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United States Government Accountability Office: 
GAO: 

Report to Congressional Committees: 

June 2014: 

Surface Ships: 

Navy Needs to Revise Its Decommissioning Policy to Improve Future 
Decision Making: 

GAO-14-412: 

GAO Highlights: 

Highlights of GAO-14-412, a report to congressional committees. 

Why GAO Did This Study: 

In today's fiscally constrained environment, the Navy must balance 
short- and long-term costs and risks. In February 2012, although it 
had concerns that its battle force was below the number of ships 
needed, the Navy announced plans to decommission nine ships. 

Congress mandated that GAO review the Navy's methodology and analysis 
that supported its decommissioning decision. This report evaluates (1) 
the extent to which the Navy followed its policy when deciding to 
decommission nine ships before the end of their service lives, and (2) 
the extent to which the Navy's policy incorporates federal standards 
for internal control. To evaluate these issues, GAO obtained evidence 
and interviewed officials about the process the Navy used to develop 
its decommissioning decision. GAO also analyzed the Navy's 
decommissioning policy, and compared its requirements to federal 
standards for internal control. 

What GAO Found: 

The Navy did not follow its policy when deciding in 2012 to 
decommission seven cruisers and two dock-landing ships well prior to 
the end of their expected service lives. When ships are decommissioned 
early, the Navy's policy requires a decision memorandum to address why 
it is in the best interest of the Navy to decommission the ships and 
mitigation strategies for any resulting capability gaps. GAO found 
that the Navy did not prepare the required decision memorandum. 
According to Navy officials, they did discuss budget and cost issues, 
including maintenance and modernization costs, but they did not 
prepare the decision memorandum because they were under time pressure 
to identify budget savings. Congress did not support the Navy's 
decision and provided funds to maintain, operate, and sustain the nine 
ships in the fleet, and the Navy has since reversed its decision to 
decommission the ships. However, it now plans to take these ships and 
five others out of their normal deployment cycles, modernize them, and 
then place them back into service at a later time. The figure below 
shows the Navy's recent proposals and subsequent congressional actions. 

Figure: Key Navy and Congressional Actions for Seven Cruisers and Two 
Dock-Landing Ships: 

[Refer to PDF for image: illustration] 

February 2012: 
Navy proposes decommissioning nine ships in fiscal years 2013 and 2014. 

March 2013: 
Congress funds nine ships for fiscal years 2013 and 2014. 

May 2013: 
Navy proposes decommissioning nine ships in fiscal year 2015. 

January 2014: 
Congress funds nine ships through fiscal year 2021. 

March 2014: 
Navy proposes placing the nine ships and five additional ships in long-
term phased modernization. 

Source: Navy information and U.S. law. 

[End of figure] 

The Navy's decommissioning policy does not incorporate key federal 
standards for internal control such as engaging external stakeholders, 
comparing actual performance to planned or expected results, and 
evaluating performance measures to achieve goals. While the policy 
requires communication within the Department of the Navy, it does not 
require the Navy to engage with external stakeholders (e.g., 
Congress). In addition, the policy does not require the Navy to 
compare differences between actual and expected performance and then 
use the results to adjust future decisions or plans. Further, the Navy'
s decommissioning policy does not require officials to specifically 
evaluate performance measures, such as risks, readiness, or 
maintenance costs, when making an early decommissioning decision. 
Moreover, the Navy's policy requires that officials address some 
elements of risk in their decision memorandum but does not 
specifically require that they evaluate risks associated with 
shortfalls in the number of ships. In this case, the Navy recommended 
decommissioning large surface combatants and amphibious ships when it 
was simultaneously reporting shortfalls in those same ship types to 
support its shipbuilding plans. Specific policy direction requiring 
engagement with external stakeholders and evaluation of key 
performance measures can help ensure that the Navy successfully 
articulates and justifies any future decisions to decommission ships 
prior to reaching their expected service lives. 

What GAO Recommends: 

GAO recommends that the Navy follow its policy to document its early 
decommissioning decisions and also update its policy to incorporate 
key federal standards for internal control—including engaging external 
stakeholders and evaluating performance measures, such as risks. DOD 
partially agreed with both recommendations. DOD agreed that it should 
follow its policy but questioned the importance of updating the policy 
to incorporate certain internal control elements. GAO believes that 
these recommendations remain valid as discussed in the report. 

View [hyperlink, http://www.gao.gov/products/GAO-14-412]. For more 
information, contact John Pendleton at (404) 679-1816 or 
pendletonj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Background: 

Under Budget Pressures, the Navy Did Not Follow Its Policy before 
Deciding to Decommission Nine Ships: 

The Navy's Early Decommissioning Policy Does Not Incorporate Key 
Aspects of Federal Standards for Internal Control: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments and Our Evaluation: 

Appendix I: Scope and Methodology: 

Appendix II: Comments from the Department of Defense: 

Appendix III: GAO Contact and Staff Acknowledgments: 

Table: 

Table 1: Navy Surface Combatant and Amphibious Ships as of March 2014: 

Figures: 

Figure 1: Images of a Navy Cruiser and Dock-Landing Ship: 

Figure 2: Key Navy and Congressional Actions for Seven Cruisers and 
Two Dock-Landing Ships: 

Figure 3: Time Frames for Developing the Alternate Program Objective 
Memorandum (POM) 2013: 

Figure 4: Total Number of Navy Cruisers by Year Based on Navy's 2012 
Decommissioning Proposal: 

Figure 5: Partial Organization of the Office of the Chief of Naval 
Operations: 

Abbreviations: 

DOD: Department of Defense: 

OSD: Office of the Secretary of Defense: 

POM: Program Objective Memorandum: 

[End of section] 

United States Government Accountability Office: 
GAO:
441 G St. N.W. 
Washington, DC 20548: 

June 11, 2014: 

Congressional Committees: 

In today's fiscally constrained environment, the high cost of Navy 
ships and the declining size of the Navy's fleet have complicated the 
Navy's attempts to balance its near-term support of the geographic 
combatant commanders with its preparations for uncertain future 
requirements. Within its battle force, the Navy currently has 84 large 
surface combatants--22 cruisers and 62 destroyers-and 31 amphibious 
ships, including 12 dock-landing ships. According to the Navy's long-
term shipbuilding plan, the battle force is below the numbers of large 
surface combatants and amphibious ships needed to support the Defense 
Strategic Guidance.[Footnote 1] However, in the President's fiscal 
year 2013 budget proposal, which was submitted to Congress in February 
2012, the Navy decided to further reduce the size of its battle force 
by decommissioning seven Ticonderoga-class cruisers (large surface 
combatants) and 2 Whidbey Island-class dock-landing ships (amphibious 
ships). The Navy had identified all nine ships, which had expected 
service lives of 35 years (cruisers) or 40 years (dock-landing ships), 
to be decommissioned well before the end of their expected service 
lives. In the National Defense Authorization Act for Fiscal Year 2013, 
however, Congress prohibited the Navy from obligating or expending 
funds to retire or inactivate Ticonderoga-class cruisers or dock-
landing ships.[Footnote 2] In the Consolidated and Further Continuing 
Appropriations Act of 2013, Congress appropriated funding to operate 
and maintain the ships through September 2014.[Footnote 3] In March 
2014, the Navy revised its decision. It now has decided to take 14 
ships--including the 9 ships identified in the February 2012 decision--
out of their normal deployment rotations and to place them in long-
term phased modernization to preserve the lives of the ships.[Footnote 
4] According to the Navy, the ships would be modernized at a later 
time and placed back into service. 

