Program officials and shipyard representatives for both seaframes said  that they are actively managing the weight of the variants. INSURV identified  36 out of 52 major systems that should be made common between  the two variants, and the Navy is currently evaluating the business  case for each of these changes. Navy Acquisition of Mission Modules Is Risky Due to Inadequately Defined Early Increments and Continued Developmental Difficulties

The Navy’s acquisition approach for mission modules is risky for three  reasons: (1) the Navy continues to buy early increments of mission  packages that lack defined requirements and clear definition of  incremental cost, schedule, and performance goals; (2) developmental  testing to date continues to identify problems with system performance;  and (3) concerns persist about the overall effectiveness of each mission  package. Navy Has Not Yet Fully Defined Early Increments

The Navy is pursuing an evolutionary acquisition strategy for the mission  packages. The current ASW mission package is early in development, and is not  intended to be fielded until 2016. Significant Questions Remain Regarding the LCS Business Case As the Navy Commits to Producing More Ships and Modules

The Navy continues to buy LCS seaframes and modules even as  significant questions remain about the program and its underlying  business case. Elements of the LCS business case, including its cost, the  time needed to develop and field the system, and its anticipated  capabilities have degraded over time. There are also significant  unknowns related to key LCS operations and support concepts that could  affect the cost of the program and soundness of the business case. By the time key  tests of integrated LCS capability and survivability are completed in  several years, the Navy will have procured or have under contract more  than half of the planned number of seaframes. GAO, Navy’s Ability to Overcome Challenges Facing the Littoral Combat Ship Will  Determine Eventual Capabilities, GAO-10-523 (Washington, D.C.: Aug. 31, 2010). Production of Seaframes and Modules Is Proceeding without Key Knowledge about LCS Capabilities

The Navy plans to make significant investments in seaframes and  mission modules before completing testing designed to demonstrate  whether the integrated ship can perform its intended missions. Further, the Navy expects to procure at least 31 of  the 64 planned mission packages while concurrently conducting  developmental and operational tests on LCS 2 and LCS 3. More recently, USD AT&L rescinded the requirement for the seaframe  program to have a Milestone C review, and also delayed the full-rate  production decision for seaframes from 2015 to 2019 because the Navy  will not be able to meet statutory criteria dependent on the completion of  operational testing until then. Even  though the milestone decision has been delayed, the Navy plans to  continue purchasing seaframes, and if current plans come to fruition the  Navy will have over half the planned seaframes under contract in the  program’s low-rate initial production phase. Further, the Navy will not be able to  demonstrate that the LCS can meet the threshold capabilities defined in  its requirements documentation with mission packages integrated with the  seaframes until 2019. To ensure that the Navy has adequate knowledge to support moving  forward with future seaframe construction, Congress should consider  restricting future funding to the program for construction of additional  seaframes until the Navy:  completes the ongoing LCS technical and design studies, determines the impacts of making any changes resulting from  these studies on the cost and designs of future LCS seaframes,  and reports to Congress on cost-benefit analyses of changes to the  seaframes to change requirements and/or capabilities and to  improve commonality of systems, and the Navy’s plan moving  forward to improve commonality. DOD also stated that no major design changes are  planned to the seaframes. While this may  provide useful information, it would not address the relative advantages of  the variants in performing the three primary LCS missions as we  recommended.
Why GAO Did This Study

The Navy's LCS consists of the ship-- called a seaframe--and mission packages, which provide combat capability. LCS is intended to be reconfigurable to perform three primary missions: surface warfare; mine countermeasures; and anti-submarine warfare. The Navy currently plans to buy 52 seaframes, including two variants being constructed at two U.S. shipyards, and 64 mission packages. The total estimated acquisition cost is about $40 billion in 2010 dollars.
GAO was asked to assess the status of the LCS program. This report examines (1) the progress and challenges associated with seaframe and mission module production, development, and testing; and (2) the soundness of the Navy's business case for the integrated LCS program. GAO analyzed Navy and contractor documents, toured shipyards and LCS ships, and interviewed DOD and Navy officials and contractor representatives.

What GAO Found

The Littoral Combat Ship (LCS) seaframe program continues to face challenges stemming from concurrent design, production, and testing activities. The Navy has taken steps to resolve problems with the lead ships, and the shipyards are beginning to realize benefits from facility improvements and experience. However, testing remains to be completed and the Navy is currently studying potentially significant design changes, such as increasing the commonality of systems between the two ship variants and changing ship capabilities. Changes at this point can compromise the positive impacts of shipyard learning, increase costs, and prolong schedules. The mission module program also has concurrency issues, and testing to date has shown considerable limitations in capabilities. The Navy is pursuing an incremental approach to fielding mission packages, but it has yet to finalize the requirements for each increment and does not plan to achieve the minimum performance requirements for the mine countermeasures and surface warfare packages until the final increments are fielded in 2017 and 2019, respectively.
The Navy continues to buy LCS seaframes and modules even as significant questions remain about the program and its underlying business case. Elements of the LCS business case, including its cost, the time needed to develop and field the system, and its anticipated capabilities have degraded over time. There are also significant unknowns related to key LCS operations and support concepts and the relative advantages and disadvantages of the two seaframe variants. The potential effect of these unknowns on the program is compounded by the Navy's aggressive acquisition strategy. By the time key tests of integrated LCS capability are completed in several years, the Navy will have procured or have under contract more than half of the planned number of seaframes. Almost half of the planned seaframes are already under contract, and the Navy plans to award further contracts in 2016, before the Department of Defense (DOD) makes a decision about full rate production of the ships. The Navy will not be able to demonstrate that mission packages integrated with the seaframes can meet the minimum performance requirements until operational testing for both variants (Freedom and Independence) is completed, currently planned for 2019. The Navy has also essentially bypassed two major acquisition reviews for mission modules, purchasing 8 of the 64 planned mission packages before gaining approval to enter the system development and initial production phases.

What GAO Recommends

To ensure that LCS investments are informed by key information, Congress should consider restricting funding for further ships until the Navy completes several studies about future LCS designs and capabilities. GAO is also making several recommendations, including that DOD limit future seaframe and mission package purchases until it achieves key acquisition and testing milestones. DOD disagreed with these recommendations, stating that slowing seaframe purchases would cause prices to rise and mission package purchases are needed to equip operational ships. GAO believes the Navy does not have adequate knowledge about LCS capabilities to support the planned procurement rate.