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Littoral Combat Ship: Need to Address Fundamental Weaknesses in LCS and Frigate Acquisition Strategies

GAO-16-356 Published: Jun 09, 2016. Publicly Released: Jun 09, 2016.
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Highlights

What GAO Found

The Navy's task force studied a number of options to improve upon known shortfalls in Littoral Combat Ship (LCS) lethality and survivability. It found that neither LCS variant with minor modifications met the Navy's desired capabilities without further tradeoffs. After briefing senior Navy leadership, the task force was directed to further examine the LCS options, which required it to alter or in some cases reduce some capabilities. In late 2014, the Navy recommended (and the Secretary of Defense approved) procuring both variants of a minor modified LCS, designating it a “frigate.” The Navy prioritized this option because of its relatively lower cost and quicker ability to field, as well as the ability to upgrade remaining LCS, over making more significant capability improvements. GAO's analysis found the planned frigate will not provide much greater capability in some areas than LCS and that some cost assumptions may have overstated this option's affordability.

As the Navy pivots from LCS to the frigate program, which is estimated to cost more than $8 billion for ship construction alone, its approach would require Congress to appropriate funding with key unknowns. The table outlines GAO's observations on the Navy's acquisition strategy.

Key Upcoming Actions for Littoral Combat Ship (LCS) and Frigate

Fiscal year

Navy planned actions

GAO observations

2016

Request proposals from both shipyards for two LCS with a block buy option for 12 additional LCS.

Including 12 LCS with the current capabilities as a block buy option does not form a sound basis for a future frigate procurement; a robust frigate competition once designs are firm would be a more informed approach.

2017

Procure two LCS, with one ship awarded to each shipyard.

Congress would fund more LCS even though these ships have not demonstrated lethality and survivability capabilities.

2018

Obtain contract change proposals for frigate capabilities for the 12 LCS under the block buy option. Exercise option on one of the shipyard's contracts for detail design and construction.

Navy would exercise the contract option frigate procurement before the start of detail design or completion of weight reduction initiatives needed to determine whether seaframes can accommodate frigate upgrades.

2019

LCS lethality and survivability testing is completed.

Testing will show how LCS can function as basis for frigate.

2021

Both shipyards complete construction of LCS already under contract.

Both shipyards have experienced schedule delays of up to a year or more.

Source: GAO analysis of Navy LCS and frigate information. │GAO-16-356

Of note, the industrial base considerations that have factored into prior LCS decisions are less compelling, as both yards will be building LCS currently under contract through fiscal year 2021. Finally, there are no current plans for official DOD milestone reviews of the frigate program, which is a major acquisition program based on its anticipated costs. In addition, the Navy does not plan to develop key frigate program documents or to reflect frigate cost, schedule, and performance information in the annual Selected Acquisition Reports (SAR) submitted to Congress. Without adequate oversight, federal funds may not be effectively spent.

Why GAO Did This Study

In February 2014, the Secretary of Defense cited concerns with the combat capabilities of the LCS—a small surface combatant (SSC) consisting of a ship and reconfigurable mission packages built by two shipyards as different variants, with 26 LCS delivered or under contract. The Secretary directed an assessment of alternatives for a SSC. A Navy task force analyzed new and existing designs, including modified LCS concepts.

The House report for the National Defense Authorization Act for Fiscal Year 2015 included a provision for GAO to analyze the Navy's study and the implications for future procurement. This report examines: (1) how the Navy arrived at its preferred solution, and (2) the potential risks associated with the Navy's approach to acquiring the SSC and continued procurement of LCS, among other objectives. To conduct this work, GAO analyzed the task force study and other documentation, and interviewed task force, Navy, and Office of the Secretary of Defense officials.

Recommendations

Congress should consider not funding any requested LCS in fiscal year 2017 and should consider requiring the Navy to revise its acquisition strategy for the frigate. GAO also recommends that the Department of Defense (DOD) align reviews to precede key acquisition decisions and enhance oversight by requiring the frigate program to develop key program documents and to report on the frigate separately in the SAR. The department concurred with the first recommendation and partially concurred with the second.