The Fiscal Year 2013 Consolidated Appropriations Act conference report 
mandated that GAO review the Navy's methodology and analysis regarding 
its decision to decommission the seven cruisers and two dock-landing 
ships.[Footnote 5] This report evaluates (1) the extent to which the 
Navy followed its policy when it decided to decommission nine ships 
before the end of their service lives, and (2) the extent to which the 
Navy's policy incorporates federal standards for internal control. 

To evaluate the extent to which the Navy followed its policy when it 
decided to decommission nine ships before the end of their service 
lives, we interviewed Navy headquarters and fleet officials and 
obtained evidence regarding the process the Navy followed. To the 
extent that documentation was available, we analyzed this documentary 
evidence and used it to either corroborate the testimonial evidence we 
had received or to serve as a basis for follow-up discussions or 
correspondence where we sought to resolve conflicting evidence. This 
documentation included e-mails, internal briefing slides, as well as 
long-range shipbuilding plans, and the minutes from Ship Inactivation 
Decision conferences that were held by the Navy before and after the 
Navy decided to decommission the nine ships. In addition, we obtained 
and analyzed applicable criteria, specifically the Navy's general 
policy for the inactivation, retirement, and disposition of naval 
vessels. 

To evaluate the extent to which the Navy's policy incorporates federal 
standards for internal control, we analyzed the Navy's decommissioning 
policy and standards for internal control in the federal government. 
[Footnote 6] We then compared the federal standards for internal 
control criteria to the Navy's decommissioning policy, as well as the 
process the Navy relied upon to arrive at its decommissioning 
decision. For both objectives, we interviewed officials from the 
Office of the Secretary of Defense (OSD), Cost Assessment and Program 
Evaluation directorate; Office of the Chief of Naval Operations: 
Integration of Capabilities and Resources, Surface Warfare, 
Expeditionary Warfare, and Warfare Integration; and Naval Sea Systems 
Command. The Navy's decision to take the 14 ships out of their normal 
deployment rotations and place them in long-term phased modernization 
to preserve the lives of the ships was outside the scope of this 
review and we did not evaluate the documentation that may have been 
prepared to support that decision. 

We conducted this performance audit from May 2013 to June 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. We discuss our 
scope and methodology in more detail in appendix I. 

Background: 

Military Strategy: 

The National Military Strategy[Footnote 7] is the Chairman of Joint 
Chiefs of Staff's plan to achieve military objectives in the near 
term, while maintaining a force capable of meeting long-term 
challenges. This strategy implements the National Defense Strategy, 
which outlines the Secretary of Defense's approach to implementing the 
President's National Security Strategy. Further, the Navy periodically 
conducts a force-structure assessment that justifies the specific 
number of ships required by the Navy, based on the requirements of the 
National Defense Strategy and the National Military Strategy. 

The Navy's Battle Force: 

The Navy's battle force includes aircraft carriers, surface 
combatants, submarines, amphibious ships, mine warfare ships, combat 
logistics ships, and fleet support ships. Surface combatants and 
amphibious ships can be further divided into "large" and "small" 
ships. Cruisers and destroyers make up the Navy's large surface 
combatants and they support every core capability in the Navy's 
maritime strategy. Small surface combatants support more-limited 
capabilities in the maritime strategy. Likewise, amphibious ships are 
grouped into large-deck amphibious assault ships and smaller 
amphibious transport dock or dock-landing ships. Our review is focused 
on Ticonderoga (CG 47) class cruisers and Whidbey Island (LSD 41) 
class dock-landing ships. Examples of these types of ships are shown 
in figure 1. 

Figure 1: Images of a Navy Cruiser and Dock-Landing Ship: 

[Refer to PDF for image: 2 photographs] 

Source: Defense Video and Imagery Distribution System. 

[End of figure] 

Table 1 shows the numbers, expected service lives, and average ages of 
the active ships in Navy's fleet of large surface combatant and 
amphibious ships as of March 2014. It shows that, on average, the 
Navy's cruisers were 24 years old and had 11 years of expected service 
life remaining in 2014, and the LSD 41 class dock-landing ships had, 
on average, 15 years of expected service life remaining. 

Table 1: Navy Surface Combatant and Amphibious Ships as of March 2014: 

Ship type (class): Large surface combatants; 
Number of ships: 84; 
Expected service life (years): 35-40; 
Average age (years): 16. 

Ship type (class): Cruisers; (CG-47 class); 
Number of ships: 22; 
Expected service life (years): 35; 
Average age (years): 24. 

Ship type (class): Destroyers; (DDG-51 class); 
Number of ships: 62; 
Expected service life (years): 35-40; 
Average age (years): 13. 

Ship type (class): Amphibious assault ships; 
Number of ships: 31; 
Expected service life (years): 35-40; 
Average age (years): 17. 

Ship type (class): Amphibious assault; (LHA-1 class); 
Number of ships: 1; 
Expected service life (years): 35; 
Average age (years): 34. 

Ship type (class): Amphibious assault; (LHD-1 class); 
Number of ships: 8; 
Expected service life (years): 40; 
Average age (years): 17. 

Ship type (class): Amphibious transport dock; (LPD-4 class); 
Number of ships: 1; 
Expected service life (years): 35; 
Average age (years): 45. 

Ship type (class): Amphibious transport dock; (LPD-17 class); 
Number of ships: 9; 
Expected service life (years): 40; 
Average age (years): 4. 

Ship type (class): Dock-landing; (LSD-41 class); 
Number of ships: 8; 
Expected service life (years): 40; 
Average age (years): 25. 

Ship type (class): Dock-landing; (LSD-49 class); 
Number of ships: 4; 
Expected service life (years): 40; 
Average age (years): 18. 

Source: Navy. 

