shipbuilder demonstrated the elevator's functionality through testing
of a model representing a quarter of the elevator. A shipboard
representative prototype is currently in production, and full-scale
testing is scheduled for later this year. The elevators will not be
tested at sea until CVN 78 qualification testing, shortly before ship
delivery.
1,100-ton air-conditioning plant;
Since the components are readily available and used on ships and shore-
based applications, the Navy considers this technology a low risk. The
shipbuilder will not demonstrate a full prototype until fiscal year
2008--after fabrication of shipboard units is already under way. An air-
conditioning plant of this size has never been used on a ship before.
If any unexpected problems arise during testing, little time remains
for resolution prior to ship installation.
Source: GAO analysis of Navy and shipbuilder data.
[End of table]
Other technologies do not affect construction, but could affect CVN
78's planned capability at ship delivery. For example, if the shipboard
weapons loader is not ready at ship delivery, additional manpower will
be needed to install aircraft weapons, and the ship's sortie generation
rates will be affected. Although weapons loaders are not required until
2015, the system is still in early development and requirements
continue to be modified. In addition, the ability to achieve enhanced
ship capability provided by the heavy underway replenishment system and
JPALS depends upon the reciprocal installation on other platforms (see
table 11). Without these enhancements, the carrier will only perform at
legacy capability.
Table 11: Other Technologies That Affect CVN 78's Planned Capability:
Heavy underway replenishment;
The system is a modification of current replenishment technology. The
design is complete, and land-based testing of a full-scale shipboard
system is scheduled to conclude this year. However, the system's
improved capability will not be achieved unless it is also outfitted on
logistics ships that replenish the carrier. Heavy underway
replenishment is not installed on logistic ships currently in the
fleet, and it is unclear when logistic ships with this capability will
be delivered.
JPALS;
The program is still in early development, and it is unclear when JPALS
will be inserted into the carrier air wing. Until installation, the
carrier will use legacy systems to land aircraft. This will require
additional design to accommodate the installation of legacy radars on
the carrier's smaller island structure. JPALS is the primary landing
system for the Joint Strike Fighter. While a backup landing system will
be installed on the Joint Strike Fighter, it will be less capable to
land aboard the carrier during inclement weather compared to other
aircraft.
Source: GAO analysis of Navy and shipbuilder data.
[End of table]
The Navy Has Made Significant Design Progress, but Sustained Progress
Depends on Technology Development:
The Navy has completed the basic design of the ship and the shipbuilder
is currently developing the detailed design. Given the amount of design
work to be performed, it appears that CVN 78's design will be more
complete than that of the previous carrier at construction contract
award. Progress in designing the ship is due in part to a structured
design approach and an extended construction preparation period that
enables the shipbuilder to perform more work prior to construction than
on previous carriers. With about 67 percent of the ship's design
complete, the shipbuilder appears on track to support the construction
schedule. However, the program may face challenges in maintaining its
design schedule because of delays in the development of the ship's
critical technologies. Such delays in technology development could
impede completion of design and interfere with construction of CVN 78.
Significant Design Development Is Being Performed Prior to Construction
Contract Award:
The Navy has already completed the basic design of the ship. In 2004,
the Navy completed the Operational Requirements Document, a necessary
step in the acquisition process. This document outlines the
requirements that the ship must possess to perform its mission. The
Navy also certified the ship's specifications, a key event in the
design process that defines the technical requirements that the ship
must fulfill. After certification, the ship is under configuration
control and any changes must be approved by Navy management. The basic
design of the ship was approved through general arrangement and block/
system diagram drawings, which describe the use of space and location
of systems within the ship, including the location of compartments,
ductwork and cabling, and the height of decks. The shipbuilder is
currently designing more detailed phases of the ship and generating the
drawings needed for construction.
A structured design approach enables the shipbuilder to more
efficiently and effectively design CVN 78. For the first time, the
shipbuilder is using a computer-aided design product model to generate
the design of an entire carrier.[Footnote 5] The product model
generates a detailed design, allowing engineers to visualize spaces.
The design is also fed into a simulated three-dimensional environment
that allows engineers to test the design by conducting a virtual "walk-
through." This validates elements of design prior to construction,
thereby avoiding potentially costly rework.
Each of the ship's design zones go through the three phases of the
product model: concept, arrangement, and detail (see fig. 3). The
phases build on each other, progressively adding more detail to the
design. The final phase enables the shipbuilder to order all necessary
material.
* Concept phase defines the primary structures of the design zone,
including structures, gratings, ladders, and passageways.
* Arrangement phase adds the form, fit, and function of components,
including piping and cables. Data are gathered during this phase to
generate material estimates and the schedule for ordering long-lead
materials.
* Detail phase provides all design zone attributes, including part
numbers, vents, drains, and other detailed information.
After completion of the detail phase, construction drawings are
developed. Once construction drawings are released, work on building
the ship can begin.
Figure 3: Product Model Design Process:
[See PDF for image]
Source: Navy.
[End of figure]
The product model gives greater visibility into the progress of design,
allowing tracking of design zones through each stage of design. The
Navy has approval points in each phase of design, including critical
design reviews at the end of the arrangement phase and a review of
significant design changes made in the detail phase. In addition, the
shipbuilder tracks the progress of design zones measured against an
established design schedule. The shipbuilder can use the product model
to assess the impact that a delay in one phase of design will have on
other design zones or on the construction schedule.
Using this approach, the shipbuilder has completed approximately 67
percent of the ship's design, including almost all of the propulsion
plant (see fig. 4 and table 12). Despite weight increases in some key
technologies, design is within threshold requirements for weight,
stability, and sortie generation rates. According to the shipbuilder,
the product model creates design efficiencies, but without the 1-year
slip in schedule, it would have been more difficult for the design to
keep pace with the construction schedule.
Figure 4: Ship Design Status as of April 2007:
[See PDF for image]
Source: Northrop Grumman Newport News.
[End of figure]
Table 12: Design Progress by Location on Ship:
Data as of April 2007.
Location: Whole ship;
Percent complete in design product model design phase: Concept: 84%;
Percent complete in design product model design phase: Arrangement:
70%;
Percent complete in design product model design phase: Detail: 55%.
Location: Below third deck;
Percent complete in design product model design phase: Concept: 100;
Percent complete in design product model design phase: Arrangement: 99;
Percent complete in design product model design phase: Detail: 98.
