Defense Infrastructure: Navy Can Improve the Quality of Its Cost Estimate to Homeport an Aircraft Carrier at Naval Station Mayport
GAO-11-309
Published: Mar 03, 2011. Publicly Released: Mar 03, 2011.
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Highlights
The 2001 Quadrennial Defense Review called for the Navy to provide more warfighting assets more quickly to multiple locations. Subsequently, the Navy made a preliminary decision to homeport a nuclear-powered aircraft carrier at Naval Station Mayport, Florida, which was affirmed by the 2010 Quadrennial Defense Review. In House Report 111-491, accompanying a proposed bill for the Fiscal Year 2011 National Defense Authorization Act (H.R. 5136), GAO was directed to develop an independent estimate of the total federal costs for the proposed homeporting. GAO's objectives were to (1) develop an independent estimate of the full life-cycle costs to homeport a nuclear aircraft carrier at Mayport and (2) determine to what extent the Navy's estimate meets the characteristics of a high-quality cost estimate. To do this, GAO worked with a firm experienced in preparing life-cycle cost estimates for major federal acquisitions and compared the Navy's cost estimating practices with the best practices in GAO's "Cost Estimating and Assessment Guide."
Recommendations
Recommendations for Executive Action
| Agency Affected | Recommendation | Status |
|---|---|---|
| Department of Defense | To improve the Navy's life-cycle cost estimate for the planned homeporting of a nuclear-powered aircraft carrier at Naval Station Mayport, Florida, and to incorporate to a greater extent the best practices identified by GAO for developing a high-quality cost estimate in future revisions of its Mayport nuclear carrier homeporting cost estimate as part of the annual budgetary process or in response to future congressional requests, the Secretary of Defense should direct the Secretary of the Navy to (1) include all potential recurring costs, and (2) clearly describe the ground rules and assumptions underlying the estimation of each cost element to improve the comprehensiveness of its cost estimate. |
The Navy stated that the elements, or cost estimating best practices, cited in the report recommendations may contribute to improved quality in cost estimates, but they may not be ideally suited to the myriad situations in which the Navy is required, or may be requested, to provide cost estimates to Congress, notably formal budget submissions which require the use of prescribed exhibits and where costs are spread across multiple appropriations. Navy cost estimates used in reports to Congress typically reflect program estimates from the formal programming and budgeting process. Additional SECDEF direction in this regard should not be required unless it is applied to all Components.
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| Department of Defense | To improve the Navy's life-cycle cost estimate for the planned homeporting of a nuclear-powered aircraft carrier at Naval Station Mayport, Florida, and to incorporate to a greater extent the best practices identified by GAO for developing a high-quality cost estimate in future revisions of its Mayport nuclear carrier homeporting cost estimate as part of the annual budgetary process or in response to future congressional requests, the Secretary of Defense should direct the Secretary of the Navy to thoroughly document the life-cycle costs associated with homeporting a nuclear-powered aircraft carrier at Naval Station Mayport. Specifically, documentation should (1) identify the source data used, their reliability, and how the data were normalized, (2) describe the steps used in developing the overall estimate so that it can be clearly understood and easily replicated, and (3) describe in sufficient detail the estimating methodology and calculations performed to derive each element's cost to improve the quality and transparency of the Navy's estimate. |
The Navy stated that the elements, or cost estimating best practices, cited in the report recommendations may contribute to improved quality in cost estimates, but they may not be ideally suited to the myriad situations in which the Navy is required, or may be requested, to provide cost estimates to Congress, notably formal budget submissions which require the use of prescribed exhibits and where costs are spread across multiple appropriations. Additional SECDEF direction in this regard should not be required unless it is applied to all Components.
|
| Department of Defense | To improve the Navy's life-cycle cost estimate for the planned homeporting of a nuclear-powered aircraft carrier at Naval Station Mayport, Florida, and to incorporate to a greater extent the best practices identified by GAO for developing a high-quality cost estimate in future revisions of its Mayport nuclear carrier homeporting cost estimate as part of the annual budgetary process or in response to future congressional requests, the Secretary of Defense should direct the Secretary of the Navy to assign a single office with the responsibility for assembling the overall estimate into a comprehensive and well documented package and for performing a sensitivity and risk and uncertainty analyses on the overall estimate to identify the (1) major cost drivers, (2) extent to which estimates could vary due to changes in key cost assumptions, and (3) level of confidence in the estimate to improve the accuracy and credibility of its cost estimate. |
Responsibilities for centralized supervision and coordination of programming and budgeting within the Navy are well-established. Navy programs/budget estimates and exhibits are prepared and submitted in accordance with OSD guidance. Additional SECDEF direction in this regard should not be required unless it is applied to all Components. Where such reports include cost information, it is long-standing Navy practice to report costs as contained in the official Future Years Defense Program, the culmination of the programming and budgeting process. Reports to Congress are typically assigned to a central office for preparation and coordination and where necessary, instructions to the offices providing inputs can include guidance on baseline assumptions.
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Best practicesComparative analysisCost analysisDefense economic analysisDocumentationFacility maintenanceFuture budget projectionsMaintenance costsMilitary forcesNaval facilitiesStrategic planningNaval basesMilitary vesselsLife cycle costsMilitary engineeringShipyardsCost estimates