[End of table] 

Planning and Budgeting: 

More than halfway through the Navy's normal budget cycle, in August 
2011, the Office of the Secretary of Defense (OSD) directed the Navy 
to plan for the budget reductions that were included in the Budget 
Control Act of 2011.[Footnote 8] In accordance with OSD's direction, 
the Navy planned to reduce the original 2013 budget proposal that it 
was in the process of preparing by nearly $60 billion over 5 years. In 
its adjusted proposal, the Navy terminated or reduced funding in areas 
deemed to be manageable risks. About 10 percent of the budget 
reduction came from force-structure reductions. Specifically, the Navy 
decided to decommission the cruisers USS Cowpens (CG 63), USS 
Gettysburg (CG 64), USS Chosin (CG 65), USS Hue City (CG 66), USS 
Anzio (CG 68), USS Vicksburg (CG 69), USS Port Royal (CG 73); and the 
dock-landing ships USS Whidbey Island (LSD 41)and USS Tortuga (LSD 
46). In a series of legislative actions, Congress expressed its 
concern over the Navy's decision to decommission nine ships early. 
[Footnote 9] For example, in the 2013 appropriations act, Congress 
provided $2.4 billion for a Ship Modernization, Operation and 
Sustainment Fund for the seven cruisers and two dock-landing ships 
through fiscal year 2014. In the 2014 Appropriations Act, Congress 
provided funds for these ships through fiscal year 2021. However, 
according to Navy officials, the Navy did not fully utilize this fund 
and continued with plans to decommission the nine ships.[Footnote 10] 
In March 2014, in conjunction with its fiscal year 2015 budget 
proposal, Navy officials made a new decision to move 14 ships into 
long-term phased modernization. The decision included the nine ships 
that the Navy had been planning to decommission early to help address 
budget concerns, as well as four additional cruisers (USS Shiloh (CG 
67), USS Lake Erie (CG 70), USS Cape St. George (CG 71), and USS Vella 
Gulf (CG 72)) and one additional dock-landing ship (USS Germantown(LSD 
42)). 

Figure 2 summarizes key Navy and congressional actions related to 
seven cruisers and two dock-landing ships from 2012 to 2014. 

Figure 2: Key Navy and Congressional Actions for Seven Cruisers and 
Two Dock-Landing Ships: 

[Refer to PDF for image: illustration] 

February 2012: 
Navy proposes decommissioning nine ships in fiscal years 2013 and 2014. 

March 2013: 
Congress funds nine ships for fiscal years 2013 and 2014. 

May 2013: 
Navy proposes decommissioning nine ships in fiscal year 2015. 

January 2014: 
Congress funds nine ships through fiscal year 2021. 

March 2014: 
Navy proposes placing the nine ships and five additional ships in long-
term phased modernization. 

Source: Navy information and U.S. law. GAO-14-412. 

[End of figure] 

Under Budget Pressures, the Navy Did Not Follow Its Policy before 
Deciding to Decommission Nine Ships: 

The Navy did not follow its policy when deciding in February 2012 to 
decommission seven cruisers and two dock-landing ships prior to 
reaching their expected service lives in order to achieve reductions 
in the department's budget. Since 2009, the Navy has had a general 
policy,[Footnote 11] OPNAV Instruction 4770.5G, to, among other 
things, guide decommissioning decisions. When the Navy decommissions a 
ship prior to the end of its estimated service life, the policy does 
not require any specific analysis or reports, but it does require a 
decision memorandum, which must at a minimum, address: 

* why it is in the best interest of the Navy to retire the vessel 
prior to the end of its estimated service life; 

* any capability gaps that will occur upon decommissioning of the 
ship, including the duration of the capability gap; and: 

* recommended strategies to mitigate any gaps in capability. 

The Navy's policy states this decision memorandum must be prepared by 
the Office of the Chief of Naval Operations, Warfare Integration 
directorate (N9I)[Footnote 12] and approved by the Chief of Naval 
Operations, Integration of Capabilities and Resources directorate 
(N8). However, officials within the Chief of Naval Operations offices 
did not adhere to the process required in the Navy's decommissioning 
policy. Specifically, the Office of the Chief of Naval Operations, 
Warfare Integration directorate, which is responsible for the Navy's 
decommissioning policy, did not prepare, and the Chief of Naval 
Operations, Integration of Capabilities and Resources directorate did 
not approve, a decision memorandum to support the Navy's decision to 
decommission the nine ships. Navy officials from the Office of the 
Chief of Naval Operations, Warfare Integration directorate acknowledge 
that they did not follow the decommissioning policy. However, 
according to Navy officials, they did discuss budget and cost issues, 
including maintenance and modernization costs. According to Navy 
officials, they did not prepare the decision memorandum for two 
reasons: (1) because they wrote the policy, they did not believe that 
they were required to follow all elements in the policy, and (2) they 
were under time pressures, which required that they identify 
significant budget savings over a relatively short period. Our review 
of the Navy's policy found that the policy does not list time 
constraints or any other situation that would allow officials to avoid 
the policy's requirements. Navy documentation shows that officials 
normally have approximately 18 months to develop a Program Objective 
Memorandum (POM) and submit a proposed budget, which provides a 
detailed description of the Navy's proposed programs projected 6 years 
into the future. However, they noted that they had about 6 months to 
resubmit their proposed fiscal year 2013 base budget and incorporate 
reductions of the alternate POM 2013, as directed by the Office of the 
Secretary of Defense, as shown in figure 3. 

Figure 3: Time Frames for Developing the Alternate Program Objective 
Memorandum (POM) 2013: 

[Refer to PDF for image: timeline] 

Planning: 

Programming: 
September 2010-February 2012: About 18 months to complete Program 
Objective Memorandum (POM) 2013. 

Reprogramming and budgeting: 
August 2011: Budget Control Act passed; 
February 2012: Budget submitted to Congress: 
About 6 months to complete Alternate Program Objective Memorandum 2013. 

Source: GAO analysis of Navy information. GAO-14-412. 

[End of figure] 

Without the required decision memorandum to explain the early 
decommissioning of the nine ships, the Navy did not employ a 
transparent process, and it is unclear why the early decommissioning 
of these nine ships, including some with nearly half of their expected 
service life remaining, was in the best interest of the Navy. 
Furthermore, the identification of potential capability gaps and any 
associated mitigation plans remain undocumented. Officials from the 
Office of the Secretary of Defense and the Navy stated that the 
decommissioning of the nine ships would not have caused capability 
gaps (having the right types of forces) because the Navy would still 
have maintained active cruisers and dock-landing ships in the battle 
force. According to Navy officials, the only reason it was in the best 
interest of the Navy to retire these ships prior to the end of their 
expected service lives was to achieve cost savings over the next 5 
years. Specifically, the Navy could avoid costly midlife 
modernizations costs on these relatively new ships and this decision 
would, in turn, make room in its reduced budget for other priorities, 
such as buying new ships. 

