Defense Acquisitions:

Success of Advanced SEAL Delivery System Hinges on Establishing a Sound Contracting Strategy and Performance Criteria

GAO-07-745: Published: May 24, 2007. Publicly Released: May 24, 2007.

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The Advanced SEAL Delivery System (ASDS) is a hybrid combatant submersible providing clandestine delivery and extraction of Navy SEALs and equipment in high-threat environments. The first ASDS has had significant performance issues and has cost, to date, over $885 million. In May 2006, Congress requested that GAO review ASDS. This report examines (1) how the Navy managed ASDS risks through its contracts and (2) the status of major technical issues and program restructuring.

The Navy did not effectively oversee the contracts to maintain, repair, and upgrade the ASDS and failed to hold the prime contractor accountable for results. The Navy took responsibility for correcting the boat's deficiencies while continuing to pay the costs and fees of the prime contractor under cost reimbursable contracts to execute the corrections. Before accepting the boat, the Navy went to sources other than the prime contractor to obtain better designs for the propeller and battery and then paid the prime contractor to install them. When the Navy accepted the ASDS in 2003 in an "as is" condition, it relieved the contractor from having to take any additional actions to correct known problems. Since then, the U.S. Special Operations Command has continued to invest millions of dollars to fix existing problems and address new ones in an attempt to make the boat operational. In making this additional investment, the Navy entered into contracts with the prime contractor that provided little incentive to control costs, authorized work before reaching agreement on the scope and price of the work to be performed, and failed to finalize the terms of the work within required time frames. Meanwhile, the contractor's performance continued to be poor, often exceeding initial estimates for the time and cost required to perform the work. ASDS officials took actions over the past 2 years to address these issues, but acknowledge that it is too early to determine the effectiveness of more recent actions to incentivize the contractor's performance. Continuing problems with the existing ASDS led to the Department of Defense's (DOD) April 2006 decision to cancel plans to buy additional ASDS boats, establish an improvement program for the in-service ASDS, and conduct an assessment of alternative material solutions to fulfill remaining operational requirements. The problems have seriously degraded the boat's reliability and performance, and the boat is only available for limited operational use. The results of these improvement and assessment efforts are expected to provide DOD the knowledge needed to determine whether ASDS's reliability can be improved cost-effectively to make ASDS an operational asset and whether an alternative development program is needed to meet the remaining operational requirements. A program decision is planned in mid-2008, after the ASDS improvement program and assessment of alternate material solutions are completed.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: DOD agreed that the Advanced SEAL Delivery System (ASDS) program needs acceptable cost, schedule, and performance criteria. The Navy and U.S. Special Operations Command (SOCOM) developed an ASDS Management Plan that included evaluation criteria and established management program reviews with off ramps. DOD stated that the ASDS future program status would be determined at these management reviews rather than solely at the completion of the ASDS critical systems reviews. In November 2008 ASDS was damaged by a fire that broke out while the batteries were recharging. On July 24, 2009 SOCOM issued a news release stating that the Navy's estimate to repair was $237 million--$180 million more than SOCOM's ASDS budget--and that competing funding priorities prevent the command from repairing ASDS.

    Recommendation: In order to prevent the government from accepting additional undue risks and expense on ASDS, the Secretary of Defense should establish acceptable cost, schedule, and performance criteria, based on fully defined scopes of work, and assess the boat's ability to meet these criteria at the Phase 1 and Phase 2 critical systems reviews and at the management reviews. If, by the time of the program decision in mid-2008, ASDS does not meet acceptable cost, schedule, or performance criteria, the Secretary of Defense should discontinue the effort and not proceed with further tests.

    Agency Affected: Department of Defense

  2. Status: Closed - Not Implemented

    Comments: DOD partially agreed but noted that there are identified design changes (e.g. hydro-dynamic mitigation) that would not not be completed by the 2008 decision due to the time it takes to develop, build, install, and test. The decision on which critical systems reviews (CSR) design changes are implemented and installed will depend on the relative improvement expected, scope of the effort needed, as well as available time and funding. According to DOD, testing might be accomplished without some recommended improvements being made to gauge progress and acceptability of the vehicle and to support an overall program decision. Additionally, DOD commented unforeseen program issues could result in a decision to discontinue the ASDS effort without any additional operational testing. In November 2008 ASDS was damaged by a fire that began while recharging the batteries. The Navy estimated it would cost $237 million and 32 months to repair. In July 2009, the U.S. Special Operations Command stated that this was $180 million more than its ASDS budget and announced that competing funding priorities prevent the command from repairing ASDS.

    Recommendation: In order to prevent the government from accepting additional undue risks and expense on ASDS, the Secretary of Defense should ensure that, if the review results meet acceptable cost, schedule, and performance criteria, the design changes resulting from the Phase 1 critical systems review essential for demonstrating ASDS reliability and maintainability be incorporated in sufficient time to be tested under operational conditions prior to the planned mid-2008 decision on how to best meet special operations forces' requirements.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: DOD concurred with this recommendation. A new Basic Ordering Agreement (BOA) was put in place for the Advanced SEAL Delivery System (ASDS) Program on July 23, 2007. The Delivery Order issued to accomplish Phase 2 of the ASDS critical systems reviews was a Cost Plus Incentive Fee effort which balances risk and promotes contractor accountability. The incentive fee structure is similar to the award fee structure that was successfully utilized for Phase 1 of the critical system reviews. The Navy has continued to maximize the use of incentivized contract efforts for the development of Phase 1 recommendations. The execution of the Delivery Orders are managed and overseen by senior personnel in the Program Office.

    Recommendation: In order to prevent the government from accepting additional undue risks and expense on ASDS, the Secretary of Defense should require the Navy to include provisions in the ASDS contracting strategy chosen when the existing basic ordering agreement expires that (1) appropriately balance risk between the government and the contractor through the contract types selected, (2) incentivize the contractor's performance and promote accountability for achieving desired outcomes by properly structuring the award and incentive fees, and (3) provide the kind of management and oversight of the program necessary to hold the contractor accountable for performance.

    Agency Affected: Department of Defense

 

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