Location: Third deck to main deck;
Percent complete in design product model design phase: Concept: 100;
Percent complete in design product model design phase: Arrangement: 99;
Percent complete in design product model design phase: Detail: 62.
Location: Main deck and above;
Percent complete in design product model design phase: Concept: 59;
Percent complete in design product model design phase: Arrangement: 19;
Percent complete in design product model design phase: Detail: 1.
Location: Miscellaneous trunk and elevators;
Percent complete in design product model design phase: Concept: 83;
Percent complete in design product model design phase: Arrangement: 67;
Percent complete in design product model design phase: Detail: 11.
Source: Northrop Grumman Newport News.
[End of table]
Progress in developing the ship's design is also due to a lengthier
preparation period than was the case on previous carriers. Under the
contract for construction preparation, the shipbuilder is not only
designing the ship but procuring long-lead materials and fabricating
parts of the ship. The Navy has had more time to prepare for CVN 78
construction than previous carriers. The shipbuilder will have 44
months to prepare, compared to just 28 months for CVN 77, an increase
of 16 months, or 57 percent.[Footnote 6]
The extended length of the preparation period and the improved design
process are allowing the shipbuilder to perform more work on CVN 78
prior to the award of the construction contract than has been performed
on previous carriers. The shipbuilder estimates that 75 percent of ship
design will be completed prior to construction contract award in
January 2008. In comparison, design of CVN 77 was largely incomplete at
construction award, even though much of the design was rolled over from
the previous ship. With more design complete, the shipbuilder is better
able to estimate its material needs. By contract award, the shipbuilder
expects to have contracted for or quotes received on approximately 70
percent of total material costs, compared to about 55 percent for CVN
77. Design progress also facilitates construction work. The shipbuilder
is fabricating more of the ship prior to construction award than on
previous carriers. Approximately 13 percent of construction units for
CVN 78 are expected to be complete prior to contract award, compared to
just 3 percent of units for CVN 77.
Delays in Developing Critical Technologies Could Impede Design
Progress:
Despite design progress to date, the shipbuilder may not be able to
complete design on schedule if it does not receive technical
information required to complete design or if ship technologies are not
delivered as planned.
The Navy is required to deliver technical information to the
shipbuilder, including power needs, weight requirements, and critical
interfaces of various technology-dependent systems. Without this
information, the shipbuilder cannot complete the design of the ship. Up
until now the shipbuilder has established the general parameters of the
technologies and has not needed the technical information. The
shipbuilder is now beginning more detailed phases of design that
require finalized technical information in order to complete design.
The Navy is already experiencing delays in transmitting information to
the shipbuilder, including delays in delivering data on 110 items for
the advanced arresting gear, 11 for the dual band radar, and 76 for
EMALS. According to the shipbuilder, these delays have not
significantly affected the schedule. However, the availability of some
of the technical information is dependent upon the Navy completing
design and testing of key technologies. Because the development
schedule for some technologies has slipped, the date that the Navy can
deliver technical information to the shipbuilder may also slip. Further
delays in completing testing and stabilizing design for critical
systems such as EMALS and the dual band radar could in turn delay when
the Navy can deliver technical information about these systems to the
shipyard, thus affecting the design schedule. Moreover, the Navy has
not yet defined the electronic warfare system. As a result, the
system's interfaces with the ship--like power, cooling water, and air-
conditioning--are not yet known, affecting the shipbuilder's ability to
complete detailed design phases.
Some of CVN 78's technologies have not completed testing. Problems
discovered during testing may lead to redesign, which could result in
changes to other sections of the ship. For example, weight increases
for EMALS and the advanced arresting gear affected the ship's weight
and stability margin, leading the shipbuilder to compensate for weight
elsewhere on the ship. While the ship is currently within threshold,
redesign of ship systems could affect other sections of the ship that
have already completed design. Moreover, the physical characteristics
of the electronic warfare system are not yet known because the system
remains undefined. According to the Navy's commander for operational
test and evaluation, the weight and stability effects on the ship will
remain uncertain until the system is determined.
Costs for CVN 78 Will Likely Exceed Budget:
Costs for CVN 78 are likely to exceed the Navy's budget because the
cost estimate that underpins the budget is optimistic, and more
specifically, the target cost for construction of the ship may not be
achievable. The budget includes a target cost for ship construction, as
well as costs for government-furnished equipment and other expenses.
While the Navy and the shipbuilder are working to reduce costs through
the use of incentive fees, capital improvements, and other initiatives,
costs will likely exceed the budget if:
* key technology-dependent systems are delivered late;
* labor efficiencies are not realized;
* materials are delayed, resulting in labor-intensive work-arounds; or:
* material costs exceed estimates.
The Navy does not have an effective cost surveillance program in place
to recognize and mitigate risks that could increase costs. Currently,
the Navy is not able to measure shipbuilder performance because
contractor performance reports are not informative. Because the Navy is
not gaining insight into current performance, it is not benefiting from
knowledge that could give insight into future costs under the
construction contract.
The Navy's Cost Estimate May Be Optimistic:
The Navy's cost estimate used to develop the budget for CVN 78 is
optimistic, in part because it underestimates the cost of government-
furnished equipment. Government-furnished equipment covers the costs
for technologies and equipment items--such as ship weapon systems,
electronics, and propulsion--purchased by the Navy and provided to the
shipbuilder for installation on the carrier.[Footnote 7] Government-
furnished equipment costs may increase because a number of critical
technologies are still in development and their production costs are
not as fully understood as those of systems that are currently fielded.
For example, EMALS has experienced schedule slips during development,
which could affect production costs. Navy cost analysts told us that
they expect to increase EMALS costs in their updated cost estimate for
CVN 78. Government-furnished equipment costs will also increase because
costs associated with an additional aircraft landing radar are not
included in the current budget estimate. The radar, however, is
necessary to land aircraft that are not equipped with the JPALS
interface. The Navy intends to request additional funding for the radar
in future budget years.
