ACV 2.0 would focus on exploring technologies to attain higher water  speed capability. The ACV 1.1 program was initiated in 2014 and development of ACV 1.1  vehicles started in November 2015. The Marine Corps acquisition of the ACV employs a two- phase strategy for selecting a contractor to produce the ACV fleet. Ongoing test results, including the operational  assessment, will be used to inform the ACV June 2018 production  decision. The ACV program plans to produce at least 208 vehicles after  exercising contract options for 2 years of low-rate production of 30  vehicles each year starting in 2018 and then exercise options for 2 years  of full-rate production for the remaining 148 or more vehicles starting in  2020. This report represents the last in the series of reports we are to issue in  response to the fiscal year 2014 National Defense Authorization Act,  which contains a provision that we review and report annually on the ACV  program until 2018. DOD did not  concur with that recommendation. ACV Program Is on Track to Meet Development Cost Goals with No Additional Schedule Delays

Costs for the development phase of ACV are on track to meet cost goals  established at the start of development, based on a recent Navy estimate,  the ACV program office, and reporting from the contractors. In September  2017, the ACV program’s Defense Acquisition Executive Summary  Report for ACV provided a Navy cost estimate for development of $750.7  million, less than the $810.5 million baseline established at the start of  development in November 2015. The Marine Corps has made no major changes to the ACV acquisition  schedule since we previously reported on the program in April 2017. ACV May Enter Production with Manufacturing Maturity That Does Not Meet Best Practices

The ACV program office is in the process of conducting tests and  assessments to determine if the program is on track to meet the criteria to  enter production, but program officials told us the Navy—which has the  authority to approve major acquisition milestone decisions for the  program—may choose to start low-rate production without meeting  established best practices for manufacturing maturity. Our previous reviews about  manufacturing best practices found that identifying manufacturing risks  early in the acquisition cycle and assessing those risks prior to key  decision points, such as the decision to enter production, reduces the  likelihood of cost growth and potential delays. The ratings are applied to various risk areas  such as design, materials, process capability and control, and quality  management. However, GAO’s previously identified best practices for managing  manufacturing risks recommend programs reach a higher level—MRL- 9— for the risk area of process capability and control before entering low- rate production. The MRL Deskbook recommends that a program achieve an MRL-9 at the start of full-rate  production. Program officials stated that they could enter production at a lower level  of manufacturing readiness than DOD guidance or GAO identified best  practices suggest. Entering the production phase of the ACV acquisition with manufacturing  readiness levels lower than those recommended by DOD guidance and  GAO-identified best practices would increase the likelihood of outcomes  associated with insufficiently mature manufacturing capabilities, such as  production quality issues and schedule delays. In fiscal  year 2018, Congress authorized funding for the program to start  production, but the decision to enter a second year of low-rate production  and the decision to start full-rate production represent opportunities for  the ACV program to verify the manufacturer has achieved a sufficient  level of readiness before commencing production of the bulk of vehicles. The Secretary of the Navy should take steps to ensure that the Marine  Corps not enter the second year of low-rate production until after the  Marine Corps has determined that the contractor has achieved an MRL of  at least an 8 for all risk areas. DOD noted that it may be  reasonable to proceed into manufacturing at lower MRLs, if steps to  mitigate identified risks are taken. We believe our recommendation to  achieve an overall MRL-8 by the second year of low-rate production is a  reasonable goal, considering it gives the ACV program an additional year  after the point at which the MRL Deskbook recommends reaching MRL- 8—the start of low-rate production. Therefore, we made no  changes to the recommendations in response to the comments.
Why GAO Did This Study

In June 2018, the United States Marine Corps plans to select a contractor and begin low-rate production for the ACV, a vehicle used to transport Marines from ship to shore under hostile conditions. The ACV will replace all or part of the current Assault Amphibious Vehicle fleet.
The National Defense Authorization Act for Fiscal Year 2014 included a provision for GAO to annually review and report on the ACV program until 2018. This report, GAO's last under that provision, assesses the extent to which the Marine Corps is making progress toward (1) meeting cost and schedule goals for the ACV program and (2) demonstrating manufacturing readiness.
GAO reviewed program cost estimates, updated schedules, and program assessments of test results and production readiness, as well as compared ACV acquisition efforts to DOD guidance and GAO-identified best practices. GAO also interviewed program and testing officials, and visited both ACV primary assembly locations.

What GAO Found

The first version of the Amphibious Combat Vehicle (ACV 1.1) is on track to meet development cost goals with no additional anticipated delays for major acquisition milestones. With regard to costs, the development phase of ACV 1.1 is on pace to not exceed cost goals that were established at the start of development, based on a recent Navy estimate, the ACV program office, and reporting from the contractors. For example, a September 2017 program progress review reported a Navy estimate of the cost of development at $750.7 million, less than the $810.5 million baseline established at the beginning of development. With regard to schedule, the ACV program has made no major changes to the acquisition schedule since GAO previously reported on the program in April 2017. ACV 1.1 program officials are in the process of preparing to down-select to a single contactor and enter low-rate production in June 2018, start a second round of low rate production the following year, and begin full-rate production in 2020. ACV 1.1 may be followed by the acquisition of other versions (ACV 1.2 and ACV 2.0) with advanced capabilities such as higher water speeds.
The ACV program is preparing to start production of ACV 1.1, which includes determining that the contractors' manufacturing capabilities are sufficiently mature. However, program officials are considering entering production with a lower level of manufacturing maturity than called for in Department of Defense (DOD) guidance or GAO identified best practices. The ACV program measures manufacturing maturity with manufacturing readiness levels (MRL) for risk areas such as design, materials, process capability and control, and quality management. DOD guidance for weapons acquisition production recommends that programs achieve an MRL of 8 across all risk areas before entering low-rate production and that a program achieve an MRL of 9 at the start of full-rate production. GAO's previous reviews about manufacturing best practices found that achieving manufacturing maturity and identifying production risks early in the acquisition cycle and assessing those risks prior to key decision points, such as the decision to enter production, reduces the likelihood of quality issues, cost growth, and delays. The Marine Corps contract option for producing the first round of low-rate production for ACV 1.1 will be exercised after June 2018; the contract also contains additional options for production vehicles. Making the decisions to proceed with the second round of low-rate production and for the start of full-rate production before meeting called-for levels of manufacturing readiness criteria increases the risk that ACV 1.1 will witness delays and increased costs.

What GAO Recommends

GAO recommends the Marine Corps (1) not enter the second year of low-rate production for ACV 1.1 until after the contractor has achieved an overall MRL of 8 and (2) not enter full-rate production until achieving an overall MRL of 9. DOD partially concurred with both recommendations, but noted that it is reasonable to proceed at lower MRL levels if steps are taken to mitigate risk. GAO made no changes to its recommendations in response to these comments.