United States General Accounting Office

GAO Report to the Chairman, Subcommittee

on Military Research and Development,

Committee on National Security, House

of Representatives

June 1996 NAVY SHIP

PROPULSION

Viability of New Engine

Program in Question

G O A

years

1921 - 1996

GAO/NSIAD-96-107

GAO United States

General Accounting Office

Washington, D.C. 20548

National Security and

International Affairs Division

B-271195 

June 7, 1996

The Honorable Curt Weldon

Chairman, Subcommittee on Military

 Research and Development

Committee on National Security

House of Representatives

Dear Mr. Chairman:

In response to your request, we are providing this report, which discusses

the Department of the Navy’s development of a new ship propulsion

system, the intercooled recuperated (ICR) gas turbine engine. Our review

focused on the (1) Navy’s need for the engine; (2) cost, schedule, and

performance of the engine testing program; and (3) impact of the test

results and funding issues on the program’s test and development

strategies.

Background The ICR gas turbine engine program was established in the mid-1980s to

develop an improved surface ship propulsion system that would be fuel

efficient. In December 1991, the Navy awarded a contract to the

Westinghouse Electric Corporation for the advanced design and an option

for full-scale development of the engine.1

 Their engine development team

includes Rolls-Royce Public Limited Company (United Kingdom),

AlliedSignal Aerospace Incorporated, and CAE Electronics.

The engine is essentially an advanced gas turbine engine, similar to the

one used on a large commercial aircraft. It is being adapted for marine use

by adding a recuperator, an intercooler, and other major components.

Housed in a special enclosure, the engine also has a lube oil module, an

off-engine intercooling module, and a digital control system specifically

built for shipboard application. A critical component of the engine is the

recuperator. The recuperator uses engine exhaust to preheat compressed

air before fuel combustion, allowing the engine to use less fuel. For

example, the Navy expects the ICR engine to achieve a weighted average

improvement of 30 percent in fuel efficiency for a mechanical drive

destroyer. Figure 1.1 shows a cut-away drawing of the ICR gas turbine

engine in its planned enclosure.

1

In January 1996, the Westinghouse Electric Corporation division responsible for the ICR engine was

sold to the Northrop Grumman Corporation.

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Figure 1.1: Cut-Away Drawing of the ICR Gas Turbine Engine in Its Enclosure

Source: Westinghouse Electric Corporation.

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Portions of the ICR program are a collaborative effort among the United

States, British, and French navies. Memorandums of understanding, signed

between the United States and the two other countries, relate to the

development of an advanced, fuel efficient ship propulsion system to

satisfy common operational requirements and meet emerging

environmental emission standards. The memorandum of understanding

with the United Kingdom calls for the joint development and qualification

testing of the ICR engine. Specifically, the United Kingdom is responsible

for providing an ICR test facility along with fuel, utilities, and manpower to

support up to 2 years, or 1,500 hours, of developmental testing. The

memorandum was signed on June 21, 1994, for a 5-year period. The 10-year

memorandum signed by France, in August 1995, calls for the joint

adaptation and testing of an ICR engine upgrade for reducing exhaust

emissions.

The U.S. Navy estimates the ICR program’s developmental total cost2

 to be

$415 million, with $223.6 million having been spent through fiscal year

1995. These amounts include foreign financial contributions of

$15.8 million from the United Kingdom and $15 million from France.

Although the Navy has classified the engine as a preplanned product

improvement program3

 for the DDG-51 destroyer, it will not decide on

whether it will install the ICR engine on the destroyer until January 1997.

The British and French navies are completing the design of a multinational

frigate, known as the Horizon, and are considering the engine as its

propulsion system. The only operational ICR test facility established, to

date, is at Pyestock, United Kingdom.

Results in Brief After more than 4 years of advanced development, some Navy officials are

questioning whether the ICR engine will provide a viable and timely return

for the large investment needed to develop it. One high level Navy official

has recommended that the engine not be funded in the future because it

does not provide a reasonable prognosis for long-term benefit, while

another has stated that the program has marginal merit in light of other

priorities. A Center for Naval Analyses report notes that the engine’s

development costs are significant, questions the affordability of the

2

Total developmental program cost assumes exercising all contract options, which includes five ICR

gas turbine engines, development test, U.S. Navy qualification and shock tests, and ship integration

testing.

3

A preplanned product improvement for an ongoing system is defined as an improvement that goes

beyond current system performance to achieve needed operational capability.

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engine, and concludes that the economic payoff for the engine is so long

term that it might not be an attractive investment.

Although the ICR program is designated a preplanned product

improvement for the DDG-51 destroyer program, several Navy officials

(including officials from that program office) have raised concerns about

the practicality of placing the engine on the destroyer since it is already

equipped with a capable and reliable propulsion system. The Center for

Naval Analyses, in a 1994 cost-benefit analysis, concluded that the engine

should not be used on the destroyer due to the high cost involved. Given

the (1) small number of new U.S. destroyers involved, (2) adequacy of the

current destroyer engine, (3) high cost and difficulty of incorporating the

engine into the destroyer, (4) uncertain status of DDG-51 integration plans,

and (5) current state of ICR development, we believe the Navy should at

least wait for a more appropriate new ship for the ICR engine.