The Navy's Early Decommissioning Policy Does Not Incorporate Key 
Aspects of Federal Standards for Internal Control: 

The Navy's policy does not incorporate key federal standards for 
internal control that can help agencies to achieve their goals, 
[Footnote 13] and as a result, the Navy was unable to gain the support 
of Congress for its February 2012 decision to decommission nine ships. 
According to federal standards for internal control[Footnote 14], 
agencies should communicate with and obtain information from external 
stakeholders (e.g., Congress), compare actual performance to planned 
or expected results, review performance measures and indicators, and 
compare and assess different sets of data to establish relationships 
and then take appropriate action. The Navy's decommissioning policy 
does not address the needs of external stakeholders in the Congress 
who can affect the Navy's ability to achieve its goals. Furthermore, 
the Navy did not evaluate the reasons why its original decommissioning 
decision was rejected by Congress before putting forth a similar 
proposal in 2013, nor did it evaluate all relevant performance 
indicators, such as the risk of decommissioning a ship with ballistic 
missile defense capabilities, before making its decision. 

The Navy's Policy Does Not Require Engagement with External 
Stakeholders: 

The Navy's decommissioning policy identifies the need for internal 
stakeholders (e.g., Chief of Naval Operations) to develop, review, and 
approve the Navy's decommissioning decision memorandum, but it does 
not take into account the need to engage external stakeholders such as 
Congress, whose support is necessary for the Navy to implement its 
decommissioning decisions. Federal standards for internal control 
require that agencies communicate with, and obtain information from, 
external stakeholders who can have a significant effect on their 
abilities to achieve their goals. The Navy's policy states that it is 
the Secretary of the Navy who ultimately decides to decommission ships 
from the Navy's fleet. However, in practice, the Secretary of the Navy 
does not have final decommissioning authority because the Navy's 
request for decommissioning is subject to congressional oversight and 
funding. The funding is required for activities such as relocating the 
ship and removing equipment from the ship. According to Navy 
officials, the Navy did not engage with Congress as it developed its 
initial decommissioning decision, and Congress later requested that 
the Navy provide information to support its 2012 early decommissioning 
decision. However, Congress chose not to fund the decommissioning of 
these ships. In 2013, the Navy continued to indicate that it intended 
to decommission the nine ships and again Congress prohibited the Navy 
from doing so. Without a policy that requires federal standards for 
internal control to engage external stakeholders, the Navy may 
continue to develop early decommissioning decisions that do not 
receive the congressional funding necessary for implementation. 

The Navy's Decommissioning Policy Does Not Require the Consideration 
of Performance Measures and Indicators to Inform Future Decisions: 

The Navy's decommissioning policy does not require the consideration 
of performance measures and indicators, including differences between 
actual performance and planned or expected results, and then use the 
results of these evaluations to adjust future plans. Federal standards 
for internal control require that managers compare actual performance 
to planned or expected results and analyze significant differences. 
They also call for comparisons and assessments of performance measures 
and indicators that can establish relationships and lead agencies to 
take appropriate action. Here, the decision maker did not document the 
basis for his decision and thus we cannot determine whether 
appropriate performance measures and indicators were considered. After 
Congress did not support the Navy's 2012 decommissioning decision, 
Navy officials did not evaluate the reasons why Congress did not 
support it and continued to stand by the decision despite 
congressional disapproval. Had Navy officials evaluated the reasons 
why Congress prohibited the Navy for decommissioning the ships, they 
would have identified the needs of their external stakeholders and 
been able to better justify their decisions and adjust their future 
decisions appropriately. Navy officials stated that Congress has 
repeatedly requested information about performance measures and 
indicators such as readiness, cost, maintenance data, combatant 
commander requirements, naval fleet size, and associated risks. 

The Navy collects information on all of these performance measures and 
indicators, but did not compare and assess all of this information 
when making its decision to decommission the nine ships. The Navy's 
decommissioning policy does not specifically require that the Navy 
evaluate many of the performance measures and indicators Congress has 
expressed interest in. However, federal standards for internal control 
call for the review of performance measures and indicators and note 
that comparisons and assessments of different sets of data can 
establish relationships and lead agencies to take appropriate action. 
For example, the Navy collects a wide variety of information 
associated with the capabilities and condition of its cruisers, 
including combatant commander demands for ballistic missile defense 
capabilities, but did not evaluate all of this information before 
deciding to decommission the USS Port Royal. Although the need to 
provide protection against ballistic missiles is one of the Department 
of Defense's (DOD) highest priorities, the Navy did not analyze 
alternatives to minimize ballistic missile defense risks prior to 
submitting its plan to decommission the Port Royal. According to Navy 
officials, the geographic combatant commanders' aggregate demand for 
ships with ballistic missile defense capabilities currently exceeds 
supply. However, the Navy's decommissioning plan called for the 
decommissioning of the Port Royal, one of five cruisers with ballistic 
missile defense capabilities, and also the newest ship in the class. 
In an April 2014 report about the Port Royal, we found that this 
cruiser had some significant advantages compared to other cruisers 
that had not been scheduled for early decommissioning.[Footnote 15] 
Decommissioning a cruiser without ballistic missile defense 
capabilities rather than the Port Royal would have maintained 
additional ballistic missile defense capabilities in the Navy at a 
time when the Director of the Missile Defense Agency testified that 
the combatant commanders continue to increase their demand for missile 
defense capability. DOD concurred with the recommendation in our April 
2014 report that the Navy reevaluate its decision to decommission the 
Port Royal, and the Navy has decided to retain the Port 
Royal.[Footnote 16] Without a policy that requires officials to review 
all relevant performance measures and indicators, the Navy may not 
consider all key information before making future decommissioning 
decisions. Although the Navy no longer plans to decommission ships, 
the Navy has now decided to place its 11 newest cruisers, including 
the Port Royal and three other cruisers with missile defense 
capabilities, in long-term phased modernization.[Footnote 17] 

Risk is a key indicator to consider when making a decommissioning 
decision; however, the Navy's policy only requires officials to 
partially address this indicator. As previously noted, the Navy's 
early decommissioning decision memorandum requires that, among other 
things, officials address any capability gaps that result from early 
decommissioning decisions. The policy does not specifically require 
that officials address any capacity gaps. According to Navy officials, 
risk can be caused by gaps in either "capability" (having the right 
types of forces, equipment, and personnel) or "capacity" (having the 
right quantity of forces, equipment, and personnel). Navy officials 
told us that the early decommissioning of the seven cruisers and two 
dock-landing ships would not cause any capability gaps. However, 
shortfalls in the number of ships--capacity gaps--can be present even 
when there are no capability gaps. 