The Navy estimates that fewer labor hours will be needed to construct
CVN 78 than for the previous two carriers--CVN 76 and CVN 77. The Navy
developed its initial labor hour estimate by adjusting the average
labor hours needed to construct previous carriers. This average,
however, includes ships that were bought as part of two-ship
procurements, which tend to be more cost-efficient due to economies of
scale (see table 13). By contrast, independent cost analysts within DOD
based their estimate on the construction experience of CVN 76, the last
carrier delivered. CVN 76, like CVN 78, included unique changes to the
design of the ship and required more labor hours to construct than
previous carriers. Lead ships, like CVN 78, typically require more
labor hours to construct than follow-on ships in the class. The Navy
adjusted its estimate by 10 percent--the increase experienced for the
lead ship of the Nimitz class. DOD cost analysts, however, estimated a
higher percentage recognizing CVN 78's greater technological leap than
the lead Nimitz-class carrier.[Footnote 8] The Navy believes that costs
associated with the lead ship will be offset by design changes that
make the ship easier to construct. Officials stated that efficiencies
from investments in facilities, use of the product model, and design
improvements should generate savings of some 2 million labor hours.
However, our past work has found that labor hour savings based on
efficiencies often did not materialize as expected.[Footnote 9] Savings
expected through the use of a computer-assisted design process on CVN
77 were not achieved. DOD's independent cost analysts did not estimate
efficiency savings for CVN 78 because their effects have not yet been
demonstrated.
Table 13: Construction Labor Hour Change:
Labor hours in millions.
Hull: CVN 70;
Total hours: 36.5;
Labor hour change: 0;
Type of ship buy: Single;
Contract award date: April 1974.
Hull: CVN 71;
Total hours: 44.4;
Labor hour change: 7.9;
Type of ship buy: Single;
Contract award date: September 1980.
Hull: CVN 72;
Total hours: 42.5;
Labor hour change: -1.9;
Type of ship buy: Two;
Contract award date: December 1982.
Hull: CVN 73;
Total hours: 38.4;
Labor hour change: -4.1;
Type of ship buy: Two;
Contract award date: December 1982.
Hull: CVN 74;
Total hours: 36.9;
Labor hour change: -1.5;
Type of ship buy: Two;
Contract award date: July 1988.
Hull: CVN 75;
Total hours: 36.5;
Labor hour change: -0.4;
Type of ship buy: Two;
Contract award date: July 1988.
Hull: CVN 76;
Total hours: 45.0;
Labor hour change: 8.5;
Type of ship buy: Single;
Contract award date: December 1994.
Hull: CVN 77;
Total hours: 43.1;
Labor hour change: -1.9;
Type of ship buy: Single;
Contract award date: January 2001.
Hull: CVN 78;
Total hours: Est. 42.7;
Labor hour change: -0.4;
Type of ship buy: Single;
Contract award date: Estimated January 2008.
Source: GAO analysis of Navy data.
Note: Figures for CVN 78 do not include 25.9 million in nonrecurring
labor hours and CVN 77 labor hours are based on Navy estimates at
completion.
[End of table]
By optimistically estimating the costs to construct CVN 78, the Navy
risks cost increases after construction has been funded and is well
under way. Recent first-in-class ships have experienced particularly
high cost growth--on average 27 percent[Footnote 10]--partly because
the total effort needed to build new designs and incorporate new
technologies is not yet understood. One way to reduce the probability
of unbudgeted cost growth is to present a confidence level for a cost
estimate based on risk and uncertainty analyses. By conducting
uncertainty analyses that measure the probability of cost growth, the
Navy can identify a level of confidence for its estimates and determine
whether program costs are realistically achievable. In an effort to
better ensure realism in DOD budgets, a panel on acquisition reform
established by the Deputy Secretary of Defense recommended that
programs be budgeted to an 80 percent confidence level, meaning that a
program has an 80 percent chance of achieving its estimated
costs.[Footnote 11] Navy cost analysts told us that they performed
quantitative risk analyses and calculated a confidence level to test
the validity of their cost estimate. However, the analyses for CVN 78
were well below an 80 percent confidence level. While there is room to
debate what is the right level to use as a standard, the difference
between an 80 percent confidence level and the one established for CVN
78 adds to the likelihood that costs will grow above budget.
Target Cost for Ship Construction May Not Be Achievable:
The Navy established a target cost for construction based on the fiscal
year 2008 budget request.[Footnote 12] The Navy and shipbuilder are
working to implement strategies that will reduce construction costs and
minimize the risk of cost growth. However, despite the progress made to
date, the shipbuilder may not be able to build the ship within its
target cost.
In recent years, the Navy has had difficulty delivering ships within
its initial target. Establishing a realistic cost target is especially
difficult for first-in-class ships because uncertainty about costs is
high. The Navy is taking action to encourage the shipbuilder to meet
its target cost by initiating cost reduction efforts prior to
negotiating the construction contract. For example, the Navy is taking
the following steps:
* designing the ship to threshold capability requirements, rather than
to objective requirements that are more costly to achieve;
* establishing incentive fees for capital improvements that will
improve the efficiency of the shipyard; and:
* awarding incentive fees in the current contract if the shipbuilder
can progressively demonstrate reductions in its cost estimate for ship
construction.
Initially, the shipbuilder's estimate was 22 percent higher than the
Navy's cost target. The shipbuilder is identifying capabilities that
can be removed from the ship while still meeting threshold
requirements, such as eliminating one of the waste disposal systems
from the ship. A dynamic armor protection system that was recently
removed from CVN 78's design was a technology that the shipbuilder had
suggested removing in order to save costs. The shipbuilder has also
invested in a number of efforts that it believes will increase
efficiency at the shipyard and lead to lower costs, including the
following:
* upgrading the lift capacity of its crane,
* building a covered modular assembly facility that will allow larger
sections of the ship to be assembled indoors, and:
* cutting holes in steel plates early--during fabrication--which is
expected to reduce labor hours associated with welding and pulling
cable once construction of the ship begins in the dock.
While such initiatives have helped close the gap between the
shipbuilder's estimate and the Navy's cost target by over 90 percent,
the shipbuilder does not believe that the target is achievable without
further capability trade-offs. The Navy believes it can further
mitigate the risk of cost growth to the government by inserting a share
line into the construction contract. However, even if the shipbuilder
succeeds in reducing its cost estimate, experience indicates that the
program is still at risk of exceeding the budget for construction. The
shipbuilder's initial cost estimates for both CVN 76 and CVN 77 were
higher than the Navy's target costs. During negotiations, the
shipbuilder lowered its estimate to meet the cost target, and a share
line was included in the contract to incentivize the shipbuilder to
contain costs. Yet in both cases, costs grew not only above the
negotiated contract price, but above the original estimate of the
shipbuilder as well.
