Navy Shipbuilding:

Significant Investments in the Littoral Combat Ship Continue Amid Substantial Unknowns about Capabilities, Use, and Cost

GAO-13-530: Published: Jul 22, 2013. Publicly Released: Jul 25, 2013.

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What GAO Found

The Littoral Combat Ship (LCS) seaframe program continues to face challenges stemming from concurrent design, production, and testing activities. The Navy has taken steps to resolve problems with the lead ships, and the shipyards are beginning to realize benefits from facility improvements and experience. However, testing remains to be completed and the Navy is currently studying potentially significant design changes, such as increasing the commonality of systems between the two ship variants and changing ship capabilities. Changes at this point can compromise the positive impacts of shipyard learning, increase costs, and prolong schedules. The mission module program also has concurrency issues, and testing to date has shown considerable limitations in capabilities. The Navy is pursuing an incremental approach to fielding mission packages, but it has yet to finalize the requirements for each increment and does not plan to achieve the minimum performance requirements for the mine countermeasures and surface warfare packages until the final increments are fielded in 2017 and 2019, respectively.

The Navy continues to buy LCS seaframes and modules even as significant questions remain about the program and its underlying business case. Elements of the LCS business case, including its cost, the time needed to develop and field the system, and its anticipated capabilities have degraded over time. There are also significant unknowns related to key LCS operations and support concepts and the relative advantages and disadvantages of the two seaframe variants. The potential effect of these unknowns on the program is compounded by the Navy's aggressive acquisition strategy. By the time key tests of integrated LCS capability are completed in several years, the Navy will have procured or have under contract more than half of the planned number of seaframes. Almost half of the planned seaframes are already under contract, and the Navy plans to award further contracts in 2016, before the Department of Defense (DOD) makes a decision about full rate production of the ships. The Navy will not be able to demonstrate that mission packages integrated with the seaframes can meet the minimum performance requirements until operational testing for both variants (Freedom and Independence) is completed, currently planned for 2019. The Navy has also essentially bypassed two major acquisition reviews for mission modules, purchasing 8 of the 64 planned mission packages before gaining approval to enter the system development and initial production phases.

Why GAO Did This Study

The Navy's LCS consists of the ship-- called a seaframe--and mission packages, which provide combat capability. LCS is intended to be reconfigurable to perform three primary missions: surface warfare; mine countermeasures; and anti-submarine warfare. The Navy currently plans to buy 52 seaframes, including two variants being constructed at two U.S. shipyards, and 64 mission packages. The total estimated acquisition cost is about $40 billion in 2010 dollars.

GAO was asked to assess the status of the LCS program. This report examines (1) the progress and challenges associated with seaframe and mission module production, development, and testing; and (2) the soundness of the Navy's business case for the integrated LCS program. GAO analyzed Navy and contractor documents, toured shipyards and LCS ships, and interviewed DOD and Navy officials and contractor representatives.

What GAO Recommends

To ensure that LCS investments are informed by key information, Congress should consider restricting funding for further ships until the Navy completes several studies about future LCS designs and capabilities. GAO is also making several recommendations, including that DOD limit future seaframe and mission package purchases until it achieves key acquisition and testing milestones. DOD disagreed with these recommendations, stating that slowing seaframe purchases would cause prices to rise and mission package purchases are needed to equip operational ships. GAO believes the Navy does not have adequate knowledge about LCS capabilities to support the planned procurement rate.

For more information, contact Michele Mackin at (202) 512-4841 or mackinm@gao.gov.

Matters for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: The FY 14 National Defense Authorization Act (NDAA) implemented restriction language on the use of funds for LCS seaframes. Specifically, Section 124 of the 2014 NDAA states that none of the funds authorized to be appropriated by this Act or otherwise made available for fiscal year 2014 for construction or advanced procurement of materials for the Littoral Combat Ships designated as LCS 25 or LCS 26 may be obligated or expended until the Secretary of the Navy submits to the congressional defense committees a number of studies and certifications covering requirements, maturity, testing, and concept of operations.