The Navy recommended decommissioning large surface combatants and 
amphibious ships when it was reporting shortfalls in those same ship 
types to support its shipbuilding plans. In a January 2013 report to 
Congress, the Navy noted that it required a total of 88 large surface 
combatants and 33 amphibious ships within a total battle force of 306 
ships.[Footnote 18] According to the document, these 306 ships are 
needed "for the force to possess the requisite capability and capacity 
to deliver credible deterrence, sea control, and power projection to 
deter or contain conflict and, if called upon to win our nation's 
wars." According to the Navy's 30-Year Shipbuilding Plan for Fiscal 
Year 2014,[Footnote 19] its fiscal year 2014 force structure of 85 
large surface combatants and 31 amphibious ships currently falls short 
of the capacity required to execute these important missions. Had the 
Navy addressed capacity risks, it would have determined that the early 
decommissioning of seven cruisers would have increased both short-term 
and long-term risks. According to the 30-Year Shipbuilding Plan, the 
early decommissioning of seven cruisers would have increased short-
term risks as it reduced the Navy's inventory of large surface 
combatants to 78 in fiscal year 2015. However, we found that the 
Navy's decision to decommission seven cruisers before the end of their 
expected service lives would also have increased long-term risks. 
Because the Navy's older cruisers had already completed their costly 
midlife upgrades and the Navy still needed to fund the upgrades for 
its newer cruisers, the Navy sought to achieve greater budget savings 
by decommissioning its newer cruisers. However, we found that the 
Navy's decision to decommission its newer cruisers would have 
increased long-term risk because it would have caused the size of the 
Navy's cruiser fleet to diminish more rapidly than would have been the 
case if the decommissioning decision had included the Navy's older 
cruisers. Figure 4 shows that under the Navy's 2012 decommissioning 
proposal only nine cruisers would have remained in the fleet by 2024. 

Figure 4: Total Number of Navy Cruisers by Year Based on Navy's 2012 
Decommissioning Proposal: 

[Refer to PDF for image: graph] 

2012: 22 cruisers; 
2016: 15 cruisers; 
2024: 9 cruisers. 

CG-52: 
September 20-1986--September 2021. 

CG-53: 
February 21, 1987--February 2022. 

CG-54: 
June 6, 1987--May 2022. 

CG-55: 
September 26, 1987--September 2020. 

CG-56: 
January 23, 1988--August 2023. 

CG-57: 
August 12, 1988--August 2023. 

CG-58: 
March 18, 1989--March 2024. 

CG-59: 
February 11, 1989--February 2024. 

CG-60: 
December 9, 1989--November 2024. 

CG-61: 
June 16, 1990--June 2025. 

CG-62: 
November 4, 1989--October 2024. 

CG-63: 
March 9, 1991--2015. 

CG-64: 
June 22, 1991--2015. 

CG-65: 
January 12, 1991--2015. 

CG-66: 
September 14, 1991--2015. 

CG-67: 
July 18, 1992--July 2027. 

CG-68: 
May 2, 1992--2015. 

CG-69: 
November 14, 1992--2015. 

CG-70: 
May 10, 1993--May 2028. 

CG-71: 
June 12, 1993--June 2028. 

CG-72: 
September 19, 1993--September 2028. 

CG-73: 
July 4, 1994--2015. 

Source: GAO analysis of Navy information. GAO-14-412. 

[End of figure] 

If the Navy's oldest seven cruisers had been selected for 
decommissioning instead, the Navy would have incurred modernization 
costs but would have had 15 cruisers in the fleet through February 
2024, because none of the newer cruisers would have been 
decommissioned prior to that date. Until the Navy made its decision to 
decommission the seven cruisers early, CG 63, CG 64, CG 65, and CG 66 
had expected service lives that ran through 2026; CG 68 and CG 69 had 
expected service lives through 2027; and CG 73 through 2029. Without 
specific policy direction to require engagement with external 
stakeholders and consideration of key performance measures, the Navy 
may be missing opportunities to successfully justify future decisions 
to decommission ships and may be unable to gain support for future 
decommissioning decisions. 

Conclusions: 

Facing the need to identify billions of dollars in short-term savings, 
Navy officials decided to decommission seven cruisers and two dock-
landing ships early. However, we found problems in the Navy's decision-
making process, which likely contributed to the lack of congressional 
support for the Navy's decommissioning decisions. These problems, 
which involve a lack of underlying support to justify the Navy's 
decisions, offer important lessons for the future. First, Navy 
officials did not follow their own policy to develop and approve a 
decision memorandum that would have required the Navy to document, 
among other things, why the early decommissioning of nine ships was in 
the best interest of the Navy. Second, even if the Navy had completed 
a decision memorandum, the Navy's policy does not incorporate key 
elements of federal standards for internal control, such as engaging 
with external stakeholders, comparing actual performance to planned or 
expected results, reviewing performance measures and indicators, and 
comparing and assessing different sets of data to establish 
relationships and take appropriate action. Revising the policy to 
incorporate federal standards for internal control may help the Navy 
justify its future decisions to congressional stakeholders who provide 
the authorization and funding necessary for the Navy to implement its 
force structure decisions. 

Recommendations for Executive Action: 

We recommend that the Secretary of Defense direct the Secretary of the 
Navy to take the following two actions. 

To improve the quality of the Navy's future decommissioning decisions, 
direct the Chief of Naval Operations to document the Navy's early 
decommissioning in decision memorandums in accordance with the General 
Policy for the Inactivation, Retirement, and Disposition of U.S. Naval 
Vessels prior to approving any future recommendations for early 
decommissioning of Navy ships. 

To enhance the likelihood that those decisions will be implemented, 
direct the Chief of Naval Operations to update the Navy's General 
Policy for the Inactivation, Retirement, and Disposition of U.S. Naval 
Vessels to incorporate key elements of federal standards for internal 
control, such as communicating with and obtaining information from 
external stakeholders, comparing actual performance to planned or 
expected results, evaluating performance measures and indicators, such 
as risk, and comparing and assessing different sets of data to 
establish relationships and take appropriate action. In updating the 
policy, the Chief of Naval Operations should also consider requiring 
that its early decommissioning decision memorandums specifically 
address capacity as well as capability gaps. 

Agency Comments and Our Evaluation: 

We provided a draft of this report to DOD for comment. In its written 
comments, which are reprinted in appendix II, DOD partially concurred 
with our two recommendations. 

DOD partially concurred with our first recommendation that the Navy 
should complete a decision memorandum in accordance with the General 
Policy for the Inactivation, Retirement, and Disposition of U.S. Naval 
Vessels for any future decommissioning decisions. DOD stated that the 
Navy should have followed the policy that requires the decision 
memorandum, but did not do so because of "compressed timelines," and 
would ensure the completion of decision memorandums for any future 
early decommissioning recommendations. In light of the Navy's large 
capital investment in its surface fleet, we continue to believe that 
any time the Navy recommends the early decommissioning of its ships it 
should follow its policy for completing decision memorandums--
regardless of any time or workload challenges. In addition, our review 
of the Navy's policy requiring decision memorandums found no exception 
for time constraints. The Navy had about 6 months between when it made 
its decision to decommission 9 ships early and when it developed a 
revised fiscal year 2013 base budget that incorporated reductions that 
were directed by OSD. We believe that 6 months is adequate time to 
meet the requirement to prepare a decision memorandum. 