Matter for Congressional Consideration

Matter Status Comments
Congress should consider not funding any requested LCS in fiscal year 2017 because of unresolved concerns with lethality and survivability; the Navy's ability to make needed improvements; and the current schedule performance of the shipyards.
Closed – Not Implemented
Congress funded Littoral Combat Ships (LCS) in fiscal year 2017 despite unresolved concerns with ship lethality and survivability. In fact, Congress funded the two requested LCS and provided additional funding for a third LCS as well. Two more LCS are anticipated to be funded in fiscal year 2018 as well. Based on Congress's decision to fund the requested LCS in fiscal year 2017, this recommendation will not be implemented and can be closed.
Congress should also consider directing the Navy to submit a revised, OSD-approved acquisition strategy under which it completes a significant portion of detail design for the frigates prior to soliciting proposals for the frigate upgrade package.
Closed – Implemented
The National Defense Authorization Act (NDAA) for Fiscal Year 2017 included a requirement that the Secretary of Defense not select a single prime contractor to construct the Littoral Combat Ship or any successor frigate class ship until a frigate design had reached sufficient maturity and completed a preliminary design review or demonstrated an equivalent level of design completeness. This direction is consistent with the intent of our matter for consideration, as it established an expectation for design maturity for the frigate that had to be achieved before an award decision could be made. Based on this legislative action, we are closing this recommendation as implemented.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Secretary of Defense should ensure that there are Office of the Secretary of Defense (OSD)-level reviews scheduled to assess the Navy's level of knowledge prior to key events, such as the Navy releasing the request for modification proposals for the frigate upgrade and committing to a frigate downselect decision.
Closed – Implemented
DOD concurred with this recommendation, noting that the department plans to conduct annual OSD-level reviews of the LCS and frigate programs. In March 2017, DOD provided an update on its plans, stating that the Navy would return for the 2017 annual LCS and Frigate program review in advance of a planned release of the formal frigate request for proposals (RFP) to the LCS shipyards. This review would include a review of the planned frigate technologies and assess the risks not only of the individual combat systems to be incorporated but also the integration risks of bringing these systems to the frigate. The Undersecretary of Defense for Acquisition, Technology, and Logistics (USD(AT&L)) also would ensure the Navy updated the affordability analysis before releasing the RFP, and the Navy would work closely with DOD's Office of Cost Assessment and Program Evaluation (CAPE) to gain CAPE's review of their service cost position to ensure that affordability risks are understood before the RFP is released. Furthermore, CAPE was expected to complete an Independent Cost Estimate (ICE) in fiscal year 2018 in response to the Frigate RFP. The 2018 annual LCS and Frigate program review was planned to occur in advance of the frigate contract award and would address the status of the Frigate cost, design, new capability risks, and integration risks. Aside from DOD's annual program reviews, the Navy planned to complete an independent design review before release of the fiscal year 2017 Frigate RFP to ensure the frigate construction contract designs had reached a sufficient level of maturity. This review was to include key DOD stakeholders and would determine the levels of maturity reached with each of the designs being considered and would then decide, using entrance and exit criteria, the timing for release of the formal Frigate RFP. As these scheduled reviews meet the intent of our recommendation, we are closing it as implemented.
Department of Defense The Secretary of Defense should, before the downselect decision for the frigates, require the program to submit appropriate milestone documentation as identified by OSD, which could include an Independent Cost Estimate, an Acquisition Program Baseline, and a plan to incorporate the frigate into SAR updates.
Closed – Implemented
DOD partially concurred with this recommendation, noting that the Navy views the LCS transition to the frigate as an incremental upgrade as opposed to a new acquisition program. DOD also stated that the Navy would be required to provide key documentation related to the seaframe, including an independent cost estimate and an updated acquisition program baseline. In 2017, the Navy decided to pursue a different acquisition strategy for the frigate. In August 2018, the program office for the new guided missile frigate program, FFG(X), confirmed that the program has been designated an acquisition category (ACAT) 1B program, with the Navy's Service Acquisition Executive serving as the Milestone Decision Authority. The program has milestone decisions planned--beginning with a Milestone B scheduled for February 2020--and will complete milestone documentation to support them. The program office confirmed it expects to complete an independent cost estimate, affordability and should-cost analyses, and an independent technical risk assessment. The program also is expected to complete an acquisition program baseline and selected acquisition reports, which will support program oversight. Based on these actions taken, we are closing this recommendation as implemented.

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Cost overrunsDefense capabilitiesMilitary vesselsNaval procurementProcurement planningRisk assessmentRisk managementSchedule slippagesShipsSurface combatantsSystems designAcquisition strategyAcquisition programsNavy ships