Littoral Combat Ship and Frigate:
Delaying Planned Frigate Acquisition Would Enable Better-Informed Decisions
GAO-17-323: Published: Apr 18, 2017. Publicly Released: Apr 18, 2017.
The Navy is moving away from its troubled Littoral Combat Ship program to a new ship—called the frigate—which is based on an LCS design with minor modifications.
The Navy's current approach requires that Congress make a significant commitment in 2017 to purchase 12 of these ships. However, we found that key frigate cost and design details will not be available to support Congress's decision.
We suggested that Congress delay this decision (worth about $9 billion) until more information is known about the frigate's cost, design, and capabilities. Doing so would result in a delay to the Navy's frigate award until at least fiscal year 2019.
Littoral Combat Ship Variants: The Freedom (left) and the Independence (right).
Two photos of Littoral Combat Ship variants: the Freedom and the Independence.
What GAO Found
The Navy's current acquisition approach for its new frigate—a ship based on a Littoral Combat Ship (LCS) design with minor modifications—requires Congress to make significant program decisions and commitments in 2017 without key cost, design, and capability knowledge. In particular, the Navy plans to request authority from Congress in 2017 to pursue what the Navy calls a block buy of 12 planned frigates and funding for the lead ship, which the Navy intends to award in 2018. Approval of these plans would effectively represent the final decision for the entire planned buy of 40 LCS and frigates. According to the Navy's approved acquisition strategy, the frigates would still require annual appropriations, so Congress would maintain its oversight through its annual appropriation decisions; however, any decision to reduce or delay the program, should that become warranted, could nevertheless be more difficult as the Navy may point to losses in favorable block buy prices, as has been done previously with LCS.
The Navy's impending request presents a key opportunity for Congress to affect the way forward for the frigate program by ensuring the Navy possesses sufficient knowledge on cost, design, and capability before authorizing an investment of a potential $9 billion for a program that
• has no current formal cost estimate—independent or otherwise,
• will not begin key detail design activities until late fiscal year 2018,
• has significant unknowns in regards to operational performance of the ship upon which its design will be based, and
• based on the existing and planned shipyard workloads, has no industrial base imperative to begin construction in the Navy's planned time frame.
The Navy's previous frigate acquisition plans included achieving a higher degree of ship design knowledge before awarding the lead ship in fiscal year 2019, as the plans included significant detail design activities prior to contract award. As GAO has previously found, such an approach—which has been supported by shipbuilders—offers greater confidence in the understanding of design changes and how they will affect ship construction costs. Further, as GAO's work on best practices for program cost estimates suggests, the Navy's prior plans for frigate design efforts and an award in fiscal year 2019 would have provided more information on which to base a decision, including a better understanding of risks and costs. The previous plans also better aligned with LCS test plans to improve the department's understanding of the operational capability and limitations for each ship variant. This knowledge could then be used to inform the Navy's decision on which LCS-based design for the frigate it will pursue. In addition to the valuable knowledge to be gained by not pursuing the frigate in the planned 2018 time frame, the existing and planned LCS construction workload for both shipyards is another important factor to consider. Specifically, each shipyard has LCS construction demands that extend into 2021, suggesting no imperative for the Navy to award the frigate in 2018. Delaying the frigate award until at least fiscal year 2019—when more is known about cost, design, and capabilities—would enable better-informed decisions and oversight for this potential $9 billion taxpayer investment.
Why GAO Did This Study
The Navy envisioned a revolutionary approach for the LCS program: dual ship designs with interchangeable mission packages intended to provide mission flexibility. This approach has fallen short, with significant cost increases, schedule delays, and reduced capabilities—some of which have yet to be demonstrated. The LCS acquisition approach has changed several times. The latest change led to the frigate—a ship that involves minor modifications to an LCS design.
The House report 114-537 for the National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to examine the Navy's plans for the frigate. This report examines the Navy's plans for the frigate acquisition as well as remaining opportunities for oversight. To conduct this work, GAO reviewed documentation and interviewed Department of Defense (DOD) officials, and leveraged prior GAO reports on shipbuilding and acquisition best practices.
What GAO Recommends
Congress should consider not enacting authority pursuant to the Navy's request for a block buy of 12 frigates in fiscal year 2018 and delaying funding of the lead frigate until at least fiscal year 2019, when more information is available on the ship's cost, design, and capabilities. GAO also recommends that DOD delay its procurement plans until sufficient knowledge is attained. DOD partially concurred with the recommendation but is not planning to delay frigate procurement. GAO continues to believe the recommendation is valid.
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Matter for Congressional Consideration
Status: Closed - Implemented
Comments: In May 2017, the Navy stated that it was delaying procurement of the lead frigate until fiscal year 2020 to ensure the ship design was mature. This action is consistent with a recommendation we made in the same report as this matter for congressional consideration. Specifically, we recommended that the Navy delay the frigate contract award until at least fiscal year 2019 in order to ensure sufficient design, cost, and capability knowledge is available to inform decisions on the award. Because the Navy's decision to delay the frigate was made prior to the release of the Fiscal Year 2018 President's Budget, the department was able to remove the fiscal year 2018 procurement funding for for the lead frigate from the budget before its issuance and no longer needed to seek block buy authority for fiscal year 2018. As a result, Congress was never presented with the opportunity decide on funding the lead ship or authorizing the block buy in for fiscal year 2018. Still, the revised Navy plans for the frigate have produced the desired effect of this matter and the recommendation by delaying the frigate in order to ensure a mature ship design before contract award. Therefore, we are closing this matter as implemented.
Matter: To ensure sound frigate procurement decisions, Congress should consider not enacting authority pursuant to the Navy's request for a block buy of 12 frigates in the fiscal year 2018 budget and consider delaying funding of the lead frigate until at least fiscal year 2019 when sufficient cost, design, and capability knowledge is expected to be available to inform decisions.
Recommendation for Executive Action
Status: Closed - Implemented
Comments: In response to this recommendation, DOD acknowledged that the Navy's final contract decision includes risks, but stated that it believed the current plan for a frigate downselect award in summer 2018 offered an acceptable tradeoff between technical and affordability risks. The Navy has since decided to delay the award of the frigate contract until fiscal year 2020 to ensure design maturity for the ship. According to budget information provided by the frigate program office, the delay eliminates frigate procurement funding needs planned for fiscal years 2018 and 2019, amounting to a $1.507 billion (then-year dollars) savings in those years ($776 million and $731 million, respectively). This delay supports closing this recommendation as implemented.
Recommendation: To ensure the department and the shipbuilders have sufficient knowledge of the frigate's anticipated cost and design during the procurement process, the Secretary of Defense should direct the Secretary of the Navy to delay frigate procurement plans and the award of the lead frigate contract until at least fiscal year 2019 when cost estimates will be completed, detail design could be underway, and significant progress will have been made in demonstrating through testing the operational capabilities of LCS that are relevant to the frigate.
Agency Affected: Department of Defense