FORD-CLASS 

AIRCRAFT CARRIER

Follow-On Ships 

Need More Frequent 

and Accurate Cost 

Estimates to Avoid 

Pitfalls of Lead Ship

Report to the Committee on Armed 

Services, U.S. Senate

June 2017

GAO-17-575

United States Government Accountability Office
United States Government Accountability Office

Highlights of GAO-17-575, a report to the 

Committee on Armed Services, U.S. Senate

June 2017

FORD-CLASS AIRCRAFT CARRIER

Follow-On Ships Need More Frequent and Accurate 

Cost Estimates to Avoid Pitfalls of Lead Ship

What GAO Found

The cost estimate for the second Ford-Class aircraft carrier, CVN 79, is not 

reliable and does not address lessons learned from the performance of the lead 

ship, CVN 78. As a result, the estimate does not demonstrate that the program 

can meet its $11.4 billion cost cap. Cost growth for the lead ship was driven by 

challenges with technology development, design, and construction, compounded 

by an optimistic budget estimate. Instead of learning from the mistakes of CVN 

78, the Navy developed an estimate for CVN 79 that assumes a reduction in 

labor hours needed to construct the ship that is unprecedented in the past 50 

years of aircraft carrier construction, as shown in the figure below. 

John F. Kennedy Aircraft Carrier (CVN 79) Estimated Labor Hour Percentage Change

Compared to Actual Nimitz Class Labor Hour Percentage Change

After developing the program estimate, the Navy negotiated 18 percent fewer 

labor hours for CVN 79 than were required for CVN 78. CVN 79’s estimate is 

optimistic compared to the labor hour reductions calculated in independent cost 

reviews conducted in 2015 by the Naval Center for Cost Analysis and the Office 

of Cost Assessment and Program Evaluation. Navy analysis shows that the CVN 

79 cost estimate may not sufficiently account for program risks, with the current 

budget likely insufficient to complete ship construction. 

The Navy’s current reporting mechanisms, such as budget requests and annual 

acquisition reports to Congress, provide limited insight into the overall Ford Class 

program and individual ship costs. For example, the program requests funding 

for each ship before that ship obtains an independent cost estimate. During an 

11-year period prior to 2015, no independent cost estimate was conducted for 

any of the Ford class ships; however, the program received over $15 billion in 

funding. In addition, the program’s Selected Acquisition Reports (SAR)—annual 

cost, status, and performance reports to Congress—provide only aggregate 

program cost for all three ships currently in the class, a practice that limits

transparency into individual ship costs. As a result, Congress has diminished

ability to oversee one of the most expensive programs in the defense portfolio. 

This is a public version of a sensitive but unclassified report that GAO issued in 

March 2017. Information the Department of Defense deemed sensitive has been 

removed. Areas where redactions occurred are noted in the body of the report.

View GAO-17-575. For more information, 

contact Michele Mackin at (202) 512-4841 or 

MackinM@gao.gov.

Why GAO Did This Study

The Navy intended for the Ford Class 

aircraft carrier to improve combat 

capability while reducing acquisition 

and life-cycle costs. However, as GAO 

has reported on extensively since 

2007, the lead ship has experienced 

cost growth of nearly 23 percent, with a 

reduced capability expected at 

delivery. CVN 78 is estimated to cost 

$12.9 billion, while the next ship, CVN 

79, is estimated to be $11.4 billion. The 

Navy plans to buy 1-2 more ships in 

the coming years.

The Senate Armed Services 

Committee Report accompanying the 

National Defense Authorization Act for 

Fiscal Year 2016 included a provision 

that GAO review Ford-class cost 

estimates, among related issues. This 

report assesses: (1) the extent to 

which the CVN 79 cost estimate is a 

reliable basis for meeting the cost cap 

and addresses known cost risks from 

the lead ship, and (2) the extent to 

which oversight mechanisms provide 

Congress with insight into ship costs. 

To do this work, GAO compared the 

CVN 79 cost estimate with GAO’s Cost 

Estimating and Assessment Guide, 

analyzed cost reports, and interviewed 

relevant officials.

What GAO Recommends

The Navy should develop a new, 

reliable cost estimate for CVN 79 

validated by cost reviews and obtain 

an independent cost estimate before 

requesting funding for future ships. The 

Navy partially concurred with these 

recommendations, but did not concur 

with a draft recommendation to 

prepare a SAR for each Ford class 

ship. In response to comments, GAO 

revised the recommendation to focus 

on SAR cost and funding summaries.
Page i GAO-17-575 Ford-Class Carriers

Letter 1

Background 3

Persistent Issues with Lead Ship Construction Continue to Drive 

Cost Uncertainty 10

CVN 79 Cost Estimate Is Not Reliable, with Construction Costs 

Likely to Exceed Cost Cap 18

Ford Class Oversight Mechanisms Provide Limited Insight into 

Ship Costs 30

Conclusions 36

Recommendations for Executive Action 37

Agency Comments and Our Evaluation 38

Appendix I Scope and Methodology 40

Appendix II Assessment of CVN 79 Cost Estimate 43

Appendix III Comments from the Department of Defense 46

Appendix IV GAO Contact and Staff Acknowledgments 49

Related GAO Products 50

Tables

Table 1: Characteristics of a High-Quality, Reliable Cost Estimate 6

Table 2: Major Gerald R. Ford Aircraft Carrier (CVN 78) 

Procurement Cost Drivers 11

Table 3: Gerald R. Ford Aircraft Carrier (CVN 78) Procurement 

Cost Growth for Selected Critical Technology Systems 12

Table 4: Key Cost Drivers for Selected Gerald R. Ford Aircraft 

Carrier (CVN 78) Critical Technology Systems as of 

November 2014 13

Table 5: Number of Production Labor Hours Required to Build 

Aircraft Carriers 20

Contents
Page ii GAO-17-575 Ford-Class Carriers

Table 6: Summary Assessment of Navy’s Cost Estimate 

Compared to Best Practices 44

Figures

Figure 1: Acquisition Framework for Ford-Class Carrier Program 8

Figure 2: Electromagnetic Aircraft Launch System (EMALS) and 

Advanced Arresting Gear (AAG) Procurement Costs from 

Fiscal Year 2008 to 2017 14

Figure 3: Gerald R. Ford Aircraft Carrier (CVN 78) Procurement 

Costs and Congressional Cap Increases 15

Figure 4: Cost Estimate Process 22

Figure 5: Ford Class Funding and Major Milestones and 

Independent Cost Estimates 32
Page iii GAO-17-575 Ford-Class Carriers

Abbreviations

AAG advanced arresting gear

CAPE Office of Cost Assessment and Program Evaluation

DBR dual band radar

DOD Department of Defense

EMALS electromagnetic aircraft launch system

NAVSEA 05C Naval Sea Systems Command Cost Engineering 

and Industrial Analysis Group

NCCA Naval Center for Cost Analysis

SAR Selected Acquisition Report

This is a work of the U.S. government and is not subject to copyright protection in the 

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without further permission from GAO. However, because this work may contain 

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Page 1 GAO-17-575 Ford-Class Carriers

441 G St. N.W.

Washington, DC 20548

June 13, 2017

The Honorable John McCain

Chairman

The Honorable Jack Reed

Ranking Member

Committee on Armed Services

United States Senate

The Navy is investing over $43 billion to develop three Ford-Class 

nuclear-powered aircraft carriers. This class of ships was intended to 

feature an array of cutting-edge technologies to improve combat 

capability and create operational efficiencies by increasing the rate of 

aircraft launches and reducing the number of personnel needed to 

operate the ship. The Navy expected to achieve these improvements 

while simultaneously reducing acquisition and life-cycle costs. However, 

this expectation has not been borne out. Costs to construct the lead ship 

Gerald R. Ford (CVN 78) have increased from $10.5 billion to $12.9 

billion (nearly 23 percent), and promised levels of capability have been 

reduced. Since 2007, we have reported extensively on issues with the 

Ford-Class program, including weaknesses in the program’s cost 

estimates. To help ensure that the Navy adhered to its cost estimates, 

Congress established a procurement cost cap for Ford-Class ships. The 

lead ship is now capped at $12.9 billion, while the follow-on ships are 

capped at $11.4 billion each.1 CVN 78 was recently delivered, in May

2017. Construction of the second ship John F. Kennedy (CVN 79) is 

underway, and Congress appropriated advance procurement funding for 

the carrier replacement program in fiscal year 2016, which the Navy has 

budgeted for the third ship Enterprise (CVN 80). The Navy is currently 

considering adding a fourth ship (CVN 81) to the program baseline.