The Navy is experiencing serious problems in the development and testing

of the ICR engine’s recuperator and has yet to recover from a January 1995

recuperator failure that resulted from design, manufacturing, and quality

assurance problems. As of April 1996, a modified recuperator had

operated for only about 120 hours. This, along with earlier testing, is

approximately 9 percent of the 1,500 hours the Navy had hoped to achieve

under the memorandum of understanding with the United Kingdom. While

the contractor has instituted a Navy-approved recovery plan to redesign

future recuperators, the plan did not provide sufficient time to evaluate

test data prior to key redesign activities. This was due to a need to meet a

planned, late 1996 decision date to order production ICR engines for the

international Horizon frigate.

In November 1995, the Navy halted work on redesigning future

recuperators because of funding reductions, contractor quality control

problems, manufacturing problems, and delivery delays.4

 The Navy is

working with the primary contractor to resolve these problems, in part, by

restructuring the ICR program. For example, officials are considering

reducing contractual requirements, such as the number of preproduction

engines purchased, and rescheduling program milestones. These

programmatic changes can be expected to reduce the scope of the

developmental program and to cause testing delays and cost growth. The

possibility of cost growth also raises questions about the viability of the

Navy’s estimate of $415 million to develop the ICR engine. For example, the

4

As of May 21, 1996, the stop work order was still in effect.

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Navy has not yet adjusted program cost estimates to reflect schedule

slippage and technical difficulties.

As the Navy restructures the ICR engine’s development program, it faces

two major decisions concerning the test program’s infrastructure. The first

decision is how and if it will use a $5.4 million ICR test facility that it built

in Philadelphia. Currently, the Navy plans to conduct almost all of its ICR

engine developmental testing at the test site in the United Kingdom. The

second is whether it will test the ICR engine at sea in a pilot ship. The cost

to test the engine at sea is estimated to range from $5.8 million to

$12.5 million.

The Value of and Need

for This Program Are

Being Questioned

In a September 1995 letter to the Navy’s Deputy Chief of Naval Operations

(Resources, Warfare Requirements and Assessments), the Navy’s

Commander in Chief, Atlantic Fleet, recommended that the ICR engine not

be funded in the future, noting that “in this year’s . . . budget process, the

ICR Gas Turbine Engine Program stands out as a major cost without a

realistic prognosis for long-term benefit.” He stated that the engine’s

long-term cost-benefit projections are speculative at best and that its

technology will most likely become obsolete before a return on its

investment is realized. He also stated that the engine is not a viable

candidate for existing ships due to its large size, weight, and cost. In an

October 1995 reply, the Deputy Chief of Naval Operations stated that the

Navy may decide the fate of the engine program as it finalizes its budget

submission for fiscal year 1998.

In November 1995, a high level Navy official informed us that the Navy’s

need for the engine was marginal compared to other current priorities and

that he believed the Center for Naval Analyses’ ICR report does not make a

compelling economic case for the continued development of the engine.

However, he also noted that the Department of Defense (DOD) supported

the international aspects of the program and that the results of the

upcoming developmental testing will be critical to determining the

program’s future.

Center for Naval Analyses

Study Raises Affordability

and Other Concerns

In a September 1994 cost-benefit analysis for the Assistant Secretary of the

Navy (Research, Development and Acquisition), the Center for Naval

Analyses looked at the ICR engine and an improved version of the current

DDG-51 engine. The report, which was prepared prior to the initial test of

the engine and recuperator, states that “(t)he economic payoff for a

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fuel-efficient engine is so long-term that it might not be an attractive

investment in the private sector, but the eventual benefits of either

improved engine are not in doubt, only the near-term affordability.” The

analysis stated that the Navy’s 1993 ship building plans for gas turbine

surface ships are less then half what they were expected to be in 1987 and

that such a large reduction could call into question the idea of a costly ICR

engine development paid for by fuel savings. Further, the remaining

development costs for the engine were significant. It would take until at

least 2026 for the cost savings from the engine to equal the Navy’s

investment, and the Navy needed to determine what priority it should give

to the engine’s development. The analysis concluded that while existing

contractual and political obligations would make cancellation of the

engine an unpleasant choice, the high cost to develop the

engine—estimated to be an average of $40 million per year through fiscal

year 1999—means that program cancellation must be considered an

option. In a December 1994 letter to the Chairman of the House

Committee on Armed Services, the Secretary of the Navy stated that the

report’s analysis supported the continued development of the ICR engine

because of potential future fuel savings.

