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: Open

    Comments: The Navy's fiscal year 2015 SCN request funds construction of three seaframes -- LCS 21, LCS 22, and LCS 23. This request reflects a decrease in one seaframe as compared to the quantities previously called for in the Navy's fiscal year 2014 request. The Navy now anticipates purchasing 23 seaframes by 2016 -- 9 of which will be delivered by then. However, it will not have a single fully capable mission module by that time. Major elements of all three mission modules (mine countermeasures, surface warfare, and antisubmarine warfare) have yet to be demonstrated. Until mission package and operational testing progresses -- and key systems are proven effective and suitable onboard seaframes -- the Navy cannot be certain that the LCS will deliver the full capability desired. Cost and performance risks increase with a commitment to higher quantities. The Navy believes this increased commitment is appropriately balanced against competing risks in the program. In February 2014, however, the Secretary of Defense stated concerns as to whether LCS has the independent protection and firepower to operate and survive against a more advanced military adversary and emerging new technologies, especially in the Asia-Pacific region. The Secretary further stated that, in light of continued fiscal restraints, the Department of Defense (DOD) must direct future shipbuilding resources toward platforms that can operate in every region and along the full spectrum of conflict. The Secretary subsequently directed that the Navy not engage in new contract negotiations beyond 32 ships and that it submit alternative proposals to procure a capable and lethal small surface combatant, generally consistent with the capabilities of a frigate. The Secretary further directed the Navy to consider a completely new design, existing ship designs, and a modified LCS within its alternative proposals. These proposals are due to the Secretary of Defense in late 2014 in time to inform DOD's budget submission for fiscal year 2016. The results of this analysis may compel changes to the LCS acquisition strategy that would be responsive to our recommendation.

    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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