The Senate Armed Services Committee report accompanying the 

National Defense Authorization Act for Fiscal Year 2016 included a 

provision for us to review the Ford-Class acquisition program, including 

the quality and reliability of cost estimates and how the Navy reports 

program costs to Congress. This report assesses: (1) drivers of CVN 78 

 1

The National Defense Authorization Act for Fiscal Year 2016 decreased the legislated 

cost cap for follow-on Ford-Class ships to $11.398 billion from $11.498 billion set by the 

National Defense Authorization Act for Fiscal Year 2014. Pub. L. No. 114-92, § 122 

(2015).

Letter
Page 2 GAO-17-575 Ford-Class Carriers

cost growth, (2) the extent to which the CVN 79 cost estimate is a reliable 

basis for meeting the cost cap and addresses known cost risks from the 

performance of the lead ship, and (3) the extent to which Ford-Class 

oversight mechanisms provide Congress with insight into ship costs.

To determine the drivers of CVN 78 cost growth, we leveraged our past 

Ford-Class program reports and analyzed Navy budget submissions and 

program documentation, including memorandums to members of 

Congress.2 To assess the reliability of the CVN 79 cost estimate, we 

determined the extent to which the estimate was consistent with cost 

estimating best practices as identified in GAO’s Cost Estimating and 

Assessment Guide, as well as Navy cost estimating guidance.3 We also 

reviewed supporting documentation and conducted interviews with 

relevant DOD and Navy officials responsible for developing and updating 

the CVN 79 estimate. To determine the extent oversight mechanisms

provide Congress with insight into Ford-Class ship costs, we reviewed 

legislation on the congressional cost caps and examined budget requests 

from 2001 to 2016 and Selected Acquisition Reports (SAR) from 2005 to 

2015 to assess the transparency of cost information. A more detailed 

description of our scope and methodology is presented in appendix I.

The performance audit upon which this report is based was conducted 

from December 2015 to March 2017 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. 

This report is a public version of a sensitive but unclassified (SBU) report 

issued in March 2017.4 After issuing that SBU report, we subsequently 

 2

GAO, Ford Class Aircraft Carrier: Poor Outcomes Are the Predictable Consequences of 

the Prevalent Acquisition Culture, GAO-16-84T (Washington, D.C.: Oct. 1, 2015). See 

Related GAO Products at the end of this report for a complete list of prior reports on the 

Ford-Class program.

3

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: Mar. 2, 2009). Naval 

Sea Systems Command, 2005 Cost Estimating Handbook (Washington, D.C.: 2005).

4 Ford-Class Aircraft Carrier: Follow-On Ships Need More Frequent and Accurate Cost 

Estimates to Avoid Pitfalls of Lead Ship, GAO-17-190SU (Washington, D.C.: Mar. 1, 

2017).
Page 3 GAO-17-575 Ford-Class Carriers

obtained comments from DOD from March 2017 to June 2017 on 

information the department deemed not releasable to the public. We 

redacted that information in order to prepare this public version of the 

original SBU report for public release. This public version of the report

was also prepared in accordance with generally accepted government 

auditing standards.

The Ford-Class nuclear-powered aircraft carriers are the successors to 

the Nimitz-Class carriers designed in the 1960s. The Navy set ambitious 

goals for the Ford-Class program, designing the carrier with an array of 

cutting-edge technologies, including an aircraft launch system that would 

use electromagnetics—versus steam—to propel aircraft off of the ship 

(EMALS), an advanced arresting gear (AAG) with an electric motor to 

recover aircraft, and a dual band radar (DBR) that would use two planar 

(stationary) radars to provide air traffic control, ship self-defense, and 

other capabilities. These technologies, along with new design features 

like a new propulsion system, an enlarged flight deck, and an aftpositioned island, would improve combat capability, while simultaneously 

reducing acquisition and life-cycle costs. Newport News Shipbuilding, in 

Newport News, Virginia, began construction of CVN 78 in September 

2008 with delivery originally expected in September 2015. Delivery was 

delayed, however; and CVN 78 was delivered in May 2017.5 Construction 

of CVN 79 began in June 2015, with an expected initial delivery in 2022.

Due to their vast size and complexity, aircraft carriers require funding for 

design, long-lead materials, and construction over many years. To 

accomplish these activities on the Ford Class, the Navy has awarded 

contracts for two phases of construction—(1) construction preparation 

and (2) detail design and construction—which are preceded by the start 

of advance procurement funding. The CVN 78 detail design and 

construction contract was a cost-plus incentive fee contract, which means 

that the shipbuilder is reimbursed for its allowable costs plus a fee which 

is adjusted according to a formula and is capped by a negotiated 

maximum fee. In contrast, the CVN 79 detail design and construction 

contract is a fixed-price incentive fee contract, meaning the government’s 

liability is capped at a negotiated ceiling price. However, because the 

Navy budgeted the ship at the target cost, any cost increases above the 

target would require the Navy to adjust its budget planning and request 

 5 CVN 78 was delivered after GAO-17-190SU was published. 

Background
Page 4 GAO-17-575 Ford-Class Carriers

additional funding from Congress.6 DOD and the Navy have conducted 

program reviews for each Ford-Class ship prior to major phases in the 

program, such as prior to awarding advanced procurement and detail 

design and construction contracts.

We have reported extensively on issues with the cost and execution of 

the Ford-Class program and made a number of recommendations. DOD 

has addressed some but not all of our recommendations:

• In 2007, we reported that delays in Ford-Class technology 

development and overly optimistic cost estimates would likely result in 

higher lead ship costs than what the Navy planned in its budget. 

Among other things, we recommended actions to improve the realism 

of the CVN 78 budget estimate and the Navy’s cost surveillance 

capability. We also recommended that the Navy develop carrierspecific tests of DBR to ensure that it could meet carrier-specific 

requirements.7 While DOD agreed with these recommendations and 

eventually acted on some of them, including improving the Navy’s 

cost surveillance capability, the Navy’s updates to CVN 78’s cost 

estimate did not reflect its most likely costs.

• In 2013, we reported that the Navy faced technical, design, and 

construction challenges to completing CVN 78 that had led to 

significant cost increases and reduced the likelihood that a fully 

functional ship would be delivered on time. The Navy’s strategy for 

providing timely demonstration of CVN 78 capabilities was hampered 

by post-delivery test plan deficiencies, Joint Strike Fighter aircraft 

delivery delays (this is one of the primary aircraft slated to operate 

from the carrier), and reliability shortfalls affecting key ship systems. 

We recommended that DOD:

• conduct a cost-benefit analysis on required CVN 78 capabilities—

namely, reduced manning and the increased rate of aircraft 

launches (known as the sortie generation rate)—in light of known 

and projected reliability shortfalls for critical systems;

 6

For additional information on the use of fixed-price incentive contracts in Navy 

shipbuilding, see: GAO, Navy Shipbuilding: Need to Document Rationale for the Use of 

Fixed-Price Incentive Contracts and Study the Effectiveness of Added Incentives, GAO17-211 (Washington, D.C. Mar. 1, 2017).

7

GAO, Defense Acquisitions: Navy Faces Challenges Constructing the Aircraft Carrier 

Gerald R. Ford within Budget, GAO-07-866 (Washington, D.C. Aug. 23, 2007).

Our Prior Reports and 

Recommendations
Page 5 GAO-17-575 Ford-Class Carriers

• update the Ford-Class program’s test and evaluation master plan 

and adjust the planned post-delivery test schedule;

• defer the CVN 79 detail design and construction contract award 

until land-based testing for critical systems was complete; and

• update the CVN 79 cost estimate on the basis of actual costs and 

labor hours needed to construct CVN 78.

