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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Michele Mackin
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mackinm@gao.gov

 

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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: Closed - Implemented

    Comments: Congress directed the Navy in the National Defense Authorization Act for Fiscal Year 2014 to provide a report on the expected performance of each seaframe variant and mission module against the current or updated capabilities development document, consistent with our recommendation.

    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: Closed - Not Implemented

    Comments: DOD did not agree with GAO's recommendations, stating that it would unnecessarily decrease production and result in higher pricing for individual seaframes. Since issuing this report, the Navy has not issued any block buy contracts, awarding two ships in fiscal year 2016 as extensions to the 2010 block buy contracts. Further, the Navy has fundamentally changed its LCS acquisition strategy including plans to acquire an improved LCS now called a frigate, starting as early as 2018. According to the current LCS and frigate acquisition strategy, approved in late March 2016, the Navy will hold annual Defense Acquisition Board (DAB)-like reviews prior to awarding contracts for construction of up to 12 frigates. Award of the frigate will be informed by a new cost estimate and updated, re-validated requirements documentation. This shift in acquisition strategy moved out the timeframes for awarding additional seaframe block-buy contracts to approximately 2018, and correspondingly pushed out the potential timetable for the oversight mechanisms we recommended. Due to the significant changes to the program, we believe that the intent of this recommendation is better reflected by those included in our most recent work on LCS/frigate (GAO-16-356). As part of recommendation follow-up associated with that report, we will monitor the department's oversight function specific to LCS/frigate as it approaches this new milestone, and will close relevant recommendations if the Navy submits a new Independent Cost Estimate as planned and holds a milestone-like review.

    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: Congress directed the Navy in the National Defense Authorization Act for Fiscal Year 2014 to provide additional information on some of the risk areas GAO identified in prior work. The Navy provided Congress with a report in May 2014 assessing the expected survivability attributes and the concept of operations for the ships, but in terms of comparing the two variants the Navy essentially suggested that since the two variants are built to the same requirements they perform the same way. The Navy did not present a more detailed comparison that would address our recommendation. While Congress did restrict LCS funds in the National Defense Authorization for Fiscal Year 2016 until the Navy submits key documents to the congressional defense committees, Congress has not requested the Navy to complete a study on the relative advantages of each LCS variant. GAO believes that completing this type of analysis would still be valuable to understanding differences in performance between the seaframes, especially in light of the Navy's plan to downselect to a single LCS variant as soon as 2018. This recommendation will remain open to allow for future Navy analysis on this topic.

    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: Closed - Implemented

    Comments: DOD has reduced the procurement quantities of LCS and frigates from 52 to 40, but the Navy has not yet lowered the procurement quantities of mission packages. However, Congress has taken action to prevent the purchasing of mission modules prior to operational testing by limiting the availability of funds for some of the mission packages (RMS/MCM and ASW). Further, the NDAA for Fiscal Year 2016 specifically called for the Navy to provide an acquisition strategy on how it will reach the total mission module quantity. Finally, the Navy cancelled procurement of the Remote Multi-Mission Vehicle included in the LCS MCM mission package. We believe actions taken by Congress and the Navy meet the intent of this recommendation; therefore, we are closing it as implemented.

    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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