Engine’s Use in Navy

Destroyer Is Questionable

According to the Navy, the ICR engine is expected to provide military

advantages, such as increased range and time on station for the DDG-51,

which the Navy considers desirable and which formed the basis for DOD’s

approving the engine as a preplanned product improvement for the

DDG-51. However, Navy officials have raised concerns about the viability

of placing the engine on the DDG-51. Officials from the DDG-51 program

office stated that the destroyer is currently equipped with a reliable gas

turbine engine and that equipping it with the unproven ICR engine is a

questionable decision.5

 They noted that the Navy’s next generation surface

combatant, planned for 2003, appeared to be a better candidate for the

engine because it could be designed from the start to accept the engine.

An ICR program official also called the ICR engine’s use on the DDG-51

questionable but noted that this decision gives the Navy an immediate

need for the engine. He agreed that the Navy’s next generation surface

combatant would be a better candidate since it could be designed to

accept a new propulsion system.

5

In June 1994, a DOD information paper on the ICR engine noted that acquisition and installation costs

related to putting 26 ICR engines in the last 13 destroyers to be built would be $249.3 million, in

then-year dollars. Further, the cost of acquiring and installing two ICR engines in a DDG-51 was

estimated to be $13.5 million, in then-year dollars, more per ship than two of the current engines.

Page 6 GAO/NSIAD-96-107 Navy Ship Propulsion
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In 1992, we reported that the ICR program lacked adequate management

controls, such as milestone reviews and comprehensive, independent cost

estimates.6

 In February 1994, the Under Secretary of Defense designated

the ICR engine program as a preplanned product improvement for the

DDG-51 destroyer in an effort to improve its management and ensure that

it was subject to the approval of the Defense Acquisition Board and an

independent cost estimate. The decision, however, on whether to actually

use the ICR engine on the DDG-51 will not take place until January 1997. In

addition, the first production engines would not be installed in a DDG-51

until over 7 years later, in 2004. The initial engine is expected to be

ordered in 2001. If the engine is used on the DDG-51, the Navy now plans

to put it on only the last nine destroyers to be built.

The Center for Naval Analyses cost-benefit analysis of the ICR engine

concluded that the engine should not be used on the DDG-51 due to the

high cost to fit the engines on ships that were not designed for them and

the small number of destroyers (14 at that time) remaining to be built. The

analysis also noted that the projected break-even point between the cost

savings generated by the engine and the Navy’s investment, based on 

79 possible candidate ships (including the DDG-51 destroyers), would not

occur until about 2026. If the engine is not put on the DDG-51, as the

analysis recommends, then the number of identified candidate ships

would be reduced to 65. In either case, the analysis noted that the cost of

replacing the DDG-51 engine is significant. The analysis estimates that the

cost to equip a new DDG-51 with two ICR engines is $12.4 million (in fiscal

year 1994 dollars) more than the current engines. This increase in cost

includes design, shipbuilding, and engine costs. This cost compares with

the $4.9 million cost increase estimate for the other gas turbine engine in

this study (a more fuel-efficient version of the current engine). The

analysis suggests that the Navy confirm this estimate before acting on its

recommendation.

The Westinghouse contract requires the development of an ICR engine that

will occupy the same space as the existing engine in the DDG-51. Current

plans call for each new destroyer to be equipped with two ICR engines and

two existing gas turbine engines. These plans present design and

integration problems for the DDG-51 because the ship’s engine

compartment will need to be redesigned to accommodate the larger ICR

engine. Since the ICR engine module is expected to weigh two and one-half

times more than the existing engine system, the engine compartment will

6

1993 Navy Budget: Potential Reductions and Rescissions in RDT&E Programs (GAO/NSIAD-92-322BR,

Sept. 29, 1992).

Page 7 GAO/NSIAD-96-107 Navy Ship Propulsion
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require substantial modification to achieve the structural strength needed

to support the added weight of the engine. In addition, with two different

propulsion systems on each ship, the Navy will have to maintain individual

logistics for each system.

In March 1995, two shipyards building the DDG-51, Ingalls Shipbuilding

Incorporated and Bath Iron Works Corporation, submitted reports to the

Navy concerning the feasibility of installing an ICR engine in the DDG-51.

Ingalls reported that while the installation was technically feasible,

maintaining the ICR engine would be difficult because it has about

30 percent more preventive maintenance requirements than the current

engine. Also, Ingalls reported “unlike the (current engine), most in-place

maintenance activities will not be convenient or expeditious due to the

very limited access to the ICR engine components.” Bath Iron Works

concluded that replacing two of the present propulsion gas turbines with

ICR gas turbines would have a significant negative impact on the ship and a

clear potential for cost growth.

Serious Problems

Experienced in

Developing and

Testing the Engine’s

Recuperator

The ICR engine’s recuperator, a critical component necessary for obtaining

improved fuel economy, is experiencing serious developmental and testing

problems. It failed after only 17 hours of testing with the engine in

January 1995. The failure occurred almost 1-1/2 years after the Navy took

the unusual step of initiating full-scale development of the engine

concurrently with its advanced development. Since the failure, the ICR

program has experienced technical and other problems that have severely

affected program cost, schedule, and performance.