While DOD agreed to update the test plan and delayed the CVN 79 detail 

design and construction contract award, it partially concurred with and 

has taken only modest action to address our other recommendations.8

• In 2014, we reported that the extent to which CVN 78 would be 

delivered on time and within the Navy’s $12.9 billion estimate was 

dependent on the Navy’s plan to defer work and costs to the postdelivery period.9 We found that CVN 78 would deploy without 

demonstrating full operational capabilities because it could not 

achieve certain key requirements—such as increasing launch and 

recovery rates—according to its test schedule. We also found that the 

Navy was implementing steps to achieve the congressional cost cap 

for CVN 79, but that they were largely based on ambitious efficiency 

gains and reducing a significant amount of construction, installation, 

and testing—work traditionally completed prior to ship delivery. We 

made no new recommendations in this report but noted that our 2013 

recommendations remained valid. However, we suggested that 

Congress consider revising the cost cap legislation to ensure that all 

work included in the initial ship cost estimate that is deferred to postdelivery is counted against the cost cap; if warranted, we noted, the 

Navy could seek statutory authority to increase the cap. To date, 

Congress has not taken action to change the cost cap legislation; 

however, the National Defense Authorization Act for Fiscal Year 2016 

lowered the cost cap for all follow-on ships, to include CVN 79, from 

$11.5 billion to $11.4 billion.

A reliable cost estimate is critical to the success of any program. Such an 

estimate provides the basis for informed investment decision making, 

 8

Additional details on our prior Ford-Class recommendations and DOD’s responses are 

included in GAO-16-84T.

9

GAO, Ford-Class Aircraft Carrier: Congress Should Consider Revising Cost Cap 

Legislation to Include All Construction Costs, GAO-15-22 (Washington, D.C.: Nov. 20, 

2014).

Cost Estimating
Page 6 GAO-17-575 Ford-Class Carriers

realistic budget formulation and program funding, meaningful progress 

measurement, proactive course correction when warranted, and 

accountability for results. The GAO Cost Estimating and Assessment 

Guide states that reliable cost estimates reflect 4 characteristics, which 

encompass 20 best practices.10 The characteristics are (1) 

comprehensive, (2) accurate, (3) credible, and (4) well-documented, as 

shown in table 1 below.

Table 1: Characteristics of a High-Quality, Reliable Cost Estimate

Cost estimate characteristic Definition

Comprehensive Includes all costs of a program over its full life cycle, from inception through design, 

development, deployment, and operation and maintenance to retirement. Program should be 

completely defined, reflecting the current schedule, and is technically reasonable. All costinfluencing ground rules and assumptions are documented. 

Accurate Estimate is based on an assessment of most likely costs. Results are unbiased and not overly 

conservative or optimistic. Estimate should be updated regularly to reflect significant changes 

in the program and actual costs.

Credible Cost drivers are crosschecked, and compared with an independent cost estimate. Risk and 

uncertainty analysis performed. Limitations are discussed. 

Well-documented Detailed documentation captures the source data used, the calculations performed and their 

results, and the estimating methodology. Information should allow for easy replication and 

updating.

Source: GAO. | GAO-17-575

For Navy shipbuilding programs, including the Ford Class, several 

different entities are involved in cost estimating:

• The Naval Sea Systems Command (NAVSEA) Cost Engineering and 

Industrial Analysis Group (05C) is responsible for developing the 

program life-cycle cost estimate, which is an estimate accounting for 

the total cost to the government of acquisition and ownership of a 

system over its full life. 

• The Naval Center for Cost Analysis (NCCA) is responsible for 

developing an independent cost assessment for certain Navy 

programs at program milestone events in the defense acquisition 

system. This assessment is not a separate estimate, but rather a 

review of the NAVSEA 05C program life-cycle cost estimate. NCCA 

and NAVSEA 05C, with support from the program office, collaborate 

to develop the Navy Service Cost Position, based on the program life-

 10GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009). 
Page 7 GAO-17-575 Ford-Class Carriers

cycle cost estimate and the independent cost assessment. NCCA first 

assessed the Ford-Class program in 2015.

• The Office of the Secretary of Defense’s Office of Cost Assessment 

and Program Evaluation (CAPE) develops an independent cost 

estimate. According to DOD’s Cost Analysis Guidance and 

Procedures, independent cost reviews are required for major defense 

acquisition programs at milestone events.11 The Navy Service Cost 

Position and the CAPE independent cost estimate are compared and 

presented to the Under Secretary of Defense for Acquisition, 

Technology, and Logistics (the Milestone Decision Authority for the 

Ford-Class program) to establish the program acquisition baseline.12

DOD policy states that a major defense acquisition program should 

budget to the independent cost estimate unless an alternative 

estimate is approved by the Milestone Decision Authority.

• The program office uses cost and risk information from the program 

life-cycle cost estimate to inform all resource and programming 

decisions. The program office is responsible for developing and 

annually updating the Cost Analysis Requirements Description, which 

includes the program acquisition approach, system characteristics, 

and preliminary schedules. This document is used as the basis for all 

program cost estimates.

The most recent CAPE and NCCA independent cost estimate and 

assessment for the Ford Class were completed in May 2015 and April 

2015, respectively, to support an April 2015 Defense Acquisition Board 

Review prior to the Navy’s June 2015 award of the CVN 79 detail design 

and construction contract. The Under Secretary of Defense for 

Acquisition, Technology, and Logistics accepted the Navy Service Cost 

Position as the program estimate.

The Ford-Class program held a Milestone B review in 2004 to approve 

the program development decision, coinciding with the award of the 

construction preparation contract, as shown in figure 1 below. Milestone 

C was aligned with the end of operational testing, scheduled for fiscal 

 11Reviews are conducted in advance of Milestone A or Milestone B certification, and in 

advance of the decision to enter low-rate initial production or full-rate production. 

Department of Defense Instruction 5000.73, Cost Analysis Guidance and Procedures 

Encl. 2 para. 2.a(1) (June 9, 2015).

12The Milestone Decision Authority is the sole and final decision authority for a major 

defense acquisition program. Department of Defense Instruction 5000.02, Operation of the 

Defense Acquisition System para. 5.a(4)(a) (Jan. 7, 2015).
Page 8 GAO-17-575 Ford-Class Carriers

year 2020. In 2014 the Under Secretary of Defense for Acquisition, 

Technology, and Logistics decided to shift this milestone review to April 

2015 to take place during the planned Defense Acquisition Board 

Review.13 In 2015 the Under Secretary canceled the milestone review, 

and rescheduled it for fiscal year 2018.

Figure 1: Acquisition Framework for Ford-Class Carrier Program

During the acquisition process, major defense programs, including 

shipbuilding programs, execute several types of testing, while the ship 

progresses toward operational milestones including the point when the 

fleet initially receives the ship.

Developmental testing is intended to assist in the maturation of 

products, product elements, or manufacturing or support processes. For 

ship technologies, developmental testing typically includes land-based 

testing activities prior to introducing a new technology in a maritime 

environment and commencing with shipboard testing. Shipboard testing—

which occurs during both developmental and integration testing—is 

 13The Defense Acquisition Board advises the defense acquisition executive (the Under 

Secretary of Defense for Acquisition, Technology, and Logistics) on critical acquisition 

decisions. Department of Defense Instruction 5000.02, Operation of the Defense 

Acquisition System para. 5.a(4)(b) (Jan. 7, 2015).

Test Events
Page 9 GAO-17-575 Ford-Class Carriers

meant to ensure correct installation and operation of the equipment and 

systems in a maritime environment. Testing in this phase is a complex 

and iterative process, as problems inherent with the start-up and initial 

operation of a system must be identified, corrected, and retested to 

ensure that the issues have been resolved.

Integration testing is intended to assess, verify, and validate the 

performance of multiple systems operating together to achieve required 

ship capabilities.

Operational testing occurs after delivery and assesses the ship’s 

capability in a realistic environment when maintained and operated by 

sailors, subjected to routine wear-and-tear, and employed in combat 

conditions against simulated enemies. During this test phase, the ship is 

exposed to as many actual operational scenarios as possible to reveal 

the weapon system’s capability under stress.

