Arleigh Burke Destroyers:
Delaying Procurement of DDG 51 Flight III Ships Would Allow Time to Increase Design Knowledge
GAO-16-613: Published: Aug 4, 2016. Publicly Released: Aug 4, 2016.
What GAO Found
The Air and Missile Defense Radar (AMDR) program's SPY-6 radar is progressing largely as planned, but extensive development and testing remains. Testing of the integrated SPY-6 and full baseline Aegis combat system upgrade—beginning in late 2020—will be crucial for demonstrating readiness to deliver improved air and missile defense capabilities to the first DDG 51 Flight III ship in 2023. After a lengthy debate between the Navy and the Department of Defense's (DOD) Director of Operational Test and Evaluation, the Secretary of Defense directed the Navy to fund unmanned self-defense test ship upgrades for Flight III operational testing, but work remains to finalize a test strategy.
Flight III ship design and construction will be complex—primarily due to changes needed to incorporate SPY-6 onto the ship, as shown in the figure.
Flight III Ship Configuration Changes Related to SPY-6 Radar Introduction
The Navy has not demonstrated sufficient acquisition and design knowledge regarding its Flight III procurement approach and opportunities exist to enhance oversight. If the Navy procures the lead Flight III ship in fiscal year (FY) 2016 as planned, limited detail design knowledge will be available to inform the procurement. In addition, the Navy's anticipated cost savings under the FY 2013-2017 Flight IIA multiyear procurement (MYP) plan do not reflect the planned addition of Flight III ships. While the Navy did not update its cost savings with Flight III information, doing so would increase transparency and could help inform expected savings under the next MYP. The Navy plans to request authority to award new Flight III MYP contracts (FY 2018-2022) in February 2017. The Navy will be asking Congress for this authority to procure nearly half of Flight III ships before being able to meet the criteria to seek this authority. For example, detail design will not be complete and costs will not be informed by any Flight III construction history. Finally, Flight III cost and schedule performance is not distinguished from that of the overall DDG 51 ship class in annual reports to Congress. Establishing Flight III as a major subprogram would improve reporting and offer greater performance insight.
Why GAO Did This Study
Over the next 10 years, the Navy plans to spend more than $50 billion to design and procure 22 Flight III destroyers, an upgrade from Flight IIA ships. Flight III ships will include the new SPY-6 radar system and Aegis (ballistic missile defense) combat system upgrades. The Navy's MYP approach requires the Navy to seek authority to do so from Congress.
House report 114-102 included a provision for GAO to examine the Navy's plans for the DDG 51 Flight III ships and AMDR. This report assesses (1) the status of efforts to develop, test, and integrate SPY-6 and Aegis in support of Flight III; (2) challenges, if any, associated with the Navy's plans to design and construct Flight III ships; and (3) the Flight III acquisition approach and oversight activities, among other issues. GAO reviewed key acquisition documents and met with Navy and other DOD officials and contractors.
What GAO Recommends
Congress should consider requiring an update of estimated savings for the current DDG 51 MYP to reflect the addition of Flight III ships. The Navy should delay procurement of the lead Flight III ship and refrain from seeking authority for a MYP contract until it can meet criteria required for seeking this authority. DOD should also designate Flight III as a major subprogram to improve oversight. DOD partially concurred with all three recommendations but is not planning to take any new actions to address them. GAO continues to believe the recommendations are valid.
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Matter for Congressional Consideration
Comments: To ensure a more accurate estimate of the expected cost savings under the fiscal year 2013-2017 multiyear procurement, we asked Congress to consider requiring the Navy to update its estimate of savings, which currently reflects only Flight IIA ships, to increase transparency for costs and savings for Congress and the taxpayers, as well as provide improved information to support future multi-year procurement savings estimates. Neither the Senate nor House National Defense Authorization Act (NDAA) reports for fiscal year 2018 direct the Navy to update its savings and both reports include language authorizing the Navy to pursue a DDG 51 Flight III multi-year procurement contract for fiscal years 2018-2022. We will continue to monitor the status of this matter at least until the NDAA for fiscal year 2018 is enacted, at which time we will close the matter as not implemented if the multi-year procurement is authorized and no savings update requirement is included.