Recuperator Failure

Forces Major Program

Restructuring

The engine, without a recuperator, started developmental testing in July

1994. In December 1994, when the Navy first tested the engine with a

recuperator, the engine demonstrated its potential effectiveness by

increasing engine power from 7,000 horse power to 11,500 horse power

with no increase in fuel consumption. In January 1995, however, the

original recuperator failed after only 17 of 500 hours of planned testing.

Test operations were terminated when a significant rise in the turbine inlet

temperature occurred. This rise in temperature was attributed to the

failure of the heat exchanger, within the recuperator, due to numerous air

leaks.

Westinghouse, the primary contractor, identified 26 different recuperator

failures, many of which were due to basic flaws in the unit’s internal

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design and construction. In response, the Navy approved a contractor

recovery plan to redesign the recuperator and requested an additional

$11 million from Congress to fund this effort.7

 As a result, the Navy

extended the advanced development phase of the contract by 21 months,

until September 1997. The plan allowed, however, key recuperator tests to

be conducted concurrently with the redesign of the recuperator. One

program official described the plan as aggressive while another told us

that this was necessary to accomplish enough testing (such as a key

500-hour engine test) to support a planned late 1996 decision to order

production engines for the Horizon frigate.8

Between March and November 1995, the Navy reduced projected program

funding by $27.3 million between fiscal years 1996 and 2000. In

November 1995, the Navy also ordered Westinghouse to stop work on

designing and manufacturing later generation recuperators. The stop order

was issued due to the decline in program funding and the inability of the

contractor to meet the delivery date for the modified recuperator. This

latter problem was due, in part, to continuing contractor quality control

problems. According to the Navy, the stop work order reduced the amount

of concurrency in the recuperator recovery program by allowing time to

review and incorporate various test results into thermal computer models

and evaluate test results from the modified recuperator. The Navy also

requested that the contractor propose possible changes to current

contract requirements, including revising the schedule, estimating cost by

quarter, and eliminating test efforts related to integration of the ICR engine

into the DDG-51.

In response to the funding reduction and the stop work order,

Westinghouse notified the Navy that while the technical problems

associated with the recuperator were understood and solutions were in

place, the engine’s development would be delayed an additional 

20 months, until May 1999. In addition, Westinghouse recommended,

among other things, that the number of preproduction engines used for

developmental testing be reduced from five to two. Westinghouse also

stated that cost growth has occurred and identified potential future

development and production cost risks. Westinghouse agreed to provide

the Navy an overall recuperator recovery strategy by May 1996.

7

The ICR program office estimates the cost of the recuperator recovery program to be $25 million.

However, since the Navy has not completed restructuring and rebaselining the program, this estimate

cannot be verified.

8

On March 1, 1996, we were informed that the decision to put the ICR engine on the Horizon had been

delayed until the summer of 1997. The first Horizon is expected to be operational in 2002.

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In March 1996, an ICR program official told us that the impact of the initial

recuperator failure on the ICR program has been catastrophic and that the

Navy has yet to recover from it. The Navy expects that the developmental

program’s scope will be reduced, resulting in testing delays and cost

growth. Navy and DOD officials told us, in commenting on our draft report,

that while they believe significant progress has been achieved in solving

the problems associated with the recuperator failure, the ICR development

program will not recover its schedule slippage and that a technical

recovery is only possible.

Uncertainty of Cost

Growth Raises Questions

About the Program’s

Viability

In our September 1992 report, we stated that “without reliable estimates of

both (1) the cost of acquiring the ICR engine and related technology and

(2) the corresponding savings in operational cost that it might produce, it

is our view that any return on the sizeable investment this program

represents is speculative at best.” Our view remains unchanged because of

concerns about the realism of the ICR engine’s development schedule and

concurrency in the recovery plan test schedule; recognized difficulties in

integrating the engine into DDG-51 fleet; the overall high cost of the

program; and total program costs that are not fully covered in existing

budget plans.

Specifically, the Navy has not funded the cost to finalize and perform ICR

developmental testing at an established U.S. facility ($17 million), to

integrate an ICR engine into the DDG-51, or to retrofit a pilot ship for

testing at sea. In addition, to keep total program costs at $415 million, the

Navy plans to reduce the scope of its developmental test efforts and use

funds intended for other test purposes to offset the expected $25 million

recuperator recovery program cost.

Also, in May 1994, the ICR engine contract was modified by deleting special

tooling and special test equipment costs since the contractor agreed to

fund these costs, if Navy funds were not available. The contractor is to

maintain a separate account of these costs for future recovery. Future

payment for such tools and equipment will obviously increase total

program costs.

Plans for the Horizon

Frigate Drove ICR Engine

Schedule

A major factor that drove the ICR engine’s development schedule has been

the need to decide, by late 1996, whether the engine will be used in the

international Horizon frigate. The 1994 memorandum of understanding

with the United Kingdom states that its goal was to move a critical ICR

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engine preproduction decision milestone to mid-1996, in order to advance

the initial operating capability date for both the DDG-51 and the Horizon

frigate. A Navy program official acknowledged that meeting that date was

part of the reason the Navy approved an aggressive recuperator recovery

plan, which included redesign of the recuperator before receiving the

results of key tests.