Higher costs for labor and material could also increase the likelihood
that actual construction costs will exceed the target cost. Costs for
the previous two carriers, CVN 76 and CVN 77, grew because more labor
hours and material were needed to construct the ship than originally
estimated. Additional labor hours will be needed for CVN 78 if labor
hour savings do not materialize as expected. The shipbuilder estimates
hundreds of thousands of labor hour savings based on new but untested
initiatives. For example, the shipbuilder believes that the product
model will generate efficiencies in pipe production that will result in
savings of 400,000 shipboard labor hours. The shipbuilder also
anticipates labor hour savings as a result of facilities enhancements
and design improvements. However, the shipbuilder recognizes that it is
difficult to accurately estimate the total labor hours that will be
saved as a result of the new initiatives. Further, our past work on
cost growth in shipbuilding programs has shown that labor hour savings
based on untested efficiencies are often initially
overestimated.[Footnote 13]
Delays in receiving material may also result in additional labor hours.
Late material delivery led to labor hour increases on both the CVN 76
and CVN 77. In both instances, when material did not arrive on time,
the shipbuilder had to work around the missing items in order to
maintain schedule--resulting in a less efficient construction sequence.
The CVN 78 program is already beginning to experience slips in the
delivery of material. According to the shipbuilder, while none of the
delays to date are expected to disrupt the construction schedule, any
further changes to the delivery of a number of EMALS and propulsion
components will result in increased labor hours and costly work-
arounds.
The CVN 78 program could reduce costs by improving labor practices at
the shipyard. The Defense Contract Audit Agency (DCAA) measures the
effectiveness of the shipbuilder's labor practices by analyzing the
rate at which workers perform work versus non-work-related activity.
More time spent on work-related activities will generate cost savings.
DCAA has found that people assigned to new carrier construction work at
a lower rate than suggested by DCAA and below the average of other
shipyards constructing Navy ships. Improving the amount of time spent
on work-related activity could decrease the number of hours required to
build CVN 78 and result in savings of tens of millions of dollars.
Actual material costs for CVN 78 may exceed estimates and grow above
target. Material costs have been significant drivers of cost growth on
past carriers. For CVN 76 and CVN 77, cost growth was due partly to the
shipbuilder basing its estimate on an incomplete bill of materials
needed to construct the ship and a 15 percent increase in material
prices. According to the shipbuilder, material requirements for
previous carriers were developed by using the bill of materials from
prior ships before the extent of design changes was well understood.
The shipbuilder expects a more accurate material estimate for CVN 78,
in part because a significant percentage of design will be completed
prior to construction award. Further, the costs for materials are
better understood because the shipbuilder is contracting for more
material and receiving more actual quotes from suppliers prior to
contract award than on previous carriers (see fig. 5). Quotes from
vendors can help provide a greater degree of realism in material cost
estimates.
Figure 5: Knowledge of Carrier Material Costs Prior to Construction
Contract Award:
[See PDF for image]
Source: GAO analysis of Northrop Grumman Newport News data.
[End of figure]
Despite the shipbuilder's efforts to improve material cost estimates,
the program is still at risk of cost growth. Over 70 percent of
estimated material costs will not be under contract when the Navy
awards the construction contract, leaving material costs vulnerable to
market fluctuations.
On the other hand, the shipbuilder's system for managing and accounting
for materials may inflate material costs.[Footnote 14] DCAA has found
inadequacies in the shipbuilder's system and identified eight
deficiencies that could lead to increases in material costs. For
example, DCAA has reported that the shipbuilder purchases material
prematurely--before it is needed in construction--costing the
government millions of dollars in annual inventory carrying costs. DCAA
has also found that inappropriate transfers of material between
different programs could increase material cost to the government. As a
result of its findings, DCAA recommended withholding 10 percent of the
shipbuilder's billed material costs. If the shipbuilder improves its
material management system, costs to the government may be reduced.
Instability of the workload at the shipyard may also lead to increased
overhead costs and labor rates. Our past work, however, has shown that
increases in overhead and labor rates are not major drivers of cost
growth.[Footnote 15] Nevertheless, increases in overhead and labor
rates often result from changes in the workload at shipyards. For
example, the CVN 77 program had to absorb a greater percentage of the
shipyard's overhead costs because of delays in the CVN 78 program and
changes in the carrier overhaul schedule. Labor rates increased on CVN
76 when workers were diverted to carrier overhauls. In order to
maintain schedule, the shipyard made significant use of overtime, which
is more expensive than normal hourly wages. The overhead and labor
rates for CVN 78 could similarly be affected if changes are made to the
schedule for overhauling current carriers or to construction of the
Virginia-class submarine, which is also being built at the shipyard.
Shipbuilders have reported that the procurement schedule or acquisition
strategy for the Virginia-class submarine has changed 12 times in 10
years.
Insufficient Cost Surveillance Hinders the Navy's Ability to Manage
Cost Growth:
The Navy's approach to designing a substantial portion of the ship
prior to the award of the construction contract award allows the Navy
to gain insights that could be used to better inform the construction
contract. The Navy, however, is not fully leveraging this knowledge
because it lacks an effective surveillance capability that can capture
and analyze current shipbuilder performance. Future government
oversight may also be impeded if the Navy does not initiate adequate
cost surveillance at the shipyard. Given the risk of cost growth, it is
important that the Navy receive timely and informative cost performance
reports that describe the shipbuilder's progress. Without such
activity, the Navy is at risk of not identifying problems and taking
corrective action promptly, allowing costs to grow.
The Navy may not be effectively managing the shipbuilder's current cost
performance because earned value management data are not informative.
Earned value management is a tool that provides the government and
contractors with insight into technical, cost, and schedule progress on
their contracts. Although the Navy has not yet contracted for
construction, the shipbuilder is currently performing work that is
equal to 30 percent of the total cost of the ship. The Navy, however,
is not receiving objective data on the shipbuilder's cost and schedule
performance, because the construction preparation contract is a cost-
reimbursement contract that specifies a level of effort for a stated
period of time--an approach typically reserved for work that does not
produce end products, such as program management support. Since work
under the contract is not divided into tasks that produce end results,
there is no schedule against which progress can be measured. As a
result, contractor cost performance reports do not show schedule
variances, and cost variances are likely to be misleading because
progress is not actually measured.
