Defense Acquisitions:

Navy's Ability to Overcome Challenges Facing the Littoral Combat Ship Will Determine Eventual Capabilities

GAO-10-523: Published: Aug 31, 2010. Publicly Released: Aug 31, 2010.

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The Navy's Littoral Combat Ship (LCS) is envisioned as a reconfigurable vessel able to meet three missions: surface warfare, mine countermeasures, and anti-submarine warfare. It consists of the ship (seaframe) and the mission package it carries and deploys. The Navy plans to invest over $25 billion through fiscal year 2035 to acquire LCS. However, recurring cost growth and schedule delays have jeopardized the Navy's ability to deliver promised LCS capabilities. Based on a congressional request, GAO (1) identified technical, design, and construction challenges to completing the first four ships within current cost and schedule estimates, (2) assessed the Navy's progress developing and fielding mission packages, and (3) evaluated the quality of recent Navy cost analyses for seaframes and their effect on program progress. GAO's findings are based on an analysis of government and contractor-generated documents, and discussions with defense officials and key contractors. This product is a public version of a For Official Use Only report, GAO-10-1006SU, also issued in August 2010.

The Navy faces technical, design, and construction challenges to completing the first four seaframes within current cost and schedule estimates. The Navy and its shipbuilders have learned lessons from construction of the first two seaframes that have positioned them to more effectively construct future vessels. However, technical issues with the first two seaframes have yet to be fully resolved. Addressing these technical issues has required the Navy to implement design changes at the same time LCS 3 and LCS 4 are being built. Incorporating changes during this phase will likely require additional labor hours beyond current forecasts. Together, these challenges may hinder the ability of shipbuilders to apply lessons learned to follow-on ships and could undermine anticipated benefits from recent capital investments in the LCS shipyards. Challenges developing mission packages have delayed the timely fielding of promised capabilities, limiting the ships' utility to the fleet during initial deployments. Until these challenges are resolved, it will be difficult for the Navy to align seaframe purchases with mission package procurements and execute planned tests. Key mine countermeasures and surface warfare systems encountered problems in operational and other testing that delayed their fielding. For example, four of six Non-Line-of-Sight Launch System missiles did not hit their intended targets in recent testing, and the Department of Defense has since canceled the program. Further, Navy analysis of anti-submarine warfare systems has shown the planned systems do not contribute significantly to the anti-submarine warfare mission. These combined challenges have led to procurement delays for all three mission packages. Mission package delays have also disrupted program test schedules--a situation exacerbated by early deployments of initial ships--limiting their availability for operational testing. In addition, these delays could disrupt program plans for simultaneously acquiring seaframes and mission packages. Until mission packages are proven, the Navy risks investing in a fleet of ships that does not deliver promised capability. The Navy entered contract negotiations in 2009 for fiscal year 2010 funded seaframes with an incomplete understanding of LCS program costs. These contract negotiations proved unsuccessful, prompting the Navy to revise its acquisition strategy for the program. The contractors' proposals for construction of the next three ships exceeded the approximate $1.4 billion in funds the Navy had allocated in its fiscal year 2010 budget. In response, the Navy revised its strategy to construct one seaframe design instead of two for fiscal year 2010 ships and beyond in an effort to improve affordability. Navy cost analyses completed prior to the failed negotiations in 2009 lack several characteristics essential to a high-quality cost estimate. These characteristics include the completion of sensitivity and uncertainty analyses and an independent review of the cost estimate. The Navy plans to complete a more comprehensive cost estimate before award of additional ship contracts in 2010. GAO recommends the Secretary of Defense take actions to ensure more realistic cost estimates, timely incorporation of design changes, and coordination of seaframe and mission package acquisition. The Department of Defense concurred with each of these recommendations.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: The department considers this recommendation closed, and has stated that both LCS seaframe designs are now stable, citing the minimal change activity to date for LCS 3 and LCS 4 and the continued availability of change order budgets for those ships. However, the Navy deferred several changes affecting key ship systems until post-delivery for LCS 3 and LCS 4 which has not yet concluded, meaning that any additional changes required may not yet be known. Further, as the Navy continues to address technical deficiencies affecting the lead ships -- generally through design changes -- the scope of deferred work for follow-on ships can reasonably be expected to grow. Finally, recent Navy announcements regarding possible increases to manning and the number of berths on the ships indicate that further redesign is forthcoming. Until the scope of these changes are fully identified -- and priced into LCS contracts -- the department cannot be fully confident that its budgets for follow-on ships are sufficient to offset the cost increases associated with performing work out of sequence. LCS 5 and LCS 6 began fabrication in August 2011, and LCS 7 and LCS 8, awarded in March 2011, began fabrication in November 2012 and June 2013, respectively. These fabrication start dates preceded completion of design changes for the first 4 seaframes.