To ensure the Navy adheres to its cost estimates, Congress established a 

procurement cost cap for the Ford Class. In the National Defense 

Authorization Act for Fiscal Year 2007, Congress set the cap at $10.5 

billion for the lead ship and $8.1 billion for each subsequent carrier. This 

legislation also established six provisions, including economic inflation 

and insertion of new technologies, which allow the Navy to make 

adjustments to the cost cap without seeking statutory authority.14

Following the 2007 legislation, Congress has twice increased the cap, 

which now stands at $12.9 billion for the lead ship and $11.4 billion for 

follow-on ships. The National Defense Authorization Act for Fiscal Year 

2014 further expanded the list of allowable adjustments, solely for CVN 

78, to include cost changes due to urgent and unforeseen requirements 

identified during shipboard testing.15

 14Pub. L. No. 109-364, § 122 (2006). Dollars are then-year. 

15Pub. L. No. 113-66, § 121 (2013). 

Legislative Cost Cap of 

Ford-Class Ships
Page 10 GAO-17-575 Ford-Class Carriers

Since August 2007, we have reported on key risks to the CVN 78 

program that would impair the Navy’s ability to deliver the ship at cost, on 

time, and with its planned capabilities. These risks have been realized, 

with nearly $2.4 billion in cost growth and over a 1-year delay in delivery. 

While construction of CVN 78 is complete, recent technical deficiencies—

discovered as the Navy continues to test the systems installed on the ship 

and the shipbuilder completes the latter stage of construction activities—

suggest that additional costs are likely. Program officials stated they have 

not fully estimated these remaining costs. As a result, the current cost cap 

of $12.9 billion does not represent the required budget necessary to 

deliver the ship.

Our work has shown that the key drivers of CVN 78’s procurement cost 

growth were an ambitious technology development plan for incorporating 

critical technologies on the ship and the ship’s incomplete design at the 

start of construction. These factors, along with engineering and 

construction challenges, contributed to inefficiencies in ship construction 

and have led to $2.4 billion in cost increases as of 2016. We highlight the 

cost drivers to date in table 2.

Persistent Issues with 

Lead Ship 

Construction 

Continue to Drive 

Cost Uncertainty

Challenges with 

Technology Development, 

Design, and Construction, 

Coupled with an Optimistic 

Budget, Drove Lead Ship 

Cost Growth
Page 11 GAO-17-575 Ford-Class Carriers

Table 2: Major Gerald R. Ford Aircraft Carrier (CVN 78) Procurement Cost Drivers 

Cost driver Description Cost growth to date 

Overly ambitious technology 

development plan

• In 2002, the Department of Defense opted to attempt to achieve a 

revolutionary approach in introducing new technologies on the lead ship. 

The Navy sought to research, develop, and produce 14 critical 

technologies aimed at facilitating CVN 78’s capability and efficiency 

gains.

• Several critical technologies encountered problems in development 

(details in table 4 below), resulting in delays to land-based testing—a key 

aspect in reducing technical risk.

• Navy elected to proceed with production of some critical technologies 

prior to fully demonstrating their capability, in an effort to maintain the 

construction schedule. A strategy of concurrent test and production 

ensued, often leading to changes in components that had already been 

produced.

• Even after installation on the ship, developmental testing of critical 

technologies continued to reveal additional problems.

$956 million 

Design immaturity at 

construction start

• Our work on shipbuilding best practices has found that achieving design 

stability before starting construction is a key step in ensuring on-time 

delivery within planned costs.

• In the case of CVN 78, a high degree of concurrency between ongoing 

technology development and ship detail design hampered the design 

process.

• At construction contract award in 2008, 76 percent of the detail design 

was complete, but ongoing testing of the critical technologies resulted in 

over 19,000 design changes. The shipbuilder did not complete detail 

design until after ship construction was well underway.

• Construction performance eroded as the shipbuilder had to implement 

workarounds and re-work to compensate for design issues. Issues with 

construction drawings and instructions contributed to inefficient work 

delays and restarts. 

$738 million 

Construction and 

engineering challenges 

• Construction deviated significantly from its optimal build sequence, 

meaning the most efficient ship construction schedule.

• Government delays in the delivery of critical technologies to the shipyard 

and design issues noted above were coupled with significant material 

shortfalls leading to construction inefficiencies. For example, delays in 

the developmental valves led to inefficient and costly workarounds. 

Similarly, problems with special thin steel plating for ship decks resulted 

in inefficient workarounds and reduced levels of pre-outfitting.

$846 million

Source: GAO and Department of Navy’s President’s Budget requests. | GAO-17-575

Note: In a September 2015 information paper to Congress, the Navy identified $141 million in 

miscellaneous cost reductions for the ship that partially offset the cost growth identified in the table.
Page 12 GAO-17-575 Ford-Class Carriers

CVN 78’s critical technologies drove approximately 40 percent of the 

ship’s procurement cost growth. This cost growth was largely attributable 

to EMALS, DBR, and AAG, as seen in table 3.

Table 3: Gerald R. Ford Aircraft Carrier (CVN 78) Procurement Cost Growth for Selected Critical Technology Systems

Dollars in millions

System Fiscal year 2008 

budget

Fiscal year 2017 

budget

Difference in 

cost

Cost growth as a percent of fiscal year 

2008 budget

Electromagnetic Aircraft 

Launch System

317.7 669.7 352.1 111%

Dual Band Radar 201.9 481.8 279.9 139%

Advanced Arresting Gear 75.0 147.6 72.6 97%

Total Cost 594.6 1299.1 704.5 118%

Source: GAO analysis of Department of Navy’s President’s Budget requests. | GAO-17-575

In addition to cost increases to buy these systems, costs to develop these 

systems also increased above initial estimates. For example, EMALS 

experienced a $549 million increase in its development costs. 

Development costs for AAG and DBR are not reflected in the 

development costs for CVN 78, as the systems are managed through 

different Navy programs. Development costs for the AAG program 

(managed by the Naval Air Systems Command) increased by $572 

million—an over 300 percent increase above its initial estimate from 

2005. The Navy initially planned to retrofit AAG on the Nimitz Class; it 

opted to install the system only on the Ford Class, in part as a result of 

cost increases. Similarly, DBR, which is managed by NAVSEA’s 

Integrated Warfare Systems Program Executive Office, experienced 

development cost increases. However, since this system was initially 

developed for the Zumwalt Class destroyer program, its cost increases 

are not accounted for in the CVN 78 program.

In our November 2014 report, we elaborated on ongoing issues with 

DBR, AAG, and EMALS, which were attributed to unanticipated 

challenges in development, as highlighted in table 4.16

 16GAO-15-22.

EMALS, DBR, and AAG Drove 

Critical Technology Cost 

Increases
Page 13 GAO-17-575 Ford-Class Carriers

Table 4: Key Cost Drivers for Selected Gerald R. Ford Aircraft Carrier (CVN 78) Critical Technology Systems as of November 

2014

Technology Description Development challenges

Dual Band Radar (DBR) DBR includes: (1) Volume search radar 

for long-range, above-horizon, 

surveillance, and air traffic control 

capabilities and (2) Multifunction radar 

for horizon search, surface search and 

navigation, and missile 

communications. DBR was intended to 

permit reduced manning and higher 

sortie generation rates aboard CVN 78.

• Technical deficiencies with the volume search 

radar, in particular, slowed system development.

• Land-based testing of DBR began over 2 years 

late, after production was underway and continued 

even after installation on the ship, with testing 

concluding close to 5 years later than planned.

• Modifications to the power regulating system to 

address issues discovered during land-based 

testing had to be completed on the system after it 

was installed on the ship, which created 

inefficiencies and increased costs. 

Advanced Arresting Gear 

(AAG)

AAG recovers current and future aircraft 

and contributes to reduced manning.

• Developmental test failures led to multiple system 

redesigns.

• As a result of cost increases and schedule 

pressures, the Navy began land-based testing 

concurrent with system production and installation 

on CVN 78, instead of on in-service aircraft carriers 

as initially planned.

• In response to schedule delays resulting from 

multiple redesigns and modifications, the Navy 

adopted a concurrent test schedule, with landbased testing continuing while shipboard testing 

was underway.

• Because of AAG’s schedule delays, the Navy will 

not deliver CVN 78 with the capability to conduct 

full flight operations with all carrier aircraft types. 

