	The Course of the LCS Program Has Changed Significantly over Time

When first conceived, the LCS program represented an innovative  approach for conducting naval operations, matched with a unique  acquisition strategy that included two nontraditional shipbuilders and two  different ships based on commercial designs—Lockheed Martin’s  Freedom variant and Austal USA’s Independence variant, respectively. The Navy planned to experiment with these ships to determine its  preferred design variant. However, in relatively short order, this  experimentation strategy was abandoned in favor of a more traditional  acquisition of over 50 ships. While one could argue that a new concept should be expected to evolve  over time, the LCS evolution has been complicated by the fact that major  commitments have been made to build large numbers of ships before  proving their capabilities. LCS Business Case Has Eroded as Cost, Schedule, and Performance Expectations Have Not Been Met

The Navy’s vision for the LCS has evolved significantly over time, with  questions remaining today about the program’s underlying business case. In its simplest form, a business case requires a balance between the  concept selected to satisfy warfighter needs and the resources— technologies, design knowledge, funding, and time—needed to transform  the concept into a product, in this case a ship. The Navy hoped to  deliver large numbers of ships to the fleet quickly at a low cost. LCS was designed with reduced requirements as  compared to other surface combatants, and over time the Navy has  lowered several survivability and lethality requirements further and  removed some design features—making the ships less survivable in their  expected threat environments and less lethal than initially planned. Despite the uncertainties, the Navy’s acquisition strategy involves  effectively demonstrating a commitment to buy all of the planned  frigates—12 in total—before establishing realistic cost, schedule, and  technical parameters—because the Navy will ask Congress to authorize  the contracting approach for the 12 frigates (what the Navy calls a block  buy contract) in 2017. However,  the Navy will not establish its cost estimate until May 2017— presumably  after the Navy requests authorization from Congress in its fiscal year  2018 budget request for the block buy contracting approach for 12  frigates—raising the likelihood that the budget request will not reflect the  most current costs for the program moving forward. In addition to the continued cost uncertainty, the schedule and approach  for the frigate acquisition have undergone substantial changes in the last  year, as shown in table 3. Frigate Does Not Address All Navy Priorities and Will Likely Carry Forward Some of the Limitations of the LCS Designs

As LCS costs grew and capabilities diluted, the Secretary of Defense  directed the Navy to explore alternatives to the LCS to address key  deficiencies. Ultimately, the department chose a frigate  concept based on a minor modified LCS in lieu of more capable small  surface combatant options because of LCS’s relatively lower cost and  quicker ability to field, as well as the ability to upgrade remaining LCS. Limited Opportunities Remain to Shape LCS and Frigate Programs

The Navy’s plans for fiscal years 2017 and 2018 involve significant  decisions for the LCS and the frigate programs, including potential future  commitments of approximately $14 billion for seaframes and mission  packages. The Navy requested funding for two LCS in its fiscal year 2017 budget  request. If these plans  hold, Congress will be asked in a few months to consider authorizing a  block buy of 12 frigates and funding the lead frigate when the fiscal year  2018 budget is proposed—before detail design has begun and the scope  and cost of the design changes needed to turn an LCS into a frigate are  well understood. GAO-16-356. Littoral Combat Ship: Knowledge of Survivability and Lethality Capabilities  Needed Prior to Making Major Funding Decisions. GAO-13-530.
Why GAO Did This Study

The Navy envisioned a revolutionary approach for the LCS program: dual ship designs with interchangeable mission packages intended to provide mission flexibility at a lower cost. This approach has fallen short, with significant cost increases and reduced expectations about mission flexibility and performance. The Navy has changed acquisition approaches several times. The latest change involves minor upgrades to an LCS design—referred to now as a frigate. Yet, questions persist about both the LCS and the frigate.
GAO has reported on the acquisition struggles facing LCS and now the frigate, particularly in GAO-13-530 and GAO-16-356 . This statement discusses: (1) the evolution of the LCS acquisition strategy and business case; (2) key risks in the Navy's plans for the frigate based on the LCS program; and (3) remaining oversight opportunities for the LCS and small surface combatant programs. This statement is largely based on GAO's prior reports and larger work on shipbuilding and acquisition best practices. It incorporates limited updated audit work where appropriate.

What GAO Found

The Navy's vision for Littoral Combat Ship (LCS) program has evolved significantly over the last 15 years, reflecting degradations of the underlying business case. Initial plans to experiment with two different prototype ships adapted from commercial designs were abandoned early in favor of an acquisition approach that committed to numerous ships before proving their capabilities. Ships were not delivered quickly to the fleet at low cost. Rather cost, schedule, and capability expectations degraded over time. In contrast, a sound business case would have balanced needed resources—time, money, and technical knowledge—to transform a concept into the desired product.
Concerned about the LCS's survivability and lethality, in 2014 the Secretary of Defense directed the Navy to evaluate alternatives. After rejecting more capable ships based partly on cost, schedule, and industrial base considerations, the Navy chose the existing LCS designs with minor modifications and re-designated the ship as a frigate. Much of the LCS's capabilities are yet to be demonstrated and the frigate's design, cost, and capabilities are not well-defined. The Navy proposes to commit quickly to the frigate in what it calls a block buy of 12 ships.
Congress has key decisions for fiscal years 2017 and 2018 that have significant funding and oversight implications. First, the Navy has already requested funding to buy two more baseline LCS ships in fiscal year 2017. Second, early next year, the Navy plans to request authorization for a block buy of all 12 frigates and funding in the fiscal year 2018 budget request for the lead frigate. Making these commitments now could make it more difficult to make decisions in the future to reduce or delay the program should that be warranted. A more basic oversight question today is whether a ship that costs twice as much yet delivers less capability than planned warrants an additional investment of nearly $14 billion. GAO has advised Congress to consider not funding the two LCS requested in 2017 given its now obsolete design and existing construction backlogs. Authorizing the block buy strategy for the frigate appears premature. The decisions Congress makes could have implications for what aspiring programs view as acceptable strategies.

What GAO Recommends

GAO is not making any new recommendations in this statement but has made numerous recommendations to the Department of Defense (DOD) in the past on LCS and frigate acquisition, including strengthening the program's business case before proceeding with acquisition decisions. While DOD has, at times, agreed with GAO's recommendations, it has taken limited action to implement them.