Technology, Design, and Construction Challenges Pose Risk to Lead Ship Cost and Schedule Outcomes

While construction of CVN 78 is more than halfway complete, the Navy  and shipbuilder must still overcome significant technology development,  design, and construction challenges in order to deliver a fully functional  ship to the fleet at the currently budgeted cost of $12.8 billion and the  February 2016 delivery date. This strategy introduces the risk of late and costly design  changes aboard the ship. In contrast to the knowledge- based approach used by leading commercial ship buyers, the Navy, in an  effort to meet required installation dates aboard CVN 78, elected to  produce these systems prior to demonstrating their maturity. By comparison, progress constructing CVN 78 has been constrained by  inefficient out-of-sequence work driven largely by material shortfalls,  engineering challenges, and delays developing and installing certain  critical technology systems (provided by the Navy to the shipbuilder for  installation). Demonstration of Ship Capabilities after Delivery Is Limited by Test Plan Deficiencies and Reliability Shortfalls

Several factors are likely to hamper the Navy’s plans to demonstrate CVN  78 capabilities after it accepts delivery of the ship. In particular, significant  risk is introduced due to the Navy’s plan to conduct integration testing of  critical technologies concurrently with the ship’s IOT&E. This strategy will  constrain opportunities to implement timely, corrective actions if problems  are discovered with key ship systems. If significant discoveries are made  during IOT&E, initial deployment could be delayed. Further, key ship systems face reliability shortfalls that the Navy does not  expect to resolve until many years after CVN 78 commissioning, which  will limit the ship’s mission effectiveness during initial deployments and  likely increase costs to the government. DOD and Navy operational test officials stated that they  share these concerns. Delayed Availability of Joint Strike Fighter Aircraft Has Hampered Integration Efforts

The Ford-class is designed to accommodate the new Joint Strike Fighter  carrier variant aircraft (F-35C), but aircraft development and testing  delays have affected integration activities on CVN 78. The projected reliability  shortfalls for these key systems—even under the Navy’s optimistic  assumptions—could delay CVN 78’s planned entry into IOT&E in 2017. Lead Ship Unknowns Complicate the Navy’s Ability to Determine Follow-on Ship Cost Outcomes

The Navy and shipbuilder are implementing changes to the build strategy  for CVN 79 aimed at reducing that ship’s costs before the construction  contract is awarded, currently planned for September 2013. Remaining technical and design  risks with CVN 78, however, could interfere with the Navy’s ability to  achieve its desired cost savings for CVN 79. These uncertainties also  affect the Navy and contractor’s ability to assess the likely CVN 79 costs  ahead of contract award and, when coupled with the existing sole source  environment for aircraft carrier construction, compromise the  government’s negotiating position for CVN 79. The shipbuilder plans to  employ a new build strategy for CVN 79 that (1) allots more time to fund  and construct the ship compared to CVN 78 and (2) implements process  improvements aimed at completing more work earlier in the build  process—steps that the Navy anticipates will achieve construction  efficiency improvements as compared to CVN 78. One key component of the CVN 79 cost estimate is a Navy assumption  that 15 percent fewer labor hours will be required to construct the follow- on ship as compared to the lead ship. Recommendations for Executive Action

We recommend the Secretary of Defense direct the Secretary of the Navy  to take the following five actions:  To ensure Ford-class carrier acquisitions are supported by sound  requirements and a comprehensive testing strategy, and to promote the  introduction of reliable, warfighting capable ships into the fleet, take the  following actions prior to accepting delivery of CVN 78:
Conduct a cost-benefit analysis on (1) currently required capabilities,  including increased sortie generation rates and reduced manning and  (2) the time and money needed to field systems to provide these  capabilities, in light of known and projected reliability shortfalls for  critical systems. In its written  comments, which are reprinted in appendix II, DOD concurred with one of  our recommendations, partially concurred with three recommendations,  and did not concur with one recommendation. Waiting until IOT&E is completed may  be too late to make effective tradeoffs among cost, schedule, and  performance. Appendix I: Scope and Methodology