    Matter: To ensure that the Navy has adequate knowledge to support moving forward with future seaframe construction, Congress should consider restricting future funding to the program for construction of additional seaframes until the Navy: (1) completes the ongoing LCS technical and design studies, (2) determines the impacts of making any changes resulting from these studies on the cost and designs of future LCS seaframes, and (3) reports to Congress on cost-benefit analyses of changes to the seaframes to change requirements and/or capabilities and to improve commonality of systems, and the Navy's plan moving forward to improve commonality.

  2. Status: Open

    Comments: Congress has not yet asked the Navy to complete such a study.

    Matter: To ensure that information on the relative capabilities of each seaframe variant is communicated in a timely and complete manner, Congress should consider requiring DOD to report on the relative advantages of each variant in carrying out the three primary LCS missions. This report should be submitted to Congress prior to the planned full-rate production decision and the award of any additional seaframe contracts.

Recommendations for Executive Action

  1. Status: Open

    Comments: DOD and the Navy did not concur with this recommendation, stating that altering the production rate of LCS hulls (called seaframes) would negatively affect the pricing arrangements that they had negotiated with the two shipyards. However, subsequent to our report the Department of Defense announced that no new contract negotiations beyond 32 seaframes would go forward, citing concerns with the capability and use of LCS. An ongoing study on Small Surface Combatants will shed additional light on the Navy's future plans.

    Recommendation: To ensure that, going forward, relevant oversight entities are able to provide appropriate decision-makers with additional insight into future contract awards for seaframes, if the Navy is approved by the Under Secretary of Defense for Acquisition, Technology and Logistics (USD AT&L) to award additional seaframe block buy contracts for LCS 25 and beyond, the Secretary of the Defense should direct the Secretary of the Navy to ensure that it only procures the minimum quantity and rate of ships required to preserve the mobilization of the production base until the successful completion of the full-rate production decision review. The award of any additional seaframe contracts should be informed by (1) a new independent cost estimate conducted by DOD's Cost Assessment and Program Evaluation office, and (2) a re-validated capabilities development document.

    Agency Affected: Department of Defense

  2. Status: Open

    Comments: As of August 2014, the Navy has not yet completed such a study.

    Recommendation: To ensure that, going forward, relevant oversight entities are able to provide appropriate decision-makers with additional insight into future contract awards for seaframes, prior to the full-rate production decision and the award of any additional seaframe contracts, the Secretary of the Defense should direct the Secretary of the Navy to report to Congress on the relative advantages of each seaframe variant for each of the three mission areas.

    Agency Affected: Department of Defense

  3. Status: Closed - Not Implemented

    Comments: The Navy has told us that they do not intend on submitting an Acquisition Program Baseline that breaks out performance, cost, and schedule thresholds and objectives by increment. Further, the program recently held a Milestone B, and did not include an Acquisition Program Baseline with this level of detail.

    Recommendation: To facilitate mission module development and ensure that the Navy has adequate knowledge to support further module purchases, the Secretary of the Defense should direct the Secretary of the Navy to ensure that the Acquisition Program Baseline submitted for the mission modules Milestone B establishes program goals--thresholds and objectives--for cost, schedule, and performance for each increment per current DOD acquisition policy.

    Agency Affected: Department of Defense

  4. Status: Open

    Comments: The Navy has not taken action on this recommendation. However, in the House version of the National Defense Authorization Act for Fiscal Year 2015, section 125 has a limitation on the availability of funds for the mission modules for LCS. This section would limit fiscal year 2015 funds for the procurement of additional mission modules for the Littoral Combat Ship program until the Secretary of the Navy submits milestone B program goals for cost, schedule, and performance for each mission module increment, and certification by the Director of Operational Test and Evaluation that sufficient mission modules are available to perform all necessary operational testing. This provision draws on our work. Similarly, Section 126 extends a limitation on the availability of funds for LCS seaframes. This section would therefore prohibit the expenditure of funds associated with Littoral Combat Ship 25 and 26 until the Secretary of the Navy submits a report of the Littoral Combat Ship program that was requested in section 124 of Public Law 113-66.

    Recommendation: To facilitate mission module development and ensure that the Navy has adequate knowledge to support further module purchases, the Secretary of the Defense should direct the Secretary of the Navy to ensure that the purchase of mission modules do not outpace key milestones, buy only the minimum quantities of mission module systems required to support operational testing.

    Agency Affected: Department of Defense

 

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