During 1995, the House Committee on Appropriations recommended, in its

report on the fiscal year 1996 DOD appropriations bill, that the program be

terminated because of concerns about serious technical problems, high

unit cost, and program cost-effectiveness. In a July 13, 1995, letter to the

Chairman of the House Appropriations Committee, the British

Ambassador expressed his concern about funding for the ICR engine

program. He stated that the United Kingdom plans to use the engine for its

next generation of warships. He noted, however, that if U.S. funding for

the ICR program was eliminated by Congress it would be incomprehensible

to the British government and it could help encourage a movement toward

a protectionist European defense market. In an August 28, 1995, letter to

the same Chairman, the Secretary of Defense also expressed concern over

the possibility that all ICR program funds would be deleted and that the

program would be terminated in the House appropriations bill. Noting that

the ICR engine is a candidate for all future nonnuclear Navy surface ships,

he stated that the United Kingdom and France are committed to fielding

the engine on their next generation of surface combatant ships and that

termination of the program would be a potential embarrassment for the

U.S. government. Full funding was restored to the program as a result of

the conference committee meeting between the Senate and House. An

additional $15.4 million, primarily for the recuperator recovery program,

was also appropriated.

Necessary Test Data Will

Not Be Fully Available

Despite some progress made in improving the recuperator recovery plan,

the test data necessary for decision making will still be limited. The

original recuperator recovery plan recommended that a test unit and three

additional generations of recuperators be manufactured during the

developmental effort. Each would be designed with a longer service life

than the previous one and would provide different solutions to address the

failures. However, much of the testing of one generation would be

conducted concurrently with the redesign of the next generation

recuperator, thus severely limiting the contractor’s ability to improve the

redesign based on test results. For example, a series of recuperator core

component tests (there are eight of these heat exchanging cores in a

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recuperator) were scheduled simultaneously with the redesign of the next

recuperator.

To support the redesign efforts, a series of component tests are planned

with a full-sized recuperator core. Such component testing had not been

performed on the original recuperator due to the manufacturer’s attempt

to meet delivery schedules for developmental testing. The manufacturer

was behind due to (1) delays in awarding the subcontract to AlliedSignal,

(2) refurbishing of the brazing furnace to satisfy safety requirements, and

(3) manufacturing additional core units to replace poorly manufactured

component units. The recovery plan concluded that these component tests

“are crucial to support the design evolution of the core configuration and

are more effective and provide earlier test data.” Due to delays in receiving

these core component test results, which are necessary to validate model

predictions, the Navy directed the contractor to stop testing the modified

recuperator in January 1996. This action was necessary since the

contractor had failed to provide substantiating data from the core tests to

allow certain engine test maneuvers. Furthermore, in later

correspondence, the Navy denied a particular test maneuver since the

Navy believed the contractor’s proposed approach was inconsistent with

the long-range requirement of extending the modified recuperator’s useful

life for future testing. Within a week of being told to stop testing, the

contractor resumed engine testing with the modified recuperator.

A blue ribbon panel that reviewed the recovery plan determined that

available test results were inadequate to predict future problem areas and

the recuperator’s operational life and to validate performance models.

Since the recuperator’s failure, the engine manufacturer has been testing

the engine without a recuperator, further limiting the amount of available

test data and the contractor’s ability to validate performance models and

engine performance.

According to Navy officials and documents, the need to have a propulsion

system available for ships in development, especially the new

multinational frigate, drove an aggressive recuperator recovery plan to

redesign recuperators without the benefit of results from tests of

individual cores and the environmental test data from a special test unit.

Examination of the failed recuperator and additional materials test results,

however, contributed to the design effort. The special test unit, which was

created using six cores from the failed recuperator and two unused cores

that had been set aside due to questionable manufacturing quality,

replaced the failed recuperator. The test objectives of the special unit

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included the provision of data for refining, developing, and validating

analytical computer models. Modeling new design concepts is a key factor

in any developmental effort. The special unit operated for about 6 hours

and demonstrated that the recuperator could be operated safely by

gradually increasing engine power to obtain idle speed and having the

recuperator partially active. The unit was extensively instrumented to gain

detailed information about the operational environment.

One of the recuperator recovery plan’s objectives was to deliver a

redesigned recuperator to the Pyestock test facility by October 31, 1995,

but an additional schedule slippage delayed delivery until December 1995.

The slippage, however, enabled the Navy to obtain some additional

preliminary core component test results that were used to establish

boundaries as to what test operations will be performed. For example, the

engine could not initially exceed 40 percent of full power nor could the

contractor restart a hot engine without risking damage to the recuperator.