Instead, flight operations will begin after ship 

delivery with only the F/A-18 E/F Super Hornet 

fighter.

Electromagnetic Aircraft 

Launch System (EMALS)

EMALS uses an electrically generated 

moving magnetic field to propel aircraft, 

which places less physical stress on 

aircraft as compared to steam catapult 

launchers. The system was expected to 

help reduce the number of sailors 

needed on board the ship.

• Significant challenges early on in development—

including generator failures, design configuration 

changes, and system engineering issues—delayed 

the start of land-based testing.

• Production of EMALS began even as land-based 

testing was underway.

• Issues with the power interfaces and conversion 

systems discovered during land-based testing 

required changes to the system already in 

production.

• Shipboard testing began in August 2014, as landbased testing continued. 

Source: GAO and Navy documentation. | GAO-17-575

The Navy took steps to limit procurement cost growth for EMALS and 

AAG, which, as noted above, are being developed and produced under 

contracts separate from the CVN 78 detail design and construction 
Page 14 GAO-17-575 Ford-Class Carriers

contract. Most notably, in fiscal year 2010, the Navy awarded a firm fixedprice contract for production of these systems for CVN 78, which had the 

effect of leveling off the systems’ procurement cost growth as shown in 

figure 2 below. The contractor developing these systems is generally 

responsible for any cost growth beyond the contract’s firm fixed-price.

Figure 2: Electromagnetic Aircraft Launch System (EMALS) and Advanced 

Arresting Gear (AAG) Procurement Costs from Fiscal Year 2008 to 2017

In August 2007, we found that the Navy’s cost estimate of $10.5 billion 

used to develop the CVN 78 budget was optimistic. We highlighted a 

number of concerns:

• The cost estimate made the unprecedented assumption that CVN 78 

would take 2 million fewer labor hours to build than its more mature 

predecessor—CVN 77. We questioned the Navy’s assumption that 

the lead ship’s costs would be offset by the use of the computerassisted product model and other investments in facilities, as these 

were unproven.

• Key technology costs were likely to increase because the systems 

were still in development.

Program Budget Underpinned 

by an Optimistic Cost Estimate
Page 15 GAO-17-575 Ford-Class Carriers

• Material costs were uncertain. CVN 78 was already beginning to 

experience slips in the delivery of material in August 2007. According 

to the shipbuilder, none of the delays to date were expected to disrupt 

the construction schedule. However, late material delivery led to labor 

hour increases on both CVN 76 and CVN 77.

CVN 78’s costs grew, as the budget did not appropriately reflect the 

actual effort required to construct the ship. As a result, the Secretary of 

the Navy increased the cost cap in 2010, and Congress approved an 

additional increase to the cap in 2013. The Navy attributed the cost 

increases to construction cost overruns and economic inflation. Figure 3 

depicts CVN 78’s procurement cost growth and cost cap increases.

Figure 3: Gerald R. Ford Aircraft Carrier (CVN 78) Procurement Costs and Congressional Cap Increases
Page 16 GAO-17-575 Ford-Class Carriers

Recent issues discovered during shipboard testing of the systems 

installed on the ship further delayed CVN 78’s delivery date, creating 

added uncertainty regarding the program’s ability to maintain costs under 

the current $12.9 billion cost cap. Since we last reported on the status of 

CVN 78 in November 2014, EMALS has completed deadload testing—a 

key aspect of the system’s test program—and the shipbuilder has 

positioned the ship to begin testing the ship’s propulsion system in 

preparation for sea trials. However, other systems have experienced the 

following problems, which have resulted in cost and schedule uncertainty:

• DBR—In August 2016, program officials told us that testing for DBR 

had been further delayed due to problems with ship integration, 

specifically related to its interface with the power system. The Navy is 

working to resolve technical deficiencies with the volume search 

radar. Program officials stated that they plan to continue DBR testing 

during sea trials following ship delivery. However, issues with DBR 

may still affect CVN 78’s schedule. For example, warfare and aircraft 

operations events scheduled for 6 weeks after ship delivery may be 

pushed back if DBR issues are not resolved.

• AAG— In May 2017, the Navy reported that shipboard testing of AAG 

is 85 percent complete, and the remaining testing has been deferred 

to post-delivery.17 The Navy is still resolving issues with emergent 

faults with the AAG system discovered during shipboard testing, while 

land-based testing with live and simulated aircraft continues. The 

Navy needs to resolve these issues in order to support aircraft 

operations during an exercise scheduled to take place 10 weeks after 

ship delivery.

• Propulsion Plant—According to the Navy, in June 2016, a transformer 

in one of the main turbine generators in CVN 78’s propulsion plant 

experienced a catastrophic failure. A shipbuilder and vendor review of 

this incident found that the failure was likely due to a manufacturing 

defect in the transformer. However, a follow-on review uncovered 

additional problems, including issues with the voltage regulator on the 

main turbine generator; design and performance problems with the 

protection system; and excessive noise in the plant. Detailed 

assessments of these issues show that the voltage regulator and 

protection systems require design modifications. Laboratory testing of 

the design modifications are complete and shipboard installation is 

 17 The Navy reported this information after GAO-17-190SU was published.

Recent Shipboard Testing 

Problems Create Cost and 

Schedule Uncertainty 
Page 17 GAO-17-575 Ford-Class Carriers

underway, which will be followed by shipboard testing. The generator 

incident and the time needed to conduct the subsequent reviews have 

affected propulsion plant testing, but program officials believe that 

they are able to meet the new delivery date.

• Advanced Weapons Elevators—In early January 2017, the Navy 

reported that testing of the Advanced Weapons Elevators was 35 

percent complete and that the shipbuilder would complete 

construction and testing of 2 of the 11 elevators by ship delivery. The 

Navy is working to resolve a problem with the elevator doors in order 

to continue with testing. In general, the elevators continue to have 

issues with reliability, which will affect their ability to support aircraft 

operations.

Program officials stated that they are considering several options to 

resolve problems uncovered during shipboard testing and have not fully 

estimated the resulting costs. Because the remaining costs have not been 

estimated, the current program baseline does not represent the required 

budget necessary to deliver the ship. Data from contract performance 

reports—owned and maintained by the shipbuilder—in turn no longer 

provide an accurate assessment of the costs at completion, as additional 

undefined work will be required to resolve problems identified in testing. 

In the likely event that additional funding is needed to complete the ship, 

the Navy may choose to defer more construction work or installation of 

mission-related systems until after ship delivery to stay within the cost 

cap. Finally, the delivery schedule for CVN 78 has continued to slip from 

its initial plan of September 2015 and was delivered in May 2017.18

Delays in delivery will result in additional costs, as the government may 

continue to have to pay for unanticipated construction work and 

unanticipated overhead costs.

 18CVN 78 was delivered after GAO-17-190SU was published. GAO-17-190SU is a 

sensitive but unclassified version of this report.
Page 18 GAO-17-575 Ford-Class Carriers

The $11.4 billion the Navy has budgeted to construct CVN 79 is likely 

insufficient, in part because the cost estimate that supports the budget is 

not reliable and does not address lessons learned from the experiences 

of the lead ship. We compared the program life-cycle cost estimate to 

best practices criteria as outlined in GAO’s Cost Estimating and 

Assessment Guide.19 While the estimate was comprehensive in that it 

included all life-cycle costs—meaning development, procurement, and 

sustainment—we found several weaknesses that indicate the $11.4 billion 

is not a realistic program estimate.

• First, we question the accuracy of the CVN 79 estimate because of its 

optimistic assessment regarding the labor hours needed to construct 

the ship and because the estimate did not use timely data to ensure 

that it reflected the costs most likely to be incurred. While Navy 

officials stated they have updated the cost estimate, the 

documentation they provided to us was only a high-level briefing chart 

reflecting final numbers. This documentation is not sufficient for us to 

gain insights into the sources or timeliness of the data—key aspects 

of our cost estimating best practices.

• Second, we question the credibility of the estimate because it does 

not sufficiently account for program risks. As a result, the cost 

estimate does not provide a reliable basis for program decision 

making, such as developing annual budgets, making requirement 

trade-offs, and gauging shipbuilder progress, among other things.

• Third, we found that the estimate lacked documentation and analysis 

to support the derived cost savings from CVN 78.