DOD partially concurred with our second recommendation that the 
Secretary of Defense direct the Secretary of the Navy to incorporate 
key elements of federal standards for internal control into its 
policies to enhance the likelihood that Navy decisions will be 
implemented. The department agreed that engaging external 
stakeholders, including Congress, is important. The Navy stated that 
until the Secretary of Defense and the President have approved the 
budget request, all actions are predecisional and internal, and 
therefore are not discussed with Congress. We recognize that the 
Navy's decision to decommission nine ships early was driven by budget 
concerns and therefore was closely aligned with the budget process; 
however, we believe that it is important for the Navy to continuously 
engage Congress on key matters related to the Navy's maritime strategy 
and core capabilities. This continual engagement with Congress 
regarding the Navy's capacity due to the early decommissioning of 
ships does not need to be linked only to budget discussions, and could 
address ongoing issues regarding core Navy capabilities such as power 
projection and its associated need for properly sized forces. Thus, 
discussions of major decisions such as the early decommissioning of 
ships should be ongoing as the Navy continues to refine its strategy 
and missions. As discussed in our report, the Navy chose not to engage 
with Congress as it developed its early decommissioning decision, on 
more than one occasion Congress asked the Navy to provide information 
to support its early decommissioning decision and in both 2013 and 
2014 decided not to fund the early decommissioning of these ships. If 
the Navy does not periodically engage external stakeholders on 
capacity and capability issues prior to providing Congress with plans 
for the early decommissioning of ships, the Navy may continue to be 
unable to gain congressional approval and funding for its plans. 
Moreover, while the Navy's comments primarily focused on engaging with 
external stakeholders, our recommendation also noted the importance of 
incorporating other elements of internal controls into its policy, 
such as comparing actual performance to planned or expected results, 
evaluating performance measures and indicators, and comparing and 
assessing different sets of data to establish relationships and to 
take appropriate action. We continue to believe that the Navy should 
update its policy to reflect these critical internal controls. 

DOD disagreed with a portion of our second recommendation to require 
future decision memorandums to address capacity as well as capability 
gaps. DOD stated that including a capacity discussion would provide 
minimal benefit since any retirement without replacement will, by 
definition, increase risk and reduce capacity. However, we continue to 
believe that a discussion of capability gaps that ignores capacity 
issues is incomplete, and believe there are benefits from specifically 
addressing capacity in early decommissioning decision memorandums. 
With the Navy's current force structure short of required capacity, it 
is critical to fully understand the nature and duration of additional 
risks caused by early decommissioning plans and alternatives. As our 
report notes, the Navy's decision to decommission newer cruisers would 
have caused greater long-term capacity gaps and risks than alternative 
options because it would have caused the size of the Navy's cruiser 
fleet to diminish more rapidly than a possible alternative that would 
have decommissioned the Navy's older cruisers. 

We are sending copies of this report to congressional defense 
committees and the Secretary of Defense. In addition, the report is 
available at no charge on the GAO website at [hyperlink, 
http://www.gao.gov]. 

If you or your staff has any questions about this report, please 
contact me at (404) 679-1816 or pendletonj@gao.gov. Contact points for 
our Offices of Congressional Relations and Public Affairs may be found 
on the last page of this report. Key contributors to this report are 
listed in appendix III. 

Signed by: 

John H. Pendleton: 
Director: 
Defense Capabilities and Management: 

List of Committees: 

The Honorable Carl Levin: 
Chairman: 
The Honorable James Inhofe: 
Ranking Member: 
Committee on Armed Services: 
United States Senate: 

The Honorable Richard Durbin: 
Chairman: 
The Honorable Thad Cochran: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
United States Senate: 

The Honorable Howard P. McKeon: 
Chairman: 
The Honorable Adam Smith: 
Ranking Member: 
Committee on Armed Services: 
House of Representatives: 

The Honorable Rodney Frelinghuysen: 
Chairman: 
The Honorable Pete Visclosky: 
Ranking Member: 
Subcommittee on Defense: 
Committee on Appropriations: 
House of Representatives: 

[End of section] 

Appendix I: Scope and Methodology: 

To evaluate the extent to which the Navy followed its policy when it 
decided to decommission nine ships before the end of their service 
lives, we reviewed relevant Navy policies and procedures on Navy 
decommissioning--including the policy entitled General Policy for the 
Inactivation, Retirement, and Disposition of U.S. Naval Vessels--to 
identify Navy requirements for the administration of inactive Navy 
vessels. We obtained and analyzed information from the Office of the 
Chief of Naval Operations and sought to corroborate any testimonial 
evidence and conducted interviews to discuss any conflicting evidence. 
For example, we reviewed e-mails, internal briefing slides, and 
summary papers that Navy officials provided to us, as well as Ship 
Inactivation Decision conference minutes that were held before and 
after the decommissioning decisions were made. We obtained and 
analyzed the Navy's Report to Congress on the Annual Long-Range Plan 
for Construction of Naval Vessels, known as the 30-year shipbuilding 
plan, for fiscal years 2012, 2013, and 2014. To understand how the 
Navy's proposal and laws related to that proposal had changed over 
time, we analyzed Navy budget information included in the President's 
fiscal year 2013 and 2014 budget submissions and the relevant portions 
of the fiscal years 2013 and 2014 defense appropriations and 
authorization acts. We interviewed Navy officials from Naval Sea 
Systems Command, the Board of Inspection and Survey, the United States 
Fleet Forces Command, and United States Pacific Fleet to validate our 
analysis. Also, we interviewed Navy headquarters and fleet officials. 

To evaluate the extent to which the Navy's policy incorporates federal 
standards for internal control, we analyzed the Navy's decommissioning 
guidance and standards for internal control in the federal government. 
We then compared the federal standards for internal control criteria 
to the Navy's decommissioning policy. We spoke with officials from the 
Office of the Chief of Naval Operations; Commander Naval Surface 
Force, U.S. Pacific Fleet; Commander Naval Surface Force, U.S. 
Atlantic Fleet; Naval Sea Systems Command; and the Navy Board of 
Inspection and Survey, whose offices were part of the Navy's Program 
Objective Memorandum (POM) 14 Ship Inactivation Decision Conference in 
December 2011. We discussed with Navy officials the information and 
data requested from and provided by their respective offices prior to 
the Navy's decision to decommission nine ships, as well as any 
challenges or risks that may occur due to the decommissioning of these 
ships. Additionally, we obtained written responses to our questions 
from the previously referenced officials and from officials of the 
Office of Warfare Integration (N9I), which is part of the Office of 
the Chief of Naval Operations; the N9I office's officials administer 
the Ship Inactivation Decision Conferences and are responsible for the 
Navy's decommissioning policy. 