Issues Concerning the

Test Program’s

Infrastructure

As the Navy restructures the ICR engine’s development program, it faces

two major decisions concerning the test program’s infrastructure. The first

decision is how and if it will use an ICR test facility already built, but not

operational, in Philadelphia. Prior to the recuperator failure, the Navy had

hoped to advance significantly the development of the ICR engine by

conducting joint testing in the United Kingdom and the United States. The

second decision is whether it will test the ICR engine at sea in a pilot ship.

Because of recuperator technical problems, funding reductions, and

schedule delays, the Navy will not be able to accelerate engine

development via planned joint land-based testing. Currently, the Navy

plans to conduct almost all of its ICR engine developmental testing at the

test site in the United Kingdom. In addition, it has yet to resolve questions

related to the need to test the engine at sea.

Land-Based Testing Crucial

to Advancing the Engine’s

Development Schedule

The Navy signed an advanced development phase contract with

Westinghouse in 1991. In developing an ICR test facility, Westinghouse

considered three potential test sites and selected Pyestock, United

Kingdom, as its primary test site. The subsequent memorandum of

understanding with the United Kingdom provided for the United Kingdom

to fund the operation of the test site for up to 2 years or 1,500 hours of

testing. This in-country support was estimated to total $22 million in

then-year U.S. dollars. The test facility in Pyestock began testing the ICR

engine (without a recuperator) in July 1994.

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When the Navy advanced the ICR engine’s development schedule in 1993 by

21 months, it created a need for another ICR land test site. Both the Navy

and Westinghouse believed that with two operational facilities they could

conduct almost simultaneous engine tests in support of the faster

development schedule. Based on the memorandum of understanding with

the United Kingdom, the United States would be responsible for funding

the Philadelphia test site. This test site would also perform required

technical and operational testing for the U.S. Navy.

U.S. Test Site Built but Not

Operational

While the Philadelphia test facility was completed in fiscal year 1995, it is

not yet operational. This is due, in part, to funding reductions and

recuperator technical problems that have resulted in major delays in the

developmental testing of the engine. As a result, there is currently no ICR

engine and recuperator available for testing at Philadelphia. In addition,

the Navy has not provided adequate funding for the operation of the

Philadelphia facility in support of desired joint developmental and

qualification engine testing. Complicating the situation is the fact that the

recuperator failure and the subsequent 41-month delay in the development

program have eliminated one of the primary justifications—to speed up

the engine’s development—for two land-based test facilities. The Navy

now plans for almost all developmental and qualification testing to be

conducted in Pyestock and, at the present time, use the Philadelphia

facility near the end of the program only for ICR engine shock testing.

The Navy and Westinghouse had originally expected that the Philadelphia

test facility would allow a second 500-hour developmental test after a

similar test had been performed at Pyestock. By conducting these tests

almost simultaneously, the Navy believed it could complete the engine’s

development 21 months early. The Philadelphia facility cost $5.4 million to

construct. The Navy estimates the cost to fully equip and staff the

Philadelphia test facility for a 500-hour test to be $17 million: $9 million in

fiscal year 1996 and $8 million in fiscal year 1997. In the fiscal year 1996

budget, however, the Navy only received $4.5 million for this test. Navy

officials told us that they would not partially fund this test and that the

$4.5 million is currently being withheld by the Navy and may, sometime in

the future, be rescinded.

The Navy also had planned to conduct ICR related testing at another test

facility in Philadelphia. Using the DDG-51 test facility, which is built and

operating, the Navy was going to accomplish tests required for integrating

the ICR engine into that class of ship. Because of funding reductions and

Page 14 GAO/NSIAD-96-107 Navy Ship Propulsion
B-271195 

other problems, the Navy is considering eliminating this testing. Also, the

ICR test facility was to have been used to test other future ship propulsion

and power projects. If the facility is not made operational, this will not be

possible. Thus, the Navy currently has an ICR test facility without

operational capability and an ICR engine test strategy that is in a state of

limbo.

Navy Undecided If It Will

Test the Engine at Sea

The Navy has not decided if it will test the ICR at sea because of the high

cost involved. It estimates that it would cost between $5.8 million to

$12.5 million to redesign a ship’s engine room and install an engine in a

pilot ship. While no decision has been made, this is an important testing

issue. A DDG-51 program official stated that it is Navy policy to test

engines at sea. A Navy testing official stated that a land-based test facility,

by itself, is not adequate to fully evaluate the engine’s operational

effectiveness and suitability because the facility does not represent a

realistic ship and maritime environment. This is, in part, because the

engine compartments on surface combatants are very limited in space

compared to other surface ships (e.g., cargo ships), thereby presenting

more challenges for repairing or maintaining the engine. Also, the Navy

has not decided what type of pilot ship the engine will be tested on. A

Navy official stated that the type of pilot ship selected is important due to

the various electronic support equipment associated with the engine.