Navy officials recognize that contractor cost performance reports are
not informative and told us that they evaluate the shipbuilder's
performance using technical instructions, which direct the shipbuilder
to accomplish certain work and include a period of performance and
funding. Technical instructions, however, are not a sufficient tool for
managing shipbuilder performance because they do not measure the value
of work accomplished--that is, whether the shipbuilder is accomplishing
tasks according to a planned budget and schedule. For example, one
instruction, authorizing the shipbuilder to continue platform design
efforts, has a period of performance of 1 year and funding of over $200
million. However, the instruction does not include a detailed plan
against which to measure performance, stating instead that all design
products should be delivered according to the shipbuilder's integrated
master schedule. In earned value management, progress can be readily
measured because contracts are usually divided into smaller, more
manageable tasks that are short in duration (e.g., between 4 and 6
weeks long), with specific start and finish dates and individual
budgets. Progress on accomplishing technical instructions cannot be
fully understood until over a year later--eliminating the Navy's
ability to take early corrective action should problems arise.
Moreover, the Navy cannot readily assess the shipbuilder's performance
because the technical instructions do not have stable schedule
benchmarks. The integrated master schedule changes periodically--
creating a fluctuating program baseline. Recognizing a lack of insight
into contractor performance, the Navy recently instituted monthly
briefings designed to improve contractor oversight.
The Navy is missing an important opportunity to gain knowledge
regarding shipbuilder performance prior to awarding the construction
contract. Although ship construction is already under way--13 percent
of the base units are expected to be finished prior to contract award-
-SUPSHIP is only minimally engaged in evaluating shipbuilder
performance. SUPSHIP provides the Navy with unique insight into program
performance because it is located at the shipyard, providing on-site
contract administration and technical and business management. SUPSHIP
is responsible for assessing contractor cost and schedule performance
through a combination of on-site program surveillance and independent
cost and schedule performance analyses. According to Navy officials,
SUPSHIP traditionally assumes its responsibility when construction
starts and will provide contract oversight after the award of the
construction contract.
Future cost surveillance efforts, however, may not provide adequate
oversight of shipyard costs. According to SUPSHIP's operating manual, a
formal cost surveillance strategy is desirable because it ensures that
surveillance is effectively performed. However, neither the program
office nor SUPSHIP has plans to develop a formal strategy for cost
surveillance. In fact, SUPSHIP does not currently have the capability
to conduct independent cost surveillance. According to officials,
SUPSHIP is currently planning to develop this capability. Until then,
the Navy will not have sufficient on-site representatives to analyze
contractor cost data and verify that the data depict actual conditions
and trends. Further, Navy officials have stated that they may not
require variance analyses in the monthly contractor cost performance
reports, only requiring reporting of variance analyses on a quarterly
basis.[Footnote 16] Variance analyses describe the reasons for cost and
schedule variances shown in the cost performance report and are
important because they serve as an official, written record of the
problems or actions taken by the shipbuilder to address them.[Footnote
17] Without monthly variance analyses, the Navy will miss timely
information regarding root causes for cost and schedule problems and
mitigation efforts--making it more difficult for managers to identify
risk and take corrective action.
Conclusions:
The Navy's ability to successfully execute its shipbuilding plan
depends on improvements in the cost performance of individual programs.
Since CVN 78 is the Navy's most expensive lead ship, its cost
performance is essential to the plan--even a small percentage of cost
growth corresponds to hundreds of millions of dollars. If CVN 78
follows historical cost growth patterns for lead ships, the Navy may be
forced to sacrifice other aspects of its plan. The recognition of ship
cost growth lags the initial budget requests for construction, such
that cost growth is recognized and funded in later years at the expense
of other ships vying for funding at that time. While construction of
CVN 78 will be budgeted in fiscal years 2008 and 2009, the bulk of
construction--and the recognition of actual cost--will occur in fiscal
years 2010-2015. Thus, the steps the Navy takes between now and the
fiscal year 2009 budget request to understand and plan for the likely
costs of the ship will determine whether and how much cost growth will
occur and require funding in those future years.
The Navy has made strides in reducing risk in the program. Construction
risk has been minimized for key systems like the nuclear propulsion and
electric system, and much of the ship's design has been completed. Yet
substantial risk remains, which the budget may not accommodate. The
budget is optimistic, with a target cost for construction that the Navy
will in all likelihood exceed. Both the budget and schedule need to
accommodate carrier-specific testing of the dual band radar. Delays in
the development of key systems, most notably EMALS and the dual band
radar, will likely have a cost impact on CVN 78 construction and--in
the worst case--schedule. To avoid the cost growth experienced by other
lead ships, coupled with the high opportunity cost of displacing other
ships to pay for cost increases, the Navy is in the best position now
to make decisions on establishing a realistic cost estimate and a
corresponding budget for CVN 78 and to put into place the tools needed
to monitor actual cost performance and react quickly to potential
variances from estimates.
Recommendations for Executive Action:
To provide more realism in the budget and minimize the likelihood of
CVN 78 cost growth, we recommend that the Secretary of Defense:
* include in the fiscal year 2009 budget request a revised cost
estimate that is based on updated Navy and independent DOD cost
estimates and the actual progress in the program and:
* provide Congress, along with the budget request:
- a stated confidence level for the cost estimate;
- results of tests of key systems and technologies;
- schedule changes to test, production, or delivery dates for key
systems; and:
- the impact of changes and test results of key systems on shipyard
costs due to changes in work sequencing and workload management.
To improve shipyard management and promote early recognition of cost
issues, we recommend that the Secretary of Defense:
* develop an independent cost surveillance capability at the cognizant
SUPSHIP and ensure that cost surveillance activities begin as soon as
actual construction starts,
* require monthly cost performance reports that include contractor
variance analyses, and:
* require that earned value management captured in cost performance
reports for construction and construction preparation contracts be made
up of discrete measurable tasks so that true cost and schedule
variances can be identified.
We also recommend that the Secretary of Defense identify and schedule
carrier-specific tests to ensure that the dual band radar meets carrier-
specific requirements.
Matters for Congressional Consideration:
On the basis of DOD's response to our report, the department does not
plan to update the independent cost estimate in support of the 2009
budget request or provide Congress a stated confidence level for the
cost estimate along with the budget request. As a result, Congress will
be asked to approve the fiscal year 2009 funding request for ship
construction without the ship's most likely costs and without
understanding DOD's confidence in its cost estimate. Accordingly,
Congress should consider directing the Secretary of Defense to provide
Congress, concurrent with the fiscal year 2009 budget request:
* certification that CVN 78 is budgeted at the most likely costs for
the ship and:
* a stated confidence level for the cost estimate.