For each of the objectives, we interviewed officials from the Office 
of the Secretary of Defense, Cost Assessment and Program Evaluation; 
and the Office of the Chief of Naval Operations, Integration of 
Capabilities and Resources, Surface Warfare, Expeditionary Warfare, 
and Warfare Integration; and Naval Sea Systems Command. Because of the 
focus of this report, we interviewed officials from the Office of the 
Chief of Naval Operations, which is responsible for overseeing the 
operating forces of the Navy. Specifically, we interviewed officials 
from offices under the Office of the Chief of Naval Operations, which 
are organized by "N" and associated numbers, including N8 (Integration 
of Capabilities and Resources), which is responsible for optimizing 
Navy investments and budget and resource programming, and N9 (Warfare 
Systems), which is responsible for the integration of manpower, 
training, sustainment, modernization, and procurement of the Navy's 
warfare systems. Within N9, N95 maintains oversight of the Navy's 
amphibious ships, and N96 oversees surface combatants. N9I oversees, 
and is responsible for, policies regarding the Navy's long-range plans 
for shipbuilding, as well as decommissioning, inactivation, and 
disposition of Navy ships.[Footnote 20] Figure 5 shows the 
administrative chain of command within the Office of the Chief of 
Naval Operations. 

Figure 5: Partial Organization of the Office of the Chief of Naval 
Operations: 

[Refer to PDF for image: organizational chart] 

Top level: 
The Office of the Chief of Naval Operations. 

Second level, reporting to The Office of the Chief of Naval Operations: 
* N8 Integration of Capabilities and Resources; 
- N80 Programming; 
- N81 Assessments; 
* N9 Warfare Systems: 
- N95 Expeditionary Warfare; 
- N96 Surface Warfare; 
- N91 Warfare Integration. 

Source: Navy. GAO-14-412. 

[End of figure] 

Finally, in reviewing the Navy's process and practices, we analyzed 
how the Navy made its decommissioning decision and compared its 
process and practices to standards for internal control in the federal 
government. The Navy's decision to take the 14 ships out of their 
normal deployment rotations and place them in long-term phased 
modernization to preserve the lives of the ships was outside the scope 
of this review and we did not evaluate the documentation that may have 
been prepared to support that decision. Further, we reviewed prior GAO 
work on Navy surface ship readiness as well as Navy testimony on Navy 
readiness and the decommissioning of its ships, and Department of 
Defense (DOD) strategic guidance on the key military missions the 
department will prepare for, and reviewed DOD's budget priorities for 
fiscal years 2013 through 2017. 

We conducted this performance audit from May 2013 through June 2014 in 
accordance with generally accepted government auditing standards. 
Those standards require that we plan and perform the audit to obtain 
sufficient, appropriate evidence to provide a reasonable basis for our 
findings and conclusions based on our audit objectives. We believe 
that the evidence obtained provides a reasonable basis for our 
findings and conclusions based on our audit objectives. 

[End of section] 

Appendix II: Comments from the Department of Defense: 

Department of The Navy: 
Office of the Chief of Naval Operations: 
2000 Navy Pentagon: 
Washington, DC 20350-2000: 

May 28, 2014: 

Mr. John Pendleton: 
Director, Defense Capabilities and Management: 
U,S, Government Accountability Office: 
441 G Street, NW: 
Washington, DC 20548: 

Dear Mr. Pendleton: 

This is the Department of Defense (DoD) response to the GAO Draft 
Report, GAO-14-412, "Surface Ships: Navy Needs to Revises Its 
Decommissioning Policy to Improve Future Decisionmaking," dated April 
30, 2014 (GAO Code 35 1827). 

Enclosed are the DoD responses to the GAO recommendations made in the 
draft report. 

If you should need any further assistance regarding this GAO 
engagement, please contact Ms. Helen Kim, helen.kim@navy.mil, (703) 
692-5434. 

Sincerely, 

Signed by: 

James F. McCarthy, Jr. 
Assistant Deputy Chief of Naval Operations: 
Integration of Capabilities and Resources: 

Enclosure: As stated: 

GAO Draft Report Dated April 30, 2014: 
GAO-14-412 (GAO Code 351827): 

“Surface Ships: Navy Needs To Revise Its Decommissioning Policy To 
Improve Future Decisionmaking” 

Department Of Defense Comments To The GAO Recommendations: 

Recommendation 1: GAO recommends that the Secretary of Defense direct 
the Secretary of the Navy to take the following action. To improve the 
quality of the Navy's future decommissioning decisions, direct the 
Chief of Naval Operations to document its early decommissioning in a 
decision memorandum in accordance with the General Policy for the 
Inactivation, Retirement, and Disposition of U.S. Naval Vessels prior to
approving any future recommendations for early decommissioning of Navy 
ships. 

DoD Response: Partially concur. The Department concurs that Navy 
should have completed a decision memorandum in accordance with the 
General Policy for the Inactivation, Retirement, and Disposition of 
U.S. Naval Vessels. Although the decision memorandum in this case was 
not completed prior to submission of the FY13 President's Budget (PB-
13) due to compressed timelines after the passage of the Budget 
Control Act in August 2011, the Department concurs that Navy should 
have completed the decision memorandum soon after the PB-13 submission 
and will ensure compliance with the policy in any future early 
decommissioning recommendations. However, Navy complied with the 
spirit and intent of the policy, and the Fleet Commanders, Chief of 
Naval Operations and Secretary of the Navy were fully engaged in the 
early decommissioning decision and approved the decision as part of 
the ALT-POM 13 submission to the Office of the Secretary of Defense 
(OSD). OSD and ultimately, the Office of Management and Budget (OMB) 
approved this decision, as documented by inclusion of the early
retirement of 7 CGs and 2 LSDs as part of the PB-13 budget submission. 

Recommendation 2: GAO recommends that the Secretary of Defense direct 
the Secretary of the Navy to take the following action. To enhance the 
likelihood that those decisions will be implemented, direct the Chief 
of Naval Operations to update the Navy's General Policy for the 
Inactivation, Retirement, and Disposition of U.S. Naval Vessels to
incorporate key elements of federal standards for internal control, 
such as communicating with and obtaining information from external 
stakeholders, comparing actual performance to planned or expected 
results, evaluating performance measures and indicators, such as risk, 
and comparing and assessing different sets of data to establish 
relationships and take appropriate action. In updating the policy, the 
Chief of Naval Operations should also consider requiring that its 
early decommissioning decision memorandum specifically address 
capacity as well as capability gaps. 

DoD Response: Partially concur. The Department concurs that engaging 
external stakeholders, including Congress, is important; however, 
until the Secretary of Defense and the President have approved the 
budget request, all actions are pre-decisional and internal. The 
release of the President's budget (PB) is the initiation of engagement 
via testimony, briefings and discussion with external stakeholders, 
providing at least 8 months for analysis and assessment to inform 
execution of all decisions in the PB. It would be inappropriate for 
the Navy to discuss tentative budget decisions outside of the 
Executive Branch prior to PB release because external deliberations 
imply a decision has been made by the President and the Secretary of 
Defense. The current budget process allows for external engagement and 
assessment from PB submission to Congress' final approval of the 
budget. 