Recommendations This report raises many questions about the viability of the ICR engine

program, and we believe DOD needs to reassess the need for and future

direction of the program. Because the United States has entered into joint

agreements with the British and French navies to develop this engine, the

decisions on the future of the program are complicated and sensitive. We

also believe that the use of the engine on the DDG-51 destroyer is

inappropriate. Therefore, we recommend that the Secretary of Defense

reassess the Navy’s continuing need for the new engine. In doing so, the

Secretary needs to carefully consider how current agreements with U.S.

allies affect the program, identify what effect the Navy’s ongoing efforts to

restructure and rebaseline the ICR program will have, and determine what

the Navy’s surface combatant ship future requirements actually are. If it is

determined that the program should continue, the Secretary of Defense

should direct the Secretary of the Navy to

• not use the engine in the DDG-51 destroyer;

Page 15 GAO/NSIAD-96-107 Navy Ship Propulsion
B-271195 

• determine total program costs for developing and acquiring the engine

relative to the Navy’s requirements for future surface combatant ships,

including costs for U.S. test facilities and/or pilot ship engine testing;

• prepare a facility use plan for the U.S. test site; and

• prepare a test plan and schedule for the engine that provide sufficient

assurance that it can transition from development to production and be

realistically available for use in any U.S. ship.

Agency Comments

and Our Evaluation

DOD said that it disagreed with our report, in large part, because the

Secretary of Defense is satisfied with the Center for Naval Analyses’

assessment and does not need to reassess the program at this time, as we

have recommended. However, DOD’s comments do not address the

difficulties the program has encountered since the Center’s 1994

assessment. Specifically, with the January 1995 failure of the engine’s

recuperator, the program has experienced serious design, manufacturing,

and quality assurance problems. In response, the Navy instituted an

aggressive recuperator recovery plan to maintain as much of the engine’s

accelerated development schedule as possible. Only in November 1995,

however, did the Navy realize that this approach would not work and

ordered work stopped on redesigning the recuperator. An ICR program

official has described the impact of the recuperator failure on the program

as being catastrophic and, as of May 21, 1996, the stop work order was still

in effect.

DOD also disagreed with our recommendation to not use the engine in the

DDG-51 destroyer. DOD commented that the ICR engine was expected to

provide military advantages to the DDG-51, such as increased range and

time on station. While acknowledging that weight and size relative to the

size of the DDG-51 engine room are important, DOD commented that it is

technically feasible to put the engine on the ship. DOD did not comment,

however, on our concerns about the high cost of putting the engine on the

DDG-51. We would like to reiterate that the Center’s assessment

recommended that the ICR engine not be used in the DDG-51 because of

the high cost to fit these engines in a ship that was not designed for them.

Moreover, representatives from the DDG-51 program office, and even the

ICR program office, have said that this is an inappropriate ship for the ICR

engine.

DOD commented that studies done by Ingalls Shipbuilding demonstrate that

putting the ICR engine on the destroyer is technically feasible. However,

DOD’s comments fail to note that Bath Iron Works concluded that the

Page 16 GAO/NSIAD-96-107 Navy Ship Propulsion
B-271195 

engine would have a significant negative impact on the ship and a clear

potential for cost growth. Further, weight is clearly an issue when DOD tells

us, in its technical comments, that the Navy will, if necessary, reduce the

amount of fuel carried on the destroyer to counter the increased weight of

the engine.

Concerning our recommendation to determine total program costs for

developing and acquiring the engine, DOD stated that total program costs

have been estimated and the ICR engine should break even around about

2020. However, when we attempted to follow up on this statement, we

learned that, as of April 1996, the Navy had yet to restructure and

rebaseline the program. The Navy is in the process of restructuring the

program to absorb the estimated $25 million cost to implement the

recuperator recovery plan and expected reductions in out-year program

funding. To accomplish this, the Navy is considering, among other things,

reducing the number of preproduction engines, under the contract, from

five to two. In addition, the Navy has not fully funded all of the test

activities, including the U.S. land-based test facility and a pilot ship to test

the engine at sea. It may even eliminate the planned DDG-51 integration

testing. Thus, total program costs are not fully known and we are

concerned about what test activities the Navy plans to reduce or eliminate

to keep total program costs down.

In addition, the Center for Naval Analyses actually predicts the break-even

point, when savings would equal the development cost, as being in 2026,

not 2020 (based on the first engines being installed in a fiscal year 1999

DDG-51). Under current Navy plans, however, ICR engines would not be

installed until 2004, meaning that the break-even point is likely to occur

even later then 2026.

Concerning our recommendation to prepare a test plan and schedule that

provides sufficient assurance that the engine can transition from

development to production and be realistically available for future use,

DOD stated that if the decision was made to use the ICR engine on a

particular ship, test planning and scheduling would be incorporated into

that ship’s test and evaluation master plan. However, with the decision to

put the engine on the DDG-51 at least a half year away and a stop work

order still in effect, we are more concerned about the current test plan and

schedule for the engine’s development. Until the Navy restructures and

rebaselines the program we will be unable to determine if test

concurrency has been eliminated and if adequate time has been provided

for developmental testing and the evaluation of test results. DOD also

Page 17 GAO/NSIAD-96-107 Navy Ship Propulsion
B-271195 

pointed out that the United States has no cognizance over the Horizon

program and that the United Kingdom, France, and Italy would develop

their own test plans. We have revised our recommendation to specify that

it only applies to U.S. ship development.

