	Navy Unlikely to Execute DDG 1000 Program within Current Cost and Schedule Estimates

The DDG 1000 program has from the onset faced a steep challenge framed  by demanding mission requirements, stealth characteristics, and a desire  to reduce manning levels by more than half that of predecessor destroyers. However, notwithstanding these efforts, significant  challenges remain in developing the ship’s design and a number of key  components—in particular, the deckhouse, volume search radar, and the  integrated power system. Although the initial phases of the design are complete, the shipbuilders  will be pressed to complete a large amount of design work by October  2008 when lead ship construction begins. To maintain the start of ship construction in 2008 while continuing to  develop the ship’s technologies, the Navy recently realigned the program’s  schedule. As a result, the integrated power system will not be demonstrated  until a year after the power systems have been produced and installed on  the two lead ships—an approach that increases exposure to cost and  schedule risk in production. As a result of changes in the software development schedule,  the Navy eliminated this margin. DDG 1000 Costs Likely to Exceed Budget

Costs of the DDG 1000 ships are likely to exceed current budgets. Program Execution Challenges Have Required the Navy to Make Trade-Offs In Its Long-Range Shipbuilding Goals

The challenges facing DDG 1000 are not unique among Navy shipbuilding  programs nor to Department of Defense acquisition programs at large. Across the shipbuilding portfolio, the Navy has not been able to execute  programs within cost and schedule estimates, which has, in turn, led to  disruptions in its long-range construction plans. Because fleet requirements remain steady at 313 ships,  the Navy must compensate for near term construction deferrals by  increasing ship construction in the out-years. Achieving this plan,  however, will require significant funding increases in the future, which will  likely be difficult to obtain. These near term trade-offs could have long-  term consequences for balancing mission, presence, industrial base, and  manning tensions. The Navy Consistently Underestimates the Effort Required to Successfully Execute Its New Shipbuilding Programs

Cost growth and schedule delays are persistent problems for shipbuilding  programs as they are for other weapon systems. 1 and 2). LCS is a recent example. Future success in shipbuilding depends on understanding why the  weaknesses in the DDG 1000 business case, which now seem to threaten  the program, did not prompt a similar re-examination several years ago. Over time, the business case for DDG 1000 eroded. The  primary mission of DDG 1000—and the foundation for its business case— was land attack. The reconsideration of the DDG 1000 buy reflects poorly on the  requirements, acquisition, and funding processes that produced the ship’s  business case. Unless some attempt is made to examine the root causes of  decisions that hope for the best and result in poor outcomes, shipbuilding  programs seem destined to the same fate: despite the best efforts to  manage, the scope of the program will outstrip the cost and schedule  budget. This examination must begin with an honest self-appraisal of what  each player in the shipbuilding acquisition process demands of programs  in terms of requirements, technologies, design, industrial base, quantities,  and cost. GAO-08-13. Defense Acquisitions: Challenges Associated with the Navy’s Long-Range  Shipbuilding Plan.
Why GAO Did This Study

The U.S. Navy is about to begin construction of the first Zumwalt-class destroyer (DDG 1000) amid considerable uncertainties and a high likelihood of cost and schedule growth. Significant cost growth and schedule delays are persistent problems that continue to compromise the Navy's shipbuilding goals. This testimony focuses on (1) the challenges faced by the DDG 1000 program and (2) the strain such challenges portend for long term shipbuilding plans.

What GAO Found

From the outset, DDG 1000 has faced a steep challenge framed by technical sophistication, demanding mission requirements, and a cost and schedule budget with little margin for error. The Navy has worked hard to manage the program within these competing goals. Yet recently, the Navy has discussed canceling construction of the remaining five DDG 1000 ships. Although a cancellation may stem from fiscal necessity, it reflects poorly on the acquisition, requirements, and funding processes that produced the DDG 1000 business case. Future success in shipbuilding depends on understanding why the weaknesses in the DDG 1000 business case, which now seem to threaten the program, did not prompt a similar re-examination several years ago. The current program of record faces significant execution risks. The Navy will be pressed to complete a large amount of design work in time for the start of construction in October 2008. Demonstration of key components--particularly, the deckhouse, the volume search radar, and the integrated power system--have fallen behind. Despite restructuring the construction schedule, margins between several major events are gone. For example, land-based tests of the integrated power system are now scheduled after installation on the lead ships. Software development has also proven challenging; the Navy certified the most recent software release before it met about half of its requirements. Further, the full costs of constructing the two lead ships have not been entirely recognized or funded. The complexity and unique features of DDG 1000, along with the design work, testing, and actual construction experience to come, make cost growth beyond budgeted amounts likely. The challenges confronted by DDG 1000 are not unique. Across the shipbuilding portfolio, executing programs within cost and schedule estimates remains problematic, largely because of unexecutable business cases that allow programs to start with a mismatch between scope and resources. Collectively, problems in individual programs erode the buying power of the Navy's long-range construction budget. The Navy compensates for near-term construction deferrals by increasing construction in the out-years, but this will require significant funding increases in the future, which are unlikely. Near-term tradeoffs could have long-term consequences for maintaining a rational balance between mission capability, presence, industrial base, and manning. The Navy's consideration of cutting the DDG 1000 program back comes after over 10 years of development and $13 billion have been invested. Clearly, changes are needed in how programs are conceptualized and approved. Although the elements needed for success are well known, unrealistic compromises are made to make business cases conform to competing demands. An examination of the root causes of unexecutable business cases must be done or shipbuilding programs will continue to produce unsatisfactory outcomes. This examination must begin with an honest appraisal of the competing demands made on new programs early in the acquisition process and how to strike a better balance between them.