In addition, development and testing activities for  the mine countermeasures, anti-submarine warfare, and surface warfare  mission packages continue. Ongoing Development of Key Seaframe Systems Could Impede Efficient Construction of Initial Follow-On Ships

The Navy faces technical, design, and construction challenges to  completing the first four seaframes within current cost and schedule  estimates. The Navy and its shipbuilders have learned lessons from  construction of the first two seaframes that can be applied to construction  of future vessels. However, technical issues with the first two seaframes  have yet to be fully resolved, posing risk of design changes to follow on  ships already under construction. Addressing these technical issues has  required the Navy to implement design changes at the same time LCS 3  and LCS 4 are being built. Incorporating changes during this phase may  disrupt the optimal construction sequence for these ships, requiring  additional labor hours beyond current forecasts. Together, these  challenges may hinder the ability of shipbuilders to apply lessons learned  to follow on ships and could undermine anticipated benefits from recent  capital investments in the LCS shipyards. Mission Package Delays Limit Ship Capabilities in the Near Term and Pose Risk to Efficient Execution of Program Acquisition and Test Plans

Challenges developing and procuring mission packages have delayed the  timely fielding of promised capabilities, limiting the ships’ utility to the  fleet during initial deployments. Until these challenges are resolved, it will  be difficult for the Navy to align seaframe purchases with mission package  procurements and execute planned tests. Key mine countermeasures and  surface warfare systems have encountered technical issues that have  delayed their development and fielding. Further, Navy analysis of LCS anti- submarine warfare systems found these capabilities did not contribute  significantly to the anti-submarine warfare mission. These challenges have  led to procurement delays for all three mission packages. Mission  package delays have also disrupted program test schedules—a situation  exacerbated by decisions to deploy initial ships early, which limit their  availability for operational testing. Until mission package performance is proven, the Navy risks  investing in a fleet of ships that does not deliver promised capability. Mission Package Procurement Delays Could Disrupt Program Plans for Simultaneously Acquiring Seaframes and Mission Packages and Will Limit the Ships’ Utility During Initial Deployments

While the Navy now plans to purchase 17 ships and 13 mission packages  between fiscal year 2011 and fiscal year 2015, developmental delays facing  key mission package systems have positioned the Navy to acquire  significant numbers of seaframes before mission packages are proven. Incomplete Cost Analyses in the LCS Program Have Undermined Program Progress

The Navy entered contract negotiations in 2009 for fiscal year 2010 funded  seaframes with an incomplete understanding of LCS program costs. These  contract negotiations proved unsuccessful, prompting the Navy to revise  its acquisition strategy for the program. The contractors’ proposals for  construction of the next three ships exceeded the approximate $1.4 billion  in funds the Navy had allocated in its fiscal year 2010 budget. In response,  the Navy revised its strategy to construct one seaframe design instead of  two for fiscal year 2010 ships and beyond in an effort to improve  affordability. Navy cost analyses completed prior to the failed negotiations  in 2009 lack several characteristics essential to a high quality cost  estimate. These characteristics include the completion of sensitivity and  uncertainty analyses and an independent review of the cost estimate. The  Navy plans to complete a more comprehensive cost estimate before award  of additional ship contracts in 2010. Navy Cost Analyses Completed Ahead of Contract Negotiations in 2009 Lacked Key Elements Needed to Ensure High Quality

Because the Department of Defense has not yet completed a milestone B  review of the LCS program—to include development and evaluation of a  comprehensive Navy cost estimate and independent cost estimate—the  typical mechanisms and processes for assessing program affordability  were not carried out ahead of the Navy’s 2009 contract negotiations, which  turned out to be unsuccessful. Specifically, we (1) identified technical, design,  and construction challenges to completing the first four seaframes within  current cost and schedule estimates, (2) assessed the Navy’s progress  developing and fielding mission packages, and (3) evaluated the quality of  recent Navy cost analyses for seaframes and their effect on program  progress. a. a.
Why GAO Did This Study

The Navy's Littoral Combat Ship (LCS) is envisioned as a reconfigurable vessel able to meet three missions: surface warfare, mine countermeasures, and anti-submarine warfare. It consists of the ship (seaframe) and the mission package it carries and deploys. The Navy plans to invest over $25 billion through fiscal year 2035 to acquire LCS. However, recurring cost growth and schedule delays have jeopardized the Navy's ability to deliver promised LCS capabilities. Based on a congressional request, GAO (1) identified technical, design, and construction challenges to completing the first four ships within current cost and schedule estimates, (2) assessed the Navy's progress developing and fielding mission packages, and (3) evaluated the quality of recent Navy cost analyses for seaframes and their effect on program progress. GAO's findings are based on an analysis of government and contractor-generated documents, and discussions with defense officials and key contractors. This product is a public version of a For Official Use Only report, GAO-10-1006SU , also issued in August 2010.

What GAO Found

The Navy faces technical, design, and construction challenges to completing the first four seaframes within current cost and schedule estimates. The Navy and its shipbuilders have learned lessons from construction of the first two seaframes that have positioned them to more effectively construct future vessels. However, technical issues with the first two seaframes have yet to be fully resolved. Addressing these technical issues has required the Navy to implement design changes at the same time LCS 3 and LCS 4 are being built. Incorporating changes during this phase will likely require additional labor hours beyond current forecasts. Together, these challenges may hinder the ability of shipbuilders to apply lessons learned to follow-on ships and could undermine anticipated benefits from recent capital investments in the LCS shipyards. Challenges developing mission packages have delayed the timely fielding of promised capabilities, limiting the ships' utility to the fleet during initial deployments. Until these challenges are resolved, it will be difficult for the Navy to align seaframe purchases with mission package procurements and execute planned tests. Key mine countermeasures and surface warfare systems encountered problems in operational and other testing that delayed their fielding. For example, four of six Non-Line-of-Sight Launch System missiles did not hit their intended targets in recent testing, and the Department of Defense has since canceled the program. Further, Navy analysis of anti-submarine warfare systems has shown the planned systems do not contribute significantly to the anti-submarine warfare mission. These combined challenges have led to procurement delays for all three mission packages. Mission package delays have also disrupted program test schedules--a situation exacerbated by early deployments of initial ships--limiting their availability for operational testing. In addition, these delays could disrupt program plans for simultaneously acquiring seaframes and mission packages. Until mission packages are proven, the Navy risks investing in a fleet of ships that does not deliver promised capability. The Navy entered contract negotiations in 2009 for fiscal year 2010 funded seaframes with an incomplete understanding of LCS program costs. These contract negotiations proved unsuccessful, prompting the Navy to revise its acquisition strategy for the program. The contractors' proposals for construction of the next three ships exceeded the approximate $1.4 billion in funds the Navy had allocated in its fiscal year 2010 budget. In response, the Navy revised its strategy to construct one seaframe design instead of two for fiscal year 2010 ships and beyond in an effort to improve affordability. Navy cost analyses completed prior to the failed negotiations in 2009 lack several characteristics essential to a high-quality cost estimate. These characteristics include the completion of sensitivity and uncertainty analyses and an independent review of the cost estimate. The Navy plans to complete a more comprehensive cost estimate before award of additional ship contracts in 2010.

What GAO Recommends

GAO recommends the Secretary of Defense take actions to ensure more realistic cost estimates, timely incorporation of design changes, and coordination of seaframe and mission package acquisition. The Department of Defense concurred with each of these recommendations.