For a high-level summary of the CVN 79 cost estimate compared to GAO 

best practices, see appendix II.

Finally, the contractor performance reports indicate the shipbuilder has 

not been consistently achieving the anticipated labor efficiencies needed 

to meet the $11.4 billion cost cap.

 19GAO-09-3SP.

CVN 79 Cost 

Estimate Is Not 

Reliable, with 

Construction Costs 

Likely to Exceed Cost 

Cap
Page 19 GAO-17-575 Ford-Class Carriers

The CVN 79 cost estimate does not address lessons learned from the 

experiences of the lead ship, specifically in terms of its optimistic 

assessment of the labor hours required to complete construction. A cost 

estimate is considered accurate when it is based on an assessment of the 

most likely costs—that is, it is neither overly conservative nor overly 

optimistic—and it is updated regularly to reflect the current status of the 

program. However, the cost estimate for CVN 79 does not fully meet 

GAO’s best practice standards for accuracy because: (1) it is based on a 

projected reduction in construction labor hours that is unprecedented in 

aircraft carrier construction and relies on untested efficiencies and (2) 

inadequate documentation existed regarding the timeliness of data to 

ensure that it reflected the costs most likely to be incurred. Additional 

information supporting the GAO conclusions in this section may be found 

in the sensitive version of this report, which is available upon request for 

official use only to those with the appropriate need-to-know.

The April 2015 cost estimate calculated that significantly fewer labor 

hours would be required to construct CVN 79 compared to CVN 78. 

NAVSEA 05C cost estimators attributed most of this labor hour reduction 

to the assumption that CVN 79 would not experience the same 

challenges that led to increased labor hours for CVN 78, including an 

immature design, and the construction and engineering challenges 

discussed above. The estimate also assumed reductions would result 

from changes in the processes to build the ship that would make 

construction more efficient and thus require fewer labor hours. Specific 

details of the CVN 79 estimate were redacted because the directorate 

responsible for NAVSEA contracting deemed the information to be 

sensitive in the context of CVN 80 contract negotiations.

After developing this cost estimate, the Navy negotiated an 18 percent 

reduction in the labor hours to construct CVN 79 compared to CVN 78. 

However, this reduction is twice the labor hour reduction from the Nimitz 

Class of carriers. Even if the shipbuilder did not experience the same 

challenges as CVN 78, a nearly 9 million labor hour reduction would be 

unprecedented in 50 years of aircraft carrier construction since the 

construction contract for CVN 68 was awarded in 1967. As shown in table 

5, in each successive aircraft carrier build, the number of labor hours 

needed to complete construction has, at most, decreased by 9.3 percent 

as compared to the previous ship (with CVN 69 compared to CVN 68 

accounting for the largest percentage decrease). Specific details of the 

CVN 79 estimate were redacted because the directorate responsible for 

Cost Estimate Is Not 

Accurate Because of 

Overly Optimistic Labor 

Hour Projections and 

Untimely Cost Data

Labor Hour Estimate Is Based 

on Unprecedented Reductions 

Compared to Prior Carrier 

Class Construction
Page 20 GAO-17-575 Ford-Class Carriers

NAVSEA contracting deemed the information to be sensitive with regard 

to CVN 80 contract negotiations.

Table 5: Number of Production Labor Hours Required to Build Aircraft Carriers 

Hull Total labor hours 

(millions)

Labor hour change 

(millions)

Percent change Construction contract 

award date

Nimitz Classa

CVN 68 34.4 - - March 1967

CVN 69 31.2 -3.2 -9.3% June 1970

CVN 70 33.7 2.5 8.0% April 1974

CVN 71 40.3 6.6 19.6% September 1980

CVN 72 38.0 -2.3 -5.7% December 1982

CVN 73 36.2 -1.8 -4.7% December 1982

CVN 74 33.2 -3.0 -8.3% July 1988

CVN 75 34.4 1.2 3.6% July 1988

CVN 76 39.2 4.8 13.9% December 1994

CVN 77 45.0 6.3 16.1% January 2001

Ford Classb

CVN 78 49.0 (estimated) - - September 2008

CVN 79 40.2 (estimated) -8.8 (estimated) -18% (negotiated) June 2015

Source: GAO analysis of Navy data. | GAO-17-575

Note: Since CVN 68 and CVN 78 were the first in class for the Nimitz and Ford Classes respectively, 

a labor hour or percent change is not calculated.

a

Nimitz Class are actual hours and include recurring planning and sourcing hours

b

Ford-Class CVN 78 hours reflect NAVSEA 05C’s April 2015 cost estimate. GAO calculated CVN 79 

hours based on negotiated labor reductions

The planned labor hour reduction in the CVN 79 cost estimate includes a 

reduction as a result of several shipbuilder initiatives intended to increase 

efficiency. NAVSEA 05C cost estimators derived this reduction based on 

the shipbuilder’s estimates of its efficiencies, but did not conduct any 

additional assessments to validate these estimates. The shipbuilder’s 

planned efficiencies include a new build sequence aimed at completing 

more work earlier in the construction sequence and in the shops instead 

of after the ship is in the dock, as well as improvements to some shipyard 

construction facilities. Work completed earlier in the build process is more 

efficient and less costly than work done later on the ship when spaces are 

more difficult to maneuver within.20 In addition, the shipbuilder’s revised 

 20We discuss this issue further in GAO-13-396. 
Page 21 GAO-17-575 Ford-Class Carriers

build plan consolidates and increases the size of superlifts—fabricated 

units and block assemblies that are grouped together and lifted into the 

dry dock—to form larger sections of the ship. However, the new build 

sequence and shipyard improvements are untested and there are no 

historical data available to support whether the planned labor reductions 

can be achieved. Shipbuilder representatives told us they had not fully 

estimated the anticipated savings from future efficiencies. Since a 

complete plan to achieve the required efficiencies has not been 

developed, the shipbuilder is at risk of not meeting the planned $11.4 

billion budget. Specific details of the CVN 79 estimate were redacted 

because the directorate responsible for NAVSEA contracting deemed the 

information to be sensitive in the context of CVN 80 contract negotiations.

Independent DOD and Navy cost reviews also found NAVSEA 05C’s 

labor hour estimates to be optimistic. To calculate the labor hour 

reduction, CAPE accounted for CVN 78 work packages that were 

adversely impacted by concurrency of design and construction, and 

material unavailability. NCCA developed two different estimates of the 

labor hour reduction from Nimitz-Class labor hour data, accounting for the 

weight of each ship. Specific details of the CAPE and NCCA estimates 

were redacted because the directorate responsible for NAVSEA 

contracting deemed the information to be sensitive.

NCCA officials stated they do not believe that CVN 79 construction will be 

as efficient as the program office projects. CAPE’s independent cost 

estimate also assumed fewer construction efficiencies than the program 

estimate. Additionally, CAPE’s review noted that challenges may arise 

during construction when parts are assembled at the dock and pier, and 

estimated that 15 percent of future work will begin late relative to the 

schedule. CAPE’s independent cost estimate projected that CVN 79 

would exceed the program’s cost estimate by several hundred million 

dollars, with nearly all of that difference for labor costs. Similarly, NCCA 

noted that the shipbuilder is at risk of not achieving the entire estimated 

labor hour savings from CVN 78 to CVN 79, and estimated that labor 

costs could potentially increase by over $100 million. Specific details of 

the CAPE and NCCA estimates were redacted because the directorate 

responsible for NAVSEA contracting deemed the information to be 

sensitive with regard to CVN 80 contract negotiations.

Although the CAPE and NCCA labor estimates are more conservative 

than the NAVSEA 05C estimate, they are still optimistic compared to 

historical aircraft carrier construction data. CAPE and NCCA officials told 

us they had limited time to prepare their reviews, in part due to delayed 
Page 22 GAO-17-575 Ford-Class Carriers

access to shipbuilder labor hour data. As a result, these reviews may not 

have captured the full extent of potential cost risks. According to DOD 

and Navy cost guidance, CAPE and NCCA should have been notified at 

least 7 or 6 months, respectively, in advance of the program milestone 

event. NCCA only had 3 months to develop its cost review and officials 

stated they had to shorten their internal review process. In addition, 

NCCA officials stated they did not receive shipbuilder labor hour data. 