In addition, the inclusion of a capacity discussion in the early 
decommissioning decision memorandum would provide minimal benefit 
since any retirement without replacement will, by definition, increase 
risk and reduce capacity. 

[End of section] 

Appendix III: GAO Contact and Staff Acknowledgments: 

GAO Contact: 

John H. Pendleton, (404) 679-1816 or pendletonj@gao.gov: 

Staff Acknowledgments: 

In addition to the contact named above, key contributors to this 
report were Michael Ferren (Assistant Director), Richard Burkard, 
Sharon Pickup, Richard Powelson, Jillena Roberts, Michael Silver, Amie 
Steele, and Nicole Volchko. 

[End of section] 

Footnotes: 

[1] Department of Defense, Sustaining U.S. Global Leadership: 
Priorities for 21ST Century Defense (Washington, D.C.: Jan. 5, 2012). 
In 2012, the Navy lowered its requirements for large surface 
combatants by 6 ships--from 94 to 88 ships--due to its plans to move 4 
destroyers to Rota, Spain, as part of the "Forward Deployed Naval 
Force." To support Marine Corps requirements, the Navy requires 33 
amphibious ships that are available 90 percent of the time. 

[2] Pub. L. No. 112-239, § 354 (2012). 

[3] Pub. L. No. 113-6, Div. C, Title VIII, § 8103 (2013). 

[4] According to the Navy, its 11 newest cruisers (CG 63 though CG 73) 
will be removed from active service in 2015, and, after undergoing 
modernization, their service lives will be extended by 5 years and 
they will be reactivated on a one-for-one basis as the Navy's 11 
oldest cruisers (CG 52 through CG 62) reach the end of their expected 
service lives. Three dock-landing ships will also undergo a phased 
modernization program, beginning in 2016, but only one dock-landing 
ship will be removed from active service at a time. 

[5] The GAO mandate appears in an explanatory statement accompanying 
the 2013 Consolidated Appropriations Act, which was enacted on March 
26, 2013. Section 4 of the act provides that the statement shall have 
the same effect as if it were a joint explanatory statement of a 
committee of conference. 

[6] GAO, Standards for Internal Control in the Federal Government, 
[hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1] 
(Washington, D.C.: November 1999). 

[7] Chairman of the Joint Chiefs of Staff, The National Military 
Strategy of the United States of America, 2011: Redefining America's 
Military Leadership (Feb. 8, 2011). 

[8] Pub. L. No. 112-25, 125 Stat. 240 (Aug. 2, 2011). We have 
previously reported that the fiscal year 2013 sequestration was 
triggered by the Budget Control Act of 2011, which amended the 
Balanced Budget and Emergency Deficit Control Act of 1985. The latter 
act established sequestration to enforce discretionary spending limits 
and control the deficit. See GAO, 2013 Sequestration: Agencies Reduced 
Some Services and Investments, While Taking Certain Actions to 
Mitigate Effects, [hyperlink, http://www.gao.gov/products/GAO-14-244] 
(Washington, D.C.: Mar. 6, 2014). 

[9] These legislative actions include the national defense 
authorization acts for fiscal years 2013 and 2014 and the fiscal years 
2013 and 2014 appropriations acts. 

[10] Navy officials said they made limited use of this fund to operate 
and sustain the ships but they did not use the fund for any ship 
modernizations. They said that it would not make sense to use the fund 
to modernize the ships because law and policy bar major modernizations 
for ships nearing decommissioning. Specifically, law and policy 
restrict the Secretary of a military department from performing major 
modernizations on any weapon platforms, including ships that would be 
completed within 5 years of being retired, with some exceptions. 
Furthermore, Navy officials stated that the funds were not sufficient 
to modernize all nine ships, and modernizations can take more than 2 
years to plan and complete. 

[11] Department of the Navy, OPNAVINST 4770.5G, General Policy for the 
Inactivation, Retirement, and Disposition of U.S. Naval Vessels (Feb. 
6, 2009). 

[12] The Navy's decommissioning policy designates N8F as the 
directorate within the Office of the Chief of Naval Operations 
responsible for preparing the decision memorandum. However, after the 
policy was released, the Navy realigned its organizational structure 
and N8F became N9I (Office of the Chief of Naval Operations, Warfare 
Integration directorate), according to an N9I official. For the 
purposes of this report, we refer to N8F as N9I. 

[13] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[14] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1]. 

[15] GAO, Military Capabilities: Navy Should Reevaluate Its Plan to 
Decommission the USS Port Royal, [hyperlink, 
http://www.gao.gov/products/GAO-14-336] (Washington, D.C.: Apr. 8, 
2014). 

[16] [hyperlink, http://www.gao.gov/products/GAO-14-336]. 

[17] According to the Navy, its 11 newest cruisers (CG 63 though CG 
73) will be removed from active service in 2015 and, after undergoing 
modernization, their service lives will be extended by 5 years, and 
they will be reactivated on a one-for-one basis as the Navy's 11 
oldest cruisers (CG 52 through CG 62) reach the end of their expected 
service lives. Three dock-landing ships will also undergo a phased 
modernization program, beginning in 2016, but only one dock-landing 
ship will be removed from active service at a time. 

[18] Department of the Navy, Navy Combatant Vessel Force Structure 
Requirement (Washington, D.C.: January 2013). 

[19] Department of the Navy, Report to Congress on the Annual Long-
Range Plan for Construction of New Vessels for FY2014 (Washington, 
D.C.: May 2013). This report is also commonly referred to as the 30-
Year Shipbuilding Plan for Fiscal Year 2014. 

[20] According to Navy policy, decommissioning is the process of 
removal of a commissioned U.S. Navy ship from active status. 
Decommissioning normally occurs at the retirement of a U.S. Navy ship 
but could coincide with the transfer of the ship to another agency, 
such as the Military Sealift Command. Inactivation is the process by 
which a ship is prepared for decommissioning and eventual disposition. 
According to the Navy policy, some ships that are decommissioned may 
be retained in the inactive ship inventory for a period for future 
mobilization or while awaiting disposal. The Navy's methods to reduce 
the inactive ship inventory, or dispose of ships, include interagency 
transfers to the Maritime Administration, U.S. Coast Guard, or other 
U.S. federal agencies; donations for memorial or museum use as static 
public displays; foreign military sales transfers and leases; 
dismantling and recycling (also known as scrapping); fleet training 
exercises; experimental use, including weapons effectiveness testing; 
or transfers to U.S. states and territories for use as artificial 
reefs. 

[End of section] 

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