After carefully reviewing all of DOD’s comments, we continue to believe

that the Secretary of Defense needs to reassess the ICR engine program and

the Navy needs to resolve problems with the ICR engine’s recuperator and

sufficiently test the engine prior to committing to its production,

particularly since there appears to be no pressing U.S. requirement. We are

also concerned about the growing cost of the program and, in particular,

the cost to acquire and install the engine in the DDG-51. While the U.S.

Navy has entered into cooperative agreements with the United Kingdom

and France, it is still funding about 93 percent of the engine’s estimated

$415 million development cost. Program restructuring, schedule slippage,

and expected cost increases will add to that amount. The decision of the

program office to advance the engine’s schedule by concurrently

conducting advanced development along with full-scale development 

1-1/2 years prior to testing the engine and recuperator together and then,

after the recuperator failure, to initiate an aggressive recuperator recovery

plan heightens our concern about program management. We also are

concerned that the Navy may significantly reduce the testing of the ICR

engine in an attempt to offset program cost growth and the additional cost

caused by the recuperator failure. We also continue to question the Navy’s

proposal to put the engine on the DDG-51 and its decision to manage the

program as a DDG-51 preplanned product improvement.

DOD’s comments are presented in appendix I. In addition, DOD provided, for

our consideration, several factual and technical corrections related to the

report. In response, we have made changes to the report where

appropriate.

Scope and

Methodology

To obtain information for this report, we reviewed various program

research and development documents, including the recuperator recovery

plan, early concept and feasibility design studies, test plans and schedules,

various development contracts and other program documents. We

interviewed officials in the offices of the Under Secretary of Defense

(Comptroller/Chief Financial Officer), DOD’s Director of Operational Test

and Evaluation, Assistant Secretary of the Navy (Research, Development

and Acquisition), Navy’s Operational Test and Evaluation Force, and the

Naval Sea Systems Command’s Advanced Surface Machinery Program,

Page 18 GAO/NSIAD-96-107 Navy Ship Propulsion
B-271195 

Engineering Division, Land Based Engineering Site, and Naval Surface

Warfare Center. We also reviewed various DDG-51 program documents

and interviewed officials in the offices of the Under Secretary of Defense

(Acquisition and Technology) and the DDG-51 Program Office. We also

discussed our report with the Naval Audit Service.

To assess and analyze the risks associated with the recuperator recovery

plan, we attended two ICR bimonthly technical conferences where program

officials and contractors discussed technical and testing issues, including

engine performance, testing problems, and the recuperator recovery

program. We compared information obtained at these conferences with

various program and technical documents.

We conducted our review from May 1995 to May 1996 in accordance with

generally accepted government auditing standards.

We are also sending copies of this report to the Chairmen and Ranking

Minority Members, House Committees on National Security and on

Government Reform and Oversight, Senate Committees on Armed

Services and on Governmental Affairs, and Senate and House Committees

on Appropriations; the Director of the Office of Management and Budget;

and the Secretaries of Defense and the Navy. We will also provide copies

to others upon request.

This report was prepared under the direction of Thomas J. Schulz,

Associate Director, Defense Acquisition Issues. Please contact him or me

on (202) 512-4841 if you or your staff have any questions concerning this

report. The major contributors to this report are listed in appendix II.

Sincerely yours,

Louis J. Rodrigues

Director, Defense Acquisitions

 Issues

Page 19 GAO/NSIAD-96-107 Navy Ship Propulsion
Contents

Letter 1

Appendix I 

Comments From the

Department of

Defense

22

Appendix II 

Major Contributors to

This Report

25

Figure Figure 1.1: Cut-away Drawing of the ICR Gas Turbine Engine in

Its Enclosure

2

Abbreviations

ICR intercooled recuperated

DOD Department of Defense

Page 20 GAO/NSIAD-96-107 Navy Ship Propulsion
Page 21 GAO/NSIAD-96-107 Navy Ship Propulsion
Appendix I 

Comments From the Department of Defense

Page 22 GAO/NSIAD-96-107 Navy Ship Propulsion
Appendix I 

Comments From the Department of Defense

Page 23 GAO/NSIAD-96-107 Navy Ship Propulsion
Appendix I 

Comments From the Department of Defense

Page 24 GAO/NSIAD-96-107 Navy Ship Propulsion
Appendix II 

Major Contributors to This Report

National Security and

International Affairs

Division, Washington,

D.C.

Thomas J. Schultz

Brad Hathaway

John J. D’Esopo

Joseph C. Brown

David R. Fisher

John P. Swain

Norfolk Field Office Robert L. Coleman

(707113) Page 25 GAO/NSIAD-96-107 Navy Ship Propulsion
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