This report evaluates the Navy’s acquisition of Ford-class aircraft carriers. Specifically, we (1) assessed technical, design, and construction  challenges the Navy faces in delivering the lead ship, CVN 78, within  current budget and schedule estimates; (2) evaluated whether the Navy’s  post-delivery test and evaluation strategy for CVN 78 will provide timely  demonstration of required capabilities; and (3) identified actions the Navy  is taking to improve cost outcomes for the first follow-on ship, CVN 79,  ahead of contract award for detail design and construction.
Why GAO Did This Study

The Navy plans to spend over $43 billion to produce three Ford-class aircraft carriers. The lead ship, CVN 78, is under construction, and preparation work is underway for the second, CVN 79. These ships will feature new technologies designed to increase capability and reduce crew size. GAO was asked to evaluate the progress of the Ford class. This report examines (1) technical, design, and construction challenges to delivering the lead ship within budget and schedule estimates; (2) the Navy's test strategy for demonstrating CVN 78's required capabilities; and (3) actions the Navy is taking to improve CVN 79 cost outcomes. GAO analyzed documents related to mission requirements, acquisition plans and performance, and testing strategies, and interviewed Department of Defense (DOD) and contractor officials.

What GAO Found

The Navy faces technical, design, and construction challenges to completing Gerald R. Ford ( CVN 78) that have led to significant cost increases and reduced the likelihood that a fully functional ship will be delivered on time. The Navy has achieved mixed progress to date developing CVN 78's critical technologies, such as a system intended to more effectively launch aircraft from the ship. In an effort to meet required installation dates aboard CVN 78, the Navy has elected to produce some of these systems prior to demonstrating their maturity--a strategy that GAO's previous work has shown introduces risk of late and costly design changes and rework, and leaves little margin to incorporate additional weight growth in the ship. In addition, progress in constructing CVN 78 has been overshadowed by inefficient out-of-sequence work, driven largely by material shortfalls, engineering challenges, and delays developing and installing critical technology systems. These events are occurring in a constrained budget environment, even as lead ship costs have increased by over 22 percent since construction authorization in fiscal year 2008--to $12.8 billion. Additional increases could follow due to uncertainties facing critical technology systems and shipbuilder underperformance.
The Navy's strategy for providing timely demonstration of CVN 78 capabilities is hampered by post-delivery test plan deficiencies, Joint Strike Fighter aircraft delays, and reliability shortfalls affecting key ship systems. Additional risk is introduced due to the Navy's plan to conduct integration testing of key systems with the ship at the same time as initial operational test and evaluation (IOT&E). This strategy will constrain opportunities to implement timely, corrective actions if problems are discovered with key ship systems. In addition, significant discoveries during IOT&E could delay demonstration of ship capabilities. The Joint Strike Fighter, intended to operate with the carrier, has faced delays, and there is the likelihood of costly retrofits to the ship to accommodate the aircraft after CVN 78 is delivered to the Navy. But even after the ship commissions, several key ship systems will continue to face significant reliability shortfalls that will likely increase costs to the government and limit the ship's mission effectiveness. The extent of these limitations will not be known until after IOT&E. GAO contemplated making a recommendation to delay CVN 78 commissioning until the ship successfully completes IOT&E. However, based on additional information provided by DOD, GAO decided not to include this recommendation in the report.
The Navy and shipbuilder are implementing process improvements aimed at reducing the cost of the follow-on ship, John F. Kennedy (CVN 79), ahead of the main construction contract award for that ship, currently planned for September 2013. CVN 79 is to be of nearly identical design to CVN 78. The shipbuilder plans to employ a new, more efficient build strategy, but remaining technical and design risks with the lead ship could interfere with the Navy's ability to achieve its desired cost savings for CVN 79. These uncertainties also affect the soundness of the Navy's current CVN 79 cost estimate, which is optimistic. These factors, when coupled with the existing sole source environment for aircraft carrier construction, may compromise the government's negotiating position for CVN 79.

What GAO Recommends

GAO recommends the Secretary of Defense take several actions aimed at ensuring Ford-class carrier acquisitions are supported by sound requirements and a comprehensive testing strategy, including conducting a cost-benefit analysis of required capabilities and associated costs. GAO is also recommending actions to improve the Navys knowledge about CVN 79 capabilities and costs before beginning contract negotiations. DOD concurred with one recommendation, partially concurred with three others, and did not concur with the recommendation to defer CVN 79s detail design and construction contract award. GAO maintains that DODs current schedule for awarding this contract undermines the governments negotiating position.