The LCS seaframe’s combat capability will be provided by one of three  interchangeable mission packages. Currently the Navy plans to buy 64 mission packages for three  mission areas—24 for mine countermeasures, 16 for antisubmarine  warfare, and 24 for surface warfare. The Navy’s Operating and Support Cost Estimates Do Not Fully Reflect Best Practices and May Change Due to Program Uncertainties

		The Navy Estimated Operating and Support Costs for the LCS Program

The Navy has estimated operating and support costs that include most  elements of the LCS program. The lack of cost estimates that fully meet best practices,  such as including an analysis to assess the likelihood that costs will be  greater than estimated, raises questions about the credibility of the  estimates that have been produced to date and limits the ability of decision  makers to make fully informed program and investment decisions, such as:    accurately assessing the affordability of LCS within the broader portfolio  of Navy and DOD programs,  identifying the resources needed over the long term to support the planned  investment in the LCS force structure,    assessing the long-term cost implications of alternative acquisition  strategies such as which seaframe the Navy will buy for the remainder of  the 55-ship class, and    analyzing the costs of options for what to do with the two seaframes of the  design that is not selected. The Navy Has Made Progress but Faces Risks in Implementing Its Plans to Operate and Support LCS

		The Navy Faces Risks in Implementing Its Personnel Plans over the Long Term

Although the Navy is conducting studies to determine personnel  requirements for LCS, it has not fully identified the number of ship and  shore support personnel required to support LCS over the long term and  faces risks in its ability to identify and assign personnel over the long term. Our analysis of a sample of LCS positions showed  that the number of training days required before an LCS sailor reports to  the crew is significantly longer than for sailors in comparable positions on  other ships—an average of 484 days versus 126 days for an amphibious  transport docking ship and 103 days for a destroyer. The 2008  National Defense Strategy describes the need to assess and mitigate risk  in the execution of defense programs critical to national security,  including risks relating to the department’s capacity to execute future  missions and manage personnel, training, and maintenance. The Navy acknowledges that there are risks in implementing its new LCS  operational concepts for personnel, training, and maintenance, and has  established some groups to manage the details of how to implement the  concepts, such as the cross-functional teams and the Oversight Board. In contrast, having a  thorough risk assessment of the new operational approaches to personnel,  training, and maintenance would provide decision makers with  information to link the effectiveness of these new operational concepts  with decisions on program investment, specifically the pace of  procurement. As a result, the Navy’s decision to operate the LCS with  a core crew of only 40 sailors drove the need to develop new operational  concepts. If the operational concepts for personnel,  training, and maintenance cannot be implemented as desired, the Navy  may face operational limitations, may have to reengineer its operational  concept, or may have to make significant design changes to the ship after  committing to building almost half of the class. Moreover, doing so could  help the Navy avoid costly retrofits if ship design changes are needed in  order to implement its new concepts. Recommendations for Executive Action

We recommend that the Secretary of Defense take the following six  actions:  In order to assess the long-term affordability of the LCS program and  enhance decision making ability for the LCS program, we recommend that  the Secretary of Defense direct the Secretary of the Navy to take the  following actions:    before deciding which seaframe to buy, produce a complete estimate of  the long-term operating and support costs which fully reflects cost  estimating best practices for each seaframe and use these updated  estimates in deciding which seaframe to buy for the remainder of the  program;    use an updated estimate as a basis for analyzing the costs and benefits of  options regarding the two seaframes built but not selected for long-term  production, and use the results of this analysis in making the decision of  how to use, or whether to retire, these seaframes;    annually update the cost estimate for the long-term operating and support  costs of the seaframe and each mission package using cost estimating best  practices and submit the results to DOD as well as to Congress as part of  the LCS Selected Acquisition Report;    perform complete and updated force structure analyses on the LCS  mission packages to help determine the appropriate purchase quantities  over the life of the program, and use these updated quantities for the  mission package cost estimate; and    perform an updated seaframe force structure analysis when key  underlying assumptions affecting seaframe quantities change, such as  crewing policy, overseas homeports, or presence requirements, and use  this updated analysis to adjust quantities and to update the seaframe cost  estimate. We also reviewed prior GAO products and DOD guidance on  risk management to assess the extent that Navy plans included  assessments of program risk.
Why GAO Did This Study

The Navy plans to spend about $28 billion to buy 55 Littoral Combat Ships (LCS) and at least 64 interchangeable mission packages to perform one of three missions--mine countermeasures, antisubmarine warfare, and surface warfare--in waters close to shore. The Navy has been developing two different LCS seaframes and plans to select one for production in 2010. Due to the small 78-person crew size--40 core crew, 23 for aviation detachment, and typically 15 for mission packages--the Navy is developing new concepts for personnel, training, and maintenance. GAO was asked to assess the extent to which the Department of Defense (DOD) has (1) estimated LCS long-term operating and support costs and (2) developed plans to operate and support LCS. To do so, GAO compared Navy cost estimates to DOD guidance and GAO best practices; and analyzed Navy plans to implement its concepts for personnel, training, and maintenance and the extent these plans included assessments of program risk.

What GAO Found

The Navy estimated operating and support costs for LCS seaframes and mission packages in 2009, but the estimates do not fully reflect DOD and GAO best practices for cost estimating and may change due to program uncertainties. GAO's analysis of the Navy's 2009 estimates showed that the operating and support costs for seaframes and mission packages could total $84 billion (in constant fiscal year 2009 dollars) through about 2050. However, the Navy did not follow some best practices for developing an estimate such as (1) analyzing the likelihood that the costs could be greater than estimated, (2) fully assessing how the estimate may change as key assumptions change, and (3) requesting an independent estimate and comparing it with the program estimate. The estimates may also be affected by program uncertainties, such as potential changes to force structure that could alter the number of ships and mission packages required. The costs to operate and support a weapon system can total 70 percent of a system's costs, and the lack of an estimate that fully reflects best practices could limit decision makers' ability to identify the resources that will be needed over the long term to support the planned investment in LCS force structure. With a decision pending in 2010 on which seaframe to buy for the remainder of the program, decision makers could lack critical information to assess the full costs of the alternatives. The Navy has made progress in developing operational concepts for LCS, but faces risks in implementing its new concepts for personnel, training, and maintenance that are necessitated by the small crew size. Specifically, the Navy faces risks in its ability to identify and assign personnel given the time needed to achieve the extensive training required. GAO's analysis of a sample of LCS positions showed an average of 484 days of training is required before reporting to a crew, significantly more than for comparable positions on other surface ships. Moreover, the Navy's maintenance concept relies heavily on distance support, with little maintenance performed on ship. The Navy acknowledges that there are risks in implementing its new concepts and has established groups to address how to implement them. However, these groups have not performed a risk assessment as described in the 2008 National Defense Strategy. The Strategy describes the need to assess and mitigate risks to executing future missions and managing personnel, training, and maintenance. If the Navy cannot implement its concepts as envisioned, it may face operational limitations, have to reengineer its operational concepts, or have to alter the ship design. Many of the concepts will remain unproven until 2013 or later, when the Navy will have committed to building almost half the class. Having a thorough risk assessment of the new operational concepts would provide decision makers with information to link the effectiveness of these new concepts with decisions on program investment, including the pace of procurement.