CAPE officials stated they received this data only one month prior to the 

estimate completion date. At the April 2015 Defense Acquisition Board 

review, the CAPE estimate was still in development, so the optimistic 

NAVSEA 05C estimate was the only complete estimate available to 

inform decision makers at that review. The final CAPE estimate was 

completed in May 2015, prior to issuance of the Acquisition Decision 

Memorandum in June 2015.

In its April 2015 estimate, NAVSEA 05C used an estimate of CVN 78’s 

total labor hours at ship completion as the starting point to determine 

CVN 79 labor hours. Since CVN 78 had not yet been delivered, NAVSEA 

05C used shipbuilder data on the actual labor hours expended and an 

estimate of the labor hours for the remaining work. However, some of the 

shipbuilder data used to calculate the distribution of production labor 

hours were from March 2014, which was already a year out of date at the 

time of the estimate. GAO’s Cost Estimating and Assessment Guide 

advises regularly updating cost estimates as technical or program 

assumptions change and more data become available. The guide also 

recommends that the cost estimate be continually updated as actual 

costs begin to replace the original estimates, as shown in figure 4.

Figure 4: Cost Estimate Process

The Navy Did Not Demonstrate 

the Estimate Has Been 

Updated with Current Data
Page 23 GAO-17-575 Ford-Class Carriers

GAO’s Cost Estimating and Assessment Guide emphasizes that cost 

estimates should be realistic and timely. If an estimate is not regularly 

updated with actual costs, it is difficult to analyze changes, accurately 

estimate future costs, and provide decision makers with accurate 

information for assessing alternatives. Regularly updating cost estimates 

also allows program officials and estimators to have a track record of the 

estimate for comparison over time. Without a documented comparison 

between a current estimate—updated with actual costs—and the previous 

estimate, cost estimators cannot determine how different the two 

estimates are, and thus how well they are estimating.

While NAVSEA 05C cost estimators assert they have updated the CVN 

79 cost estimate since April 2015, we are unable to validate this claim

based on the documentation provided. In June 2016, we were provided 

with a demonstration of the cost estimating model NAVSEA 05C used to 

develop the CVN 79 cost estimate. However, the cost estimating model 

did not incorporate any updates based on new performance data. 

According to officials from NAVSEA 05C, the cost estimating model was 

updated in July and September 2016 with actual costs. However, officials 

were unable to provide documentation sufficient for us to verify the 

assumptions and sources of the estimate. This level of detail is a key 

component of the “accurate” characteristic for our cost best practices.
Page 24 GAO-17-575 Ford-Class Carriers

To determine an estimate’s credibility, cost estimators should test, among 

other things, the sensitivity of key elements of cost, such as labor hours 

and labor rates, and conduct uncertainty analyses to quantify risks.21

Uncertainty analysis provides the basis for adjusting estimates to reflect 

known facts and circumstances that could affect costs and a level of 

confidence in the estimate to help inform decision makers about the 

effects of varying levels of cost. Additionally, an independent cost 

estimate should be conducted by a group outside the acquiring 

organization to determine whether other estimating methods produce 

similar results. While CAPE and NCCA conducted independent cost 

assessments and NAVSEA 05C conducted sensitivity and risk analyses 

to test the validity of its estimate, our evaluation of the cost estimate 

shows that it may not accurately account for the risk of certain 

technologies and the new shipbuilder efficiencies. As a result, the amount 

the Navy has budgeted for CVN 79 is likely insufficient to cover program

costs. Additional information supporting the GAO conclusions in this 

section may be found in the sensitive version of this report, which is 

available upon request for official use only to those with the appropriate 

need-to-know.

In August 2016, the Under Secretary of Defense for Acquisition, 

Technology, and Logistics expressed concern about CVN 78’s schedule 

and performance and directed an independent team to review the critical 

technologies in order to identify and mitigate potential risks for Ford-Class

follow-on ships. In December 2016, the independent review found that 

CVN 79 is at risk of not meeting planned efficiencies. In particular, the 

review found that the new radar system, which was intended to reduce

cost and technical risk, is at risk of not meeting the CVN 79 schedule. The 

review also found that reverting to legacy systems for follow-on FordClass ships is impractical and would impact the ships’ ability to meet key 

performance parameters.22

While NAVSEA 05C conducted a sensitivity analysis to identify a range of 

possible costs, we found that the results of this analysis were not realistic. 

We reviewed some of the top cost drivers identified in the sensitivity 

analysis developed for NAVSEA 05C’s cost estimate and how each driver 

 21See app. II for a detailed description of best practices.

22 Our assessment of the DOD independent review was conducted after GAO-17-190SU 

was published.

CVN 79 Cost Estimate Is 

Not Credible Because It 

Does Not Include 

Sufficient Risk for Program 

Uncertainties

Sensitivity Analysis Indicates 

CVN 79 Cost Estimate Does 

Not Accurately Reflect 

Program Uncertainties
Page 25 GAO-17-575 Ford-Class Carriers

impacts the range of potential program costs. Our analysis of the results 

of the sensitivity analysis found that for some cost drivers, NAVSEA 05C 

estimated a higher likelihood that these costs would be lower than 

expectations (or underrun), rather than higher than expectations (or 

overrun)—which seems unlikely given the program uncertainties.

This is particularly evident in NAVSEA 05C’s sensitivity analysis for 

production labor hours. As previously mentioned, we found the CVN 79 

labor hour estimate to be optimistic. This optimism results in an unrealistic 

range of labor hours in the sensitivity analysis. Compared to historical 

aircraft carrier data, the minimum value represents a labor reduction 

which is significantly more than the largest decrease that has been 

observed in the past 50 years of carrier construction. The sensitivity 

analysis also indicates that the range for labor hour underruns is larger 

than the range for overruns, which is not realistic given that construction 

for CVN 76 and CVN 77 have required more labor hours than originally 

estimated. Specific details of the CVN 79 sensitivity analysis were 

redacted because the directorate responsible for NAVSEA contracting 

deemed the information to be sensitive with regard to CVN 80 contract 

negotiations.

In addition, the sensitivity analysis for EMALS and AAG may not 

accurately reflect program uncertainty. Specifically, the analysis for AAG 

conducted by NAVSEA 05C indicates that a cost underrun is more likely 

than a cost overrun. Given the significant technical issues on AAG that 

are still being resolved for the lead ship, this risk analysis may not 

accurately reflect the cost risk associated with AAG performance issues.

Specific details of the CVN 79 sensitivity analysis were redacted because 

the directorate responsible for NAVSEA contracting deemed the 

information to be sensitive.

Further, NAVSEA 05C’s estimate did not sufficiently account for potential 

changes during CVN 79 construction. NAVSEA 05C estimators only 

included a factor of 3 percent of the total construction cost for changes. 

However, 3 percent is not realistic compared to historical data from the 

Nimitz-Class ships. The actual change order costs for all but one carrier 

were greater than 3 percent, with an average cost of 5 percent. 