Agency Comments and Our Evaluation:
In written comments on a draft of this report, DOD agreed with our
recommendation to identify and schedule carrier-specific testing of the
dual band radar. DOD also concurred with our recommendations aimed at
developing an independent cost surveillance capability at the cognizant
SUPSHIP and strengthening earned value management analysis. DOD noted
that the Navy has recently increased the number of people at SUPSHIP
and expects further increases in fiscal year 2008. Some of the manning
increases will be available for cost surveillance activities. In
addition, DOD stated that SUPSHIP is currently increasing its oversight
of the construction preparation contract for CVN 78 in advance of the
construction contract award, including routine reviews of contractor
earned value data.
DOD stated that it will require monthly cost performance reports that
include variance analyses. The CVN 78 program office's initial decision
to require quarterly cost performance reports would not have provided
frequent formal reporting and review of contractor cost data necessary
to manage a program of this size. DOD also agreed that data captured in
cost performance reports should be composed of discrete measurable
tasks and stated that the Navy plans to conduct a review of the program
management baseline shortly after construction contract award to ensure
that the shipbuilder has properly planned, scheduled, and resourced
work. DOD noted that a similar review would also be conducted for the
construction preparation contract of the first follow-on carrier--CVN
79, but it is not clear if the baseline for this program will be made
up of discrete measurable tasks. If this contract also specifies a
level-of-effort approach, similar to the CVN 78 contract structure, the
Navy may again have difficulty accurately assessing the shipbuilder's
cost and schedule performance. Our recommendation was intended to apply
to all construction and construction preparation contracts--and not
just the contract for CVN 78. We have revised our recommendation to
reflect this distinction.
In a draft of this report we recommended that DOD include in its fiscal
year 2009 budget request a revised cost estimate that is based on
updated Navy and independent DOD cost estimates and provide Congress
with a confidence level for CVN 78 along with its budget request. DOD
stated that the Navy revised its cost estimate for CVN 78 in support of
the upcoming Defense Acquisition Board program review. DOD believes
that this estimate validates the program budget for fiscal year 2008
and plans to update CVN 78's budget request for fiscal year 2009 to
reflect the program's funding needs. Moreover, DOD did not agree to an
updated estimate by the Cost Analysis Improvement Group--DOD's
independent cost analysts. Nonetheless, the differences between the
cost group's prior estimate and the Navy's current estimate remain.
Consequently, the ship's budget levels for construction are likely to
be insufficient.
DOD stated further that it does not routinely use confidence levels in
developing cost estimates because the assumptions used to calculate
confidence levels often lead to incorrect or misleading results. DOD
also expressed concern about the use of high confidence levels in
determining program budgets. We agree that confidence levels can be too
low or too high, but the use of confidence levels is recognized as a
best practice in cost estimating because it validates an estimate's
realism. Moreover, DOD has previously agreed with our recommendation
that the Navy develop confidence levels for all ship cost estimates and
noted that the Navy trained its cost analysts in the use of risk and
uncertainty analysis. In fact, Navy cost analysts established a
confidence level for the CVN 78 cost estimate--the estimate that was
used to determine the budget request. While DOD may believe this
confidence level for CVN 78 is sufficient, it seems appropriate that
Congress have the same information available as it decides what funds
to provide for CVN 78's budget. In the absence of an updated
independent cost estimate and the reservations expressed by DOD over
confidence levels, we have included as matters for congressional
consideration that the Secretary of Defense provide Congress,
concurrent with the fiscal year 2009 budget request, a certification
that CVN 78 is budgeted at the most likely costs for the ship and a
stated confidence level for the cost estimate.
We also recommended that DOD provide Congress with the results of tests
of key systems and technologies; changes to test, production, or
delivery schedules; and the impact of such changes to construction
costs. DOD agreed, stating that such updates are provided in the annual
Selected Acquisition Report (SAR). However, the SAR does not adequately
address our recommendation because it provides only a high-level view
of the program and does not provide the level of detail that is
necessary to identify changes in schedule and understand the risk of
cost growth. As we state in the report, technologies like EMALS are
behind schedule and could affect the ship's construction schedule.
However, neither the 2005 nor the 2006 SAR reports this fact--or even
discusses EMALS at all. Consequently, the SAR alone does not provide
Congress with sufficient information upon which to gauge the realism of
the budget request and this does not fully address our recommendation.
DOD's written comments are included in their entirety in appendix II.
The department also provided technical comments, which were
incorporated into the report as appropriate.
As agreed with your office, unless you announce its contents, we will
not distribute this report further until 30 days from its date. At that
time, we will send copies to the Secretary of Defense, the Secretary of
the Navy, and interested congressional committees. We will also make
copies available to others on request. In addition, the report will be
available at no charge on the GAO Web site at [hyperlink,
http://www.gao.gov].
Please contact me on (202) 512-4841 if you or your staff have any
questions concerning this report. Contact points for our Offices of
Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made contributions to this report
are listed in appendix III.
Signed by:
Paul L. Francis:
Director Acquisition and Sourcing Management:
[End of section]
Appendix I: Scope and Methodology:
To assess the Navy's ability to meet its goals for CVN 78, we examined
the Navy's progress in developing its critical technologies,
stabilizing the ship's design, and estimating the cost of the ship. To
examine the extent to which technology development could affect the
construction and capability of CVN 78, we analyzed all the technologies
that the Navy defined as critical technologies at the time we began our
review. We developed a matrix based on the degree to which the optimum
construction sequence and planned capability of the ship could be
affected if technologies did not deliver as planned. To determine the
impact on construction, we analyzed the in-yard and erect dates and
examined the location, number of design zones, and interfaces for each
technology. To determine the impact on ship capability, we analyzed
ship requirements by reviewing the Operational Requirements Document,
examining the development of sortie generation rates, and assessing the
program's schedule for technology off-ramp decisions. We categorized
each technology based on the results above and examined their degree of
risk by analyzing key program documents. We analyzed, among other
documents, CVN 21 Milestone B Risk Assessment Report, Critical
Technology Integrated Product Team briefings, CVN 78 Program and Design
Review briefings, technology test reports, critical design review
checkout lists, risk matrices, Defense Contract Management Agency
(DCMA) reports, and contractor cost performance reports for key
technologies. To supplement our analysis, we visited contractors and
test sites where the ship's major technologies are being developed and
tested.
