The detail design process,  as shown in figure 1, begins at a high level for the overall ship. After a lengthy debate with DOT&E over  the need for an unmanned self-defense test ship equipped with Aegis and  SPY-6 in initial operational test and evaluation plans, the Navy has begun  to budget for the test ship at the direction of the Secretary of Defense. Table 5 describes changes related to  SPY-6 and other upgrades planned for Flight III. The Navy Lacks Sufficient Knowledge to Procure Flight III Ships as Planned and Oversight Opportunities Are Limited by Planned Program Reporting

If the Navy purchases the first Flight III ship in fiscal year 2016 as planned  by issuing a series of modifications to its existing construction contracts, it  will do so without sufficient acquisition and design knowledge. In addition, while the Navy did not  update its anticipated cost savings under the current (fiscal year 2013- 2017) multiyear procurement to reflect the addition of Flight III ships,  doing so would provide Congress a more accurate savings estimate, as  well as provide improved information to support future multiyear  procurement savings estimates. Further, in February 2017, when the  Navy plans to request authority from Congress to award new multiyear  procurement contracts for 10 Flight III ships in fiscal years 2018-2022, it  will not be positioned to meet the criteria necessary to support the  request. Flight III Ships Will Offset Navy’s Estimated Cost Savings for Its Current Contracts and Meeting Criteria for New Multiyear Procurement Will Be Challenging

Congress authorized procurement of up to 10 DDG 51 ships under the  Navy’s current multiyear procurement for fiscal years 2013 through 2017;  the Navy’s estimated cost savings of $1.54 billion did not take into  account the differing costs between Flight IIA and Flight III ships. The Navy Is Using an Incremental Approach to Achieve Full Flight III Capability

The Navy plans to meet key operational performance requirements for  Flight III initial operational capability in 2023, as outlined in the Navy’s  DDG 51 Flight III Capability Development Document, but is using an  incremental approach to deliver the full capability planned for the ships. To ensure sufficient knowledge of Flight III design and enable some Flight  III construction history to inform cost expectations for future multiyear  procurement decisions, we also recommend that the Secretary of  Defense direct the Secretary of the Navy to:
Refrain from seeking authority from Congress for multiyear authority  for the procurement of Flight III ships, as currently planned for 2018,  until the Navy is able to preliminarily find, relying on DDG 51 Flight III  data, that the Flight III configuration will meet criteria for seeking  multiyear procurement authority, such as a stable design and realistic  cost estimates. DOD partially  concurred with our three recommendations. We continue to believe that the improved  transparency that would be achieved by formally recognizing Flight III as  a major subprogram would be beneficial to Congress and to the  taxpayers. Appendix I: Objectives, Scope, and Methodology

This report evaluates the Navy’s planned acquisition strategies for the  DDG 51-class Flight III ships and the Air and Missile Defense Radar  (AMDR) programs. Specifically, we assessed (1) the status of the Navy’s  efforts to develop, test, and integrate the SPY-6 radar and Aegis combat  system in support of DDG 51 Flight III, including plans for operational  testing; (2) challenges, if any, associated with the Navy’s plans to design  and construct Flight III ships; (3) the Flight III acquisition approach and  oversight activities, including reporting on cost, schedule, and  performance; and (4) the capabilities that Flight III ships are expected to  provide and the extent to which these capabilities fulfill the Navy’s existing  and future surface combatant needs. This included discussion  of how the Flight III integrated air and missile defense systems— particularly the SPY-6 radar, Aegis, and Evolved Sea Sparrow Missile  systems—could be effectively tested to demonstrate the ship’s self- defense capabilities.
Why GAO Did This Study

Over the next 10 years, the Navy plans to spend more than $50 billion to design and procure 22 Flight III destroyers, an upgrade from Flight IIA ships. Flight III ships will include the new SPY-6 radar system and Aegis (ballistic missile defense) combat system upgrades. The Navy's MYP approach requires the Navy to seek authority to do so from Congress.
House report 114-102 included a provision for GAO to examine the Navy's plans for the DDG 51 Flight III ships and AMDR. This report assesses (1) the status of efforts to develop, test, and integrate SPY-6 and Aegis in support of Flight III; (2) challenges, if any, associated with the Navy's plans to design and construct Flight III ships; and (3) the Flight III acquisition approach and oversight activities, among other issues. GAO reviewed key acquisition documents and met with Navy and other DOD officials and contractors.

What GAO Found

The Air and Missile Defense Radar (AMDR) program's SPY-6 radar is progressing largely as planned, but extensive development and testing remains. Testing of the integrated SPY-6 and full baseline Aegis combat system upgrade—beginning in late 2020—will be crucial for demonstrating readiness to deliver improved air and missile defense capabilities to the first DDG 51 Flight III ship in 2023. After a lengthy debate between the Navy and the Department of Defense's (DOD) Director of Operational Test and Evaluation, the Secretary of Defense directed the Navy to fund unmanned self-defense test ship upgrades for Flight III operational testing, but work remains to finalize a test strategy.
Flight III ship design and construction will be complex—primarily due to changes needed to incorporate SPY-6 onto the ship, as shown in the figure.
The Navy has not demonstrated sufficient acquisition and design knowledge regarding its Flight III procurement approach and opportunities exist to enhance oversight. If the Navy procures the lead Flight III ship in fiscal year (FY) 2016 as planned, limited detail design knowledge will be available to inform the procurement. In addition, the Navy's anticipated cost savings under the FY 2013-2017 Flight IIA multiyear procurement (MYP) plan do not reflect the planned addition of Flight III ships. While the Navy did not update its cost savings with Flight III information, doing so would increase transparency and could help inform expected savings under the next MYP. The Navy plans to request authority to award new Flight III MYP contracts (FY 2018-2022) in February 2017. The Navy will be asking Congress for this authority to procure nearly half of Flight III ships before being able to meet the criteria to seek this authority. For example, detail design will not be complete and costs will not be informed by any Flight III construction history. Finally, Flight III cost and schedule performance is not distinguished from that of the overall DDG 51 ship class in annual reports to Congress. Establishing Flight III as a major subprogram would improve reporting and offer greater performance insight.

What GAO Recommends

Congress should consider requiring an update of estimated savings for the current DDG 51 MYP to reflect the addition of Flight III ships. The Navy should delay procurement of the lead Flight III ship and refrain from seeking authority for a MYP contract until it can meet criteria required for seeking this authority. DOD should also designate Flight III as a major subprogram to improve oversight. DOD partially concurred with all three recommendations but is not planning to take any new actions to address them. GAO continues to believe the recommendations are valid.