    Recommendation: To attain the level of knowledge needed to retire design risk and reduce construction disruptions, the Secretary of Defense should ensure changes identified in building and testing the first four ships are incorporated into the basic and functional design by the start of construction for future LCS seaframes.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: The Navy updated the LCS test and evaluation master plan (TEMP) in 2013. This TEMP update reflects events that have occurred since our 2010 report, including the early deployments of LCS 1 and developmental delays to key mine countermeasures and surface warfare mission package systems. Further, the TEMP update identifies additional seaframes beyond LCS 1 and LCS 2 that will be used to support initial operational test and evaluation of both seaframes and mission packages.

    Recommendation: To provide a meaningful framework for evaluating seaframe and mission package performance, the Secretary of Defense should update the LCS test and evaluation master plan to (1) account for any early deployments of seaframes and the significant developmental challenges faced by key mission package systems and (2) identify alternative approaches for completing seaframe and mission package initial operational test and evaluation.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: Since we issued this report, the Navy has significantly altered its planned acquisition strategy and no longer intends to award new block buy contracts in 2016. The Navy now plans to award contracts--with the acquisition strategy to be determined--for 3 ships in fiscal year 2017 and 3 ships in fiscal year 2018, and that it will award contracts for up to 20 of a new modified LCS in 2019. This revised approach alters the timing of our recommendation as written, but does not change our intention, which is to ensure that the Navy does not continue to commit to additional ships until it demonstrates that it has attained some level of knowledge related to, among other thing, operational testing of at least one of the mission packages on each variant. The Navy completed initial operational test and evaluation of the Surface Warfare mission package on the Freedom variant in 2015. However, initial operational test and evaluation of the Mine Countermeasures mission package on the Independence variant continues to be delayed, with testing currently planned for Fall 2015. At the time of this update, Congress was considering language to restrict LCS and Frigate funds in the FY 2016 National Defense Authorization Act (NDAA) until the Navy submits, among other things, an acquisition strategy for LCS 25-32. Similarly, the National Defense Appropriations Act for 2016 recommends an approximate $104.5 million reduction in the Mine Countermeasures mission modules.

    Recommendation: To safeguard against excess quantities of ships and mission packages being purchased before their combined capabilities are demonstrated, the Secretary of Defense should update the LCS acquisition strategy to account for operational testing delays in the program and resequence planned purchases of ships and mission packages, as appropriate.

    Agency Affected: Department of Defense

  4. Status: Closed - Implemented

    Comments: In April 2011, the Navy completed a new program life cycle cost estimate for LCS seaframes in support of the program's Milestone B review. This estimate (and related materials) displayed several key tenets associated with well-documented, comprehensive, accurate, and credible estimates including (1) clear definition of purpose, program characteristics, and ground rules and assumptions; (2) developed estimating plans and approaches; (3) comparison to an independent cost estimate; and (4) completion of sensitivity and risk analyses.

    Recommendation: To provide a sound basis for future LCS investment decisions, the Secretary of Defense should ensure that future LCS cost estimates--including the program life cycle cost estimate currently planned for milestone B--are well-documented, comprehensive, accurate, and credible.

    Agency Affected: Department of Defense


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