Defense Acquisitions:

Cost to Deliver Zumwalt-Class Destroyers Likely to Exceed Budget

GAO-08-804: Published: Jul 31, 2008. Publicly Released: Jul 31, 2008.

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In October 2008, the U.S. Navy will begin construction of the first of two lead DDG 1000 Zumwalt-class destroyers--at an expected cost of $6.3 billion. Given the history of cost growth on shipbuilding programs, as well as the Navy's request for approval of a third ship, GAO was asked to assess the progress of the program. GAO examined (1) whether key systems can be delivered on time and work as intended (2) design maturity (3) shipyard readiness and (4) whether lead and follow-on DDG 1000 ships can be built within budget. To accomplish this, our work included analysis of schedules, ship progress reviews and cost estimates; interviews with Navy and other officials; and our own past work.

From the outset, DDG 1000 has faced a steep challenge framed by technical sophistication, demanding mission requirements, and a somewhat unforgiving schedule. The Navy conceived a thoughtful strategy to meet these demands and has had success with several technologies and its design approach. Yet, the program did not proceed as planned and the Navy recently realigned the construction schedule for the first two ships to provide more time to finish key systems and software. Still, the Navy will produce--and in some cases install--key systems on the ship before fully demonstrating and testing them. Software development has proven challenging; the Navy certified the most recent software release before it met about half of its requirements. At this point--the first year of a 6-year construction schedule for the lead ships--the Navy may have exhausted its options for solving future problems without adding money and time. The Navy expects to achieve a greater degree of design maturity before starting construction than has been the case on previous surface combatant programs. To meet this goal, the Navy will be pressed to complete a large amount of design work by October 2008 when construction will begin. From August 2007 through May 2008, the shipbuilders finished work on 16 of the 100 design "zones" that make up the ship, leaving 84 zones to finish the final design phases in the 5 months leading up to the start of construction. Both shipyards that will build DDG 1000 are preparing for construction through facility enhancements and production improvements. However, uncertainty remains. The ship's deckhouse will be built primarily from composite rather than steel and the shipbuilder is still refining the process for large scale composite manufacturing and assembly. Workforce instability could also prevent shipbuilders from fully realizing expected efficiencies. The full costs of constructing the two lead ships have not been entirely recognized or funded. The risk of cost growth is high in part because of the potential for late delivery of key systems and software and difficulties in constructing and integrating sections of the ship, like the deckhouse. Remaining funds may not be sufficient to buy key components and pay for other work not yet under contract. The Navy has already requested funding for a third ship and plans to contract for this ship with options for four more ships in fiscal year 2009. The Navy will not have enough data then on the actual costs of the lead ships to develop realistic prices for follow-on ships. As currently planned, all ships will be under contract and all but one under construction before the Department of Defense holds the production milestone review in 2013.

Matter for Congressional Consideration

  1. Status: Closed - Not Implemented

    Comments: This recommendation is being closed as it has been overtaken by events. A report to Congress was triggered by section 2433a of title 10 (Nunn-McCurdy cost breach). The report covers changes in schedule, testing requirements and a decision to remove the volume search radar (a part of the dual band radar) from the ship due to cost concerns. A report was sent to Congress on June 1, 2010.

    Matter: To provide insight into the potential for cost growth as the program progresses, the Congress may wish to consider requiring the Navy to report on (1) the current production and testing schedule for systems necessary to meet ship light-off, ship delivery, and combat system activation; (2) any changes to this schedule, particularly with the dual band radar and the total ship computing environment; and (3) the cost impact of these changes if the schedule is maintained and if the schedule is stretched out.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: The DDG 1000 program completed a milestone review in October 2010, following recertification under a Nunn-McCurdy breach. This milestone approval included authorization to proceed with the start of construction of the third ship.

    Recommendation: The Secretary of Defense should hold the Milestone C review in advance of awarding a contract for the third ship.

    Agency Affected: Department of Defense

  2. Status: Closed - Implemented

    Comments: At the time of our report, the Navy planned to award a contract for the third ship (DDG 1002) as early as January 2009, when less than 3 months of construction on the first ship was expect to occur. Our report concluded that this would provide too little knowledge to inform cost estimates or retire risks associated with lead ships. The Navy is now planning to award the contract in the fall of 2010. Substantial progress has been made on construction of the lead ship. We reported in March 2010 that 68 percent of the units that make up the ship were in production. By October 2010, the Navy will be 20 months into the construction of the lead ship, providing much greater insight into construction issues and challenges than initially envisioned.

    Recommendation: The Secretary of Defense should defer contract award for follow-on ships until the Navy has completed a substantial amount of construction on the lead ships.

    Agency Affected: Department of Defense

  3. Status: Closed - Implemented

    Comments: The Navy aimed to have 85 percent of product modeling for the ship's design zones essentially complete at the start of construction of the lead ship initially planned for October 2008. However, at the program's production readiness reviews in October 2008, the shipbuilders had completed less than 35 percent of the product model and faced challenges maintaining its design schedule. Rather than proceeding with ship construction, the Navy delayed the start of ship construction by 4 months to February 2009 in order to mature the ship's design. According to the Navy, almost 90 percent of the design zones are complete, emphasizing that no zone will start construction until the design for that zone is done.

    Recommendation: The Secretary of Defense should require the Navy to complete product modeling of the ship's design to the level currently planned before the start of construction.

    Agency Affected: Department of Defense

 

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