To evaluate the Navy's progress in achieving design stability, we
reviewed the ship's design requirements and analyzed metrics captured
in the integrated master schedule, including schedule delinquencies,
key dates, receipt of government-furnished information, and progress in
construction activity and material acquisition. We compared CVN 78's
design process with GAO's knowledge-based acquisition methodology and
past work on shipbuilding programs. We analyzed and compared CVN 78
design metrics with the experience of previous carriers, particularly
CVN 77 and CVN 76. In conducting our analysis, we examined key
documents, including Quarterly Ship Progress Reviews.
We assessed the challenges to building CVN 78 within budget by
examining the Navy's budget request and cost estimates as well as
recent shipyard cost performance. We analyzed the Navy's cost estimates
by examining the Program Life Cycle Cost Estimate for CVN 78 and
updates since the Milestone B decision in 2004. We compared the Navy's
estimate with estimates from Department of Defense (DOD) independent
cost analysts and our past work on shipbuilding cost growth. We
evaluated the ship's cost target by reviewing Defense Contract Audit
Agency (DCAA) reports and examining the shipbuilder's cost-savings
initiatives and cost performance on previous carriers. We assessed the
Navy's practices for cost surveillance by analyzing the construction
preparation contract, contractor cost performance reports, technical
instructions, and Supervisor of Shipbuilding, Conversion and Repair's
(SUPSHIP) Operating Manual. In addition, we reviewed, among other
documents, Cost Analysis Requirements Description, business clearance
memorandums, DOD's Earned Value Implementation Guide, and Naval Sea
Systems Command's (NAVSEA) Cost Estimating Guide.
In conducting our analysis, we held discussions and attended briefings
with the shipbuilder and officials from NAVSEA, including the CVN 21
Program Office; Naval Nuclear Propulsion Directorate; DDG 1000 Program
Office; Program Executive Office, Integrated Warfare Systems; Cost
Engineering and Industrial Analysis Division; Ship Design Integration
and Engineering Division, Contracts Division; Naval Surface Warfare
Center, Carderock; SUPSHIP, Newport News; as well Naval Air Systems
Command, including the program offices for Aviation Support Equipment,
Air Traffic Control and Combat Identification, and Aircraft Launch and
Recovery. In addition, we interviewed officials from the Navy's
Commander of Operational Test and Evaluation Force and DOD's Cost
Analysis Improvement Group; DCAA in Newport News, Virginia; and DCMA in
San Diego, California, Moorestown, New Jersey, and Tewksbury,
Massachusetts.
We conducted our review from July 2006 through June 2007 in accordance
with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from the Department of Defense:
Office Of The Under Secretary Of Defense:
3000 Defense Pentagon:
Washington, DC 20301-3000:
Acquisition,Technology And Logistics:
August 3, 2007:
Mr. Paul L. Francis:
Director, Acquisition and Sourcing Management:
U.S. Government Accountability Office:
441 G Street, N.W.:
Washington, D.C. 20548:
Dear Mr. Francis:
This is the Department of Defense (DoD) response to the GAO Draft
Report 07-866, "Defense Acquisitions: Navy Faces Challenges in
Constructing USS Gerald R. Ford Aircraft Carrier within Budget," dated
July 3, 2007, GAO Code 120576. The Department's comments on the
recommendations are attached. I submitted separately a list of
technical and factual errors for your consideration. The Department
partially concurs with recommendations 1 and 2, which relate to
updating the current cost estimate and reporting the confidence level
for the cost estimates, reporting the results of tests of key systems
and technologies, and any associated impacts to the program,
respectively. The Department concurs with the other 4 recommendations,
which relate to cost surveillance, monthly cost reporting, earned value
management, and testing of the dual band radar system.
The Department appreciates the opportunity to comment on the draft
report. Technical comments were provided separately. For further
questions concerning this report, please contact Ms. Darlene Costello,
Deputy Director, Naval Warfare, 703-697-2205.
Sincerely,
Signed by:
David G. Ahern:
Director:
Portfolio Systems Acquisition:
Enclosure:
As stated:
GAO Draft Report Dated July 3, 2007 GAO-07-866 (GAO Code 120576):
"Defense Acquisitions: Navy Faces Challenges In Constructing USS Gerald
R. Ford Aircraft Carrier Within Budget":
Department Of Defense Comments To The Gao Recommendations:
Recommendation 1: The GAO recommends that the Secretary of Defense
include in the fiscal year 2009 budget request a revised cost estimate
that is based on updated Navy and independent DoD cost estimates and
the actual progress in the program. (p. 42/GAO Draft Report)
DoD Response: Partially Concur. At Milestone B in April 2004,
independent cost estimates were completed by both the Navy and the OSD
Cost Analysis Improvement Group (CAIG). Reconciliation of these two
estimates established the full funding level for the program and
provided the basis for the program's budget for award of the lead ship
construction contract in fiscal year 2007. The Navy, with OSD
concurrence, shifted the lead ship award year from fiscal year 2007 to
fiscal year 2008 in the fiscal year 2006 budget request. The CAIG
agreed with the changes to the Navy budget to reflect the one year move
of the lead ship. In support of the upcoming Defense Acquisition Board
(DAB) program review, now planned for fall, the Navy updated its
Program Life Cycle Cost Estimate, confirming the program budget for the
fiscal year 2008 lead ship award. The Navy update is based on progress
of the program to date. While it is certainly feasible to update the
CAIG independent cost estimate by the FY 2009 budget submission, there
are currently no plans to do so because it is so early in the program
that actual costs incurred to date will provide little insight in
resolving the key differences in cost estimates since Milestone B,
specifically in the areas of labor rates, material costs, and
productivity levels. The fiscal year 2009 President's Budget request
will update the Department's funding needs for the lead ship, CVN 78.