Matter: To ensure a more accurate estimate of the expected cost savings under the fiscal year 2013-2017 multiyear procurement, Congress should consider requiring the Navy to update its estimate of savings, which currently reflects only Flight IIA ships, to increase transparency for costs and savings for Congress and the taxpayers, as well as provide improved information to support future multiyear procurement savings estimates.
Recommendations for Executive Action
Status: Closed - Implemented
Comments: Regarding this recommendation, DOD acknowledged the importance of a thorough understanding of the costs and risks prior to making procurement decisions but did not believe that procurement of the lead Flight III ship should be delayed until more detail design information was available. The lead ship contract was expected to be awarded in fiscal year 2016 at the time of this recommendation, and we emphasized in the report that waiting until at least fiscal year 2017 to procure the lead Flight III ship would result in additional time to develop the detail design for Flight III and would in turn support a more refined understanding of design changes and their implications on ship construction and costs prior to making significant contractual commitments. Since report issuance, the shipbuilders have continued detail design efforts and the Navy delayed the award of the lead ship. In late June 2017, Huntington Ingalls Industries--one of the two DDG 51 shipbuilders--was awarded a fixed-price-incentive-firm target modification to a previously awarded contract for incorporation of the Flight III baseline on DDG 125. This delay is consistent with our recommendation, as it provided additional time for further design maturity and assessment of associated costs and risks. As a result, we are closing this recommendation as implemented.
Recommendation: To ensure the department and the shipbuilder have sufficient knowledge of the Flight III design and anticipated costs when making decisions on the award of the lead ship, the Secretary of Defense should direct the Secretary of the Navy to delay the procurement of the lead Flight III ship until detail design is sufficiently complete to allow the government to have a more thorough understanding of the costs and risks associated with Flight III ship construction.
Agency Affected: Department of Defense
Status: Closed - Not Implemented
Comments: Regarding this recommendation, DOD agreed that the criteria for seeking multiyear procurement authority must be met but disagreed that it should refrain from seeking multiyear procurement (MYP) authority based on the current state of information available on the Flight III configuration. As reflected in the congressional reports supporting the National Defense Authorization Act (NDAA) for fiscal year 2018 that has yet to be finalized and enacted, the Navy has sought MYP authority from Congress for fiscal years 2018-2022 and congressional action to date supports providing this authority to the Navy. This authority was sought without the benefit of a significant amount of detail design knowledge or any Flight III construction history to inform any estimates of ship costs or the savings from use of multiyear procurement. Because the Navy sought this MYP authority without this knowledge, this recommendation will be closed as not implemented.
Recommendation: To ensure sufficient knowledge of Flight III design and enable some Flight III construction history to inform cost expectations for future multiyear procurement decisions, the Secretary of Defense should direct the Secretary of the Navy to refrain from seeking authority from Congress for multiyear authority for the procurement of Flight III ships, as currently planned for 2018, until the Navy is able to preliminarily find, relying on DDG 51 Flight III data, that the Flight III configuration will meet criteria for seeking multiyear procurement authority, such as a stable design and realistic cost estimates.
Agency Affected: Department of Defense
Comments: DOD agreed that visibility into DDG 51 Flight III cost, schedule, and performance is important for oversight, but does not plan to designate Flight III as a major subprogram. No further DOD action has been taken on this recommendation and congressional reports supporting the National Defense Authorization Act for Fiscal Year 2018--yet to be finalized and enacted--do not include any direction for the department to do so. Nevertheless, with construction of the lead Flight III ship only recently awarded (June 2017), we will continue to monitor any action taken to designate Flight III as a major subprogram.
Recommendation: To better support DDG 51 Flight III oversight, the Secretary of Defense should designate the Flight III configuration as a major subprogram of the DDG 51 program in order to increase the transparency, via Selected Acquisition Reports, of Flight III cost, schedule, and performance baselines within the broader context of the DDG 51 program.
Agency Affected: Department of Defense