Recommendation 2: The GAO recommends that the Secretary of Defense
provide congress along with the budget request: a stated confidence
level for the cost estimate; results of tests of key systems and
technologies; schedule changes to tests, production, or delivery dates
for key systems; and the impact of changes and test results of key
systems on shipyard costs due to changes in work sequencing and
workload management. (p. 42/GAO Draft Report)
DoD Response: Partially concur. The Department does not concur with the
specific request to include a stated confidence level for the cost
estimate. The Department does not routinely calculate the quantitative
confidence level associated with acquisition program life-cycle cost
estimates for two reasons: 1) the Department frequently does not agree
with the mathematical assumptions most often used to directly calculate
quantitative estimates of confidence levels associated with acquisition
cost estimates, particularly those developed in standard DoD work
breakdown structures, making the results of these confidence
calculations potentially incorrect and misleading; and 2) if
quantitative confidence levels could be calculated correctly, the
recent recommendations to budget to very high confidence levels
associated with DoD cost estimates would be inefficient from a resource
perspective when applied to the entire DoD acquisition portfolio. The
Department partially concurs with the remaining recommendations. In its
regularly submitted Selected Acquisition Reports, the CVN 21 Program
provides updates on any significant impact to ship construction, cost,
schedule, and performance which would include the areas recommended by
GAO.
Recommendation 3: The GAO recommends that the Secretary of Defense
develop an independent cost surveillance capability at the cognizant
SUPSHIP and ensure that cost surveillance activities begin as soon as
actual construction starts. (p. 42/GAO Draft Report)
DoD Response: Concur. The Supervisor of Shipbuilding, Conversion, and
Repair, Newport News (SUPSHIPNN) provides the Program Manager valuable
on-site project management, engineering support, quality assurance,
contract administration, and logistics support. SUPSHIPNN routinely
reviews the contractor's earned value data, however, due to manpower
constraints the project teams conducted the analysis whereas an
independent analysis is preferred. The Navy recognized this and
authorized manning increases of 50 people in fiscal year 2006 and
another 30 people in fiscal year 2008. In addition to providing an
independent organization for earned value analysis, the increased
manpower allows for additional quality assurance monitoring,
engineering review, production control, and oversight of business
operations. SUPSHIPNN is currently increasing its engagement with
construction preparation activities in advance of the ship construction
contract award.
Recommendation 4: The GAO recommends that the Secretary of Defense
require monthly cost performance reports that include contractor
variance analyses. (p. 43/GAO Draft Report)
DoD Response: Concur. In accordance with the Contract Performance
Report (CPR) Data Item Description dated March 30, 2005, and the
DoD/DCMA Earned Value Management Implementation Guide dated October
2006, the CVN 78 detail design and construction contract will require
that CPRs be submitted monthly. The reports will include the
contractor's analysis of any cost or schedule variance in sufficient
detail to permit effective oversight.
Recommendation 5: The GAO recommends that the Secretary of Defense
require that Earned Value Management captured in cost performance
reports be made up of discrete [ed.] measurable tasks so that true cost
and schedule variances can be identified. (p. 43/GAO Draft Report)
DoD Response: Concur. Within 180 days of awarding the detail design and
construction contract for CVN 78 and in accordance with DoD policy, the
CVN 21 Program Office will conduct an Integrated Baseline Review (IBR).
The review will ensure that the contractor has properly planned,
scheduled, and resourced the contract scope of work and has established
a program management baseline comprised of discrete work packages
managed at the control account level. The IBR will establish the
baseline for all subsequent earned value calculations, including cost
and schedule variances. Similarly, the CVN 21 Program Office plans to
conduct an IBR for the CVN 79 construction preparation contract.
Recommendation 6: The GAO recommends that the Secretary of Defense
identify and schedule carrier specific tests to ensure that the dual
band radar meets carrier-specific requirements. (p. 43/GAO Draft
Report)
DoD Response: Concur. The dual band radar testing will be completed to
verify the established performance requirements. Identification of the
test requirements designed to specifically demonstrate any CVN-unique
requirements not previously tested is in progress. The test
requirements and the associated schedule will be documented in the CVN
78 Test and Evaluation Master Plan.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Paul L. Francis (202) 512-4841:
Staff Acknowledgments:
Other contributors to this report were Assistant Director Karen
Zuckerstein, Lisa L. Berardi, Diana Moldafsky, Moshe Schwartz, and
Alyssa Weir.
Footnotes:
[1] The Navy plans to increase its inventory to 12 aircraft carriers
beginning in 2019. See Report to Congress on Annual Long-Range Plan for
Construction of Naval Vessels for FY 2008.
[2] The Navy recently removed the 1,100-ton air-conditioning plant and
the aviation data management control system from its critical
technologies list because they are no longer considered developmental
systems.
[3] Government-furnished equipment includes technologies, electronics,
weapons systems, propulsion, mechanical equipment, and other items,
which are purchased by the Navy and installed by the shipbuilder.
[4] The same contractor is responsible for developing EMALS and the
advanced arresting gear.
[5] This approach has been used to design previous ships and select
sections of CVN 77.
[6] This is partially a result of the 1-year delay in CVN 78's
construction schedule.
[7] The costs are only to procure the equipment; development costs for
the majority of the systems--with the exception of EMALS and the
propulsion system--are captured under separately funded acquisition
programs. While the costs for the equipment are the responsibility of
the Navy, installation and integration costs are the responsibility of
the shipbuilder.
[8] The final estimate approved by DOD leadership at Milestone B
increased the labor hour estimate based on differences between DOD's
independent cost estimate and the Navy's cost estimate. Even with this
adjustment, estimated labor hours are still below the previous two
carriers of the Nimitz class.
[9] See GAO, Defense Acquisitions: Improved Management Practices Could
Help Minimize Cost Growth In Navy Shipbuilding Programs, GAO-05-183
(Washington, D.C.: Feb. 28, 2005).
[10] We examined the average growth in construction budgets for all
first-in-class ships built between 1996 and 2006.
[11] Defense Acquisition Performance Assessment Panel, Defense
Acquisition Performance Assessment Report (Washington, D.C.: January
2006).
[12] The target cost for construction is based on the fiscal year 2008
budget request for basic construction and escalation, minus the cost of
fees and facilities.
[13] We found that savings that were anticipated through the use of
computer-assisted design and manufacturing for the LPD 17 amphibious
transport ship were not achieved. Similar efficiencies estimated for
the DDG 92 destroyer were also not initially achieved. See GAO-05-183,
20.
[14] The material management and accounting system is used to manage
the purchase, use, and disposal of materials used to build the ship.
[15] We found that almost 50 percent of the cost increase in overhead
dollars was related to a growth in labor hours. See GAO-05-183, 16.
[16] In responding to a draft of this report, DOD stated that the Navy
will require the shipbuilder to submit monthly cost performance
reports.
[17] Variance analyses are provided in format 5 of the cost performance
report.
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