Additionally, the estimate is on the low side of cost guidance from 

NAVSEA for programs to budget between 3 and 5 percent of total 

construction costs for potential changes on its follow-on ships. Due to the 

uncertainty of the new technologies and build strategies, CVN 79 will 

likely have above average change orders that will exceed the 3 percent 

budget.
Page 26 GAO-17-575 Ford-Class Carriers

Finally, none of the cost reviews validated the program office’s anticipated 

savings of $188 million from replacing the DBR with a new radar solution, 

known as the Enterprise Air Surveillance Radar.23 The NCCA 

independent cost assessment stated that analysts could not develop a 

cost estimate for the radar since the program office did not provide 

sufficient technical details. At the time of NCCA’s estimate, the Navy had 

not yet begun development of the Enterprise Air Surveillance Radar. In 

addition, NCCA pointed out that the radar program was not fully funded to 

the cost estimate. As a result, the Navy may need to request additional 

funding. The Navy awarded a contract for the radar development in 

August 2016. While the new radar may result in procurement cost 

savings, as the independent review team identified, there is risk for 

additional costs going forward to integrate the radar on the ship.24

Based on our analysis, the CVN 79’s program estimate will likely be 

insufficient to complete ship construction. NAVSEA 05C analysts 

conducted a risk analysis to identify and quantify program risks, and 

determined the effects of changing key cost driver assumptions and 

factors—important steps in creating a high quality estimate. However, 

NAVSEA 05C’s risk analysis indicates that the point estimate of $11.5 

billion represented less than a 50 percent confidence level—the 

probability that costs for the program will be at or below that level. For 

example, a 50 percent confidence level indicates that there is an equal 

chance that program costs will be above or below that cost level. An 

estimate’s confidence level is used to inform a program budget, and as 

additional budget is allocated to a program, there is a higher confidence 

that program costs will fall under the budgeted amount. Navy cost 

guidance recommends using the “risk adjusted mean” as the best 

estimate for unknown cost for the program, which usually lies between 50 

and 60 percent. Additionally, GAO’s Cost Estimating and Assessment 

Guide states that program cost estimates should be budgeted to at least 

the 50 confidence level. Even then, there is still a chance that the 

program will need additional funding because programs tend to overrun 

more than underrun. Thus, budgeting to the mean of the distribution or 

higher, which is between the 55 percent to 65 percent confidence level, is 

considered a best practice to guard against potential risks. Specific 

details of the CVN 79 risk analysis were redacted because the directorate 

 23The Navy now estimates that anticipated savings will be $143 million.

24 Our assessment of the DOD independent review was conducted after GAO-17-190SU 

was published.

Risk Analysis Indicates CVN 

79 Budget Will Not Cover Most 

Likely Costs and Has No 

Reserve for Cost Growth
Page 27 GAO-17-575 Ford-Class Carriers

responsible for NAVSEA contracting deemed the information to be 

sensitive in the context of CVN 80 contract negotiations.

However, NAVSEA 05C’s risk analysis indicates that the current budget 

does not provide margin for cost risk. We compared NAVSEA 05C’s risk 

analysis of CVN 79’s potential cost outcomes and the associated 

probability that such an outcome will be realized, with the typical riskadjusted funding levels based on Navy cost guidance and GAO best 

practices. Specific details of the CVN 79 risk analysis were redacted 

because the directorate responsible for NAVSEA contracting deemed the 

information to be sensitive.

The National Defense Authorization Act for Fiscal Year 2016 reduced 

CVN 79’s cost cap to $11.4 billion and the program budget was further 

reduced, resulting in a confidence level well below typical risk-adjusted 

funding levels based on GAO’s best practices and Navy guidance. As a 

result, the current budget for CVN 79 construction is unlikely to cover the 

program costs even if there are no issues or schedule delays, and 

therefore leaves no margin for program risk or uncertainty. The program 

office plans to meet the cost cap in part from anticipated savings through 

a two-phase delivery for CVN 79. Under this strategy, labor hours would 

shift to a second phase, where installation of some electronic systems (in 

particular the Enterprise Air Surveillance Radar) and compartments will 

be completed after the ship is delivered and competed among different 

vendors, which the Navy hopes will lower costs. The NAVSEA 05C 

estimate did not include any savings from the two-phased delivery 

approach beyond the savings identified for radar replacement, assuming 

that the shipbuilder would remain responsible for completing all remaining 

installation work. However, the NCCA independent cost assessment 

reviewed the two-phase approach and could not substantiate the 

assumption that the shift in labor hours to the second phase would 

decrease overall costs. As a result, it is unclear whether the two-phase 

approach will result in cost savings to meet the CVN 79 cost cap. Specific 

details of the CVN 79 risk analysis were redacted because the directorate 

responsible for NAVSEA contracting deemed the information to be 

sensitive.

Further, we found that since the cost estimate does not sufficiently 

account for program risks, it is likely that its confidence levels are 

optimistic and this ship is at an even higher risk of exceeding the budget. 

Based on an insufficient reflection of risk in the program office estimate 

and recent budget reductions, the Navy will likely need additional funding 

beyond the cost cap to complete CVN 79 construction. Typically, a high 
Page 28 GAO-17-575 Ford-Class Carriers

confidence level means that there is a high probability that funding is 

available to cover costs, even if multiple risks are realized. In the case of 

CVN 79, this means that a high confidence level should cover the 

shipbuilder not meeting planned labor efficiencies, as well as any critical 

technologies requiring unplanned changes. We found the estimate does

not realistically reflect the full potential of CVN 79 cost growth, compared 

to CVN 76 and CVN 77, the last two ships in the Nimitz Class, which had 

6 and 17 percent cost growth respectively. Considering the cost risks 

associated with potential changes to CVN 79’s baseline and the cost 

growth observed on previous carriers, it is unlikely that the confidence 

levels reflects the potential for CVN 79 cost growth. Since NAVSEA 05C 

applied a narrow risk range to the cost estimate, the confidence levels are 

particularly sensitive to change. However, since CVN 79 is not a low risk 

program, it is likely that the cost estimate does not capture all potential 

risks or costs.

A reliable cost estimate is supported by detailed documentation that 

describes how it was derived and how the expected funding will be spent 

in order to achieve an objective. It is important that outside parties can 

replicate the cost estimate and understand the logic behind the estimate. 

The cost estimate documentation we reviewed did not describe the 

estimating methodologies used and estimators had to provide us with 

additional explanations to support the methodologies. Although 

production man hours are identified as the top risk variable, there is 

limited documentation to support the inputs behind the labor hour risk 

analysis. For example, the estimate for planned construction efficiencies 

was based on a shipbuilder estimate and had insufficient documentation 

and no historical data to support it. To be considered fully documented in 

accordance with best practices, we would expect to see data sources, 

methodologies, and assumptions behind the estimate. For example, for 

Milestone B in 2004, a 58-page document with 13 separate appendixes 

was produced for the Ford-Class program life-cycle cost estimate. In 

contrast, the primary documentation for the April 2015 program life-cycle 

cost estimate was a 14-page memorandum which did not include the 

same level of detail. Specific details of the CVN 79 cost analysis were 

redacted because the directorate responsible for NAVSEA contracting 

deemed the information to be sensitive with regard to CVN 80 contract 

negotiations.

Poorly documented cost estimates can cause a program’s credibility to 

suffer because the documentation cannot explain the rationale of the 

methodology or the calculations underlying the cost elements. Therefore, 

Basis for Program Cost 

Estimate Is Poorly 

Documented
Page 29 GAO-17-575 Ford-Class Carriers

estimates that lack sufficient documentation are not useful for updates or 

information sharing and can hinder understanding and proper use. 

Furthermore, without adequate documentation, analysts unfamiliar with 

the program will not be able to replicate the estimate because they will 

not understand the logic behind it. Documentation is essential for 

validating and defending a cost estimate. That is, without a welldocumented cost estimate, one cannot present a convincing argument of 

an estimate’s validity, or answer decision makers’ and oversight groups’

probing questions.

Shipbuilder representatives told us that they are still working to define 

some of the future efficiencies that will help them meet the planned 

reduction in labor hours. As of January 2016, the shipbuilder had primarily 

made progress on structural and component fabrication assembly work, 

which represents only 15 percent of total labor. The largest labor 

category, ship assembly, which is 45 percent of total labor, was only 5 

percent complete, so it is uncertain whether shipbuilder performance will 

continue to progress similarly as more ship assembly work is completed. 

CAPE noted in its May 2015 independent cost estimate that although the 

CVN 79 construction preparation contract was performing well at the time, 

ship assembly is a key cost driver for the remainder of the construction 

contract. Since efficiencies will be implemented for specific phases of 

work, achieving efficiencies to date does not ensure that the shipbuilder 

can achieve future efficiencies.

Our analysis of contract performance reports shows the shipbuilder is not 

achieving the estimated labor efficiencies and cost performance—as 

illustrated by the cost performance index, which indicates a steady 

decline in performance. The cost performance index measures the ratio 

of work performed to actual costs for work performed. 

A cost performance index of less than 1 is unfavorable, because work is 

being performed less efficiently than planned; a value greater than 1 is 

favorable, implying that work is being performed more efficiently than 

planned. Cost performance can be expressed in dollars: 0.9 means that 

for every dollar spent, the program has received 90 cents worth of 

completed work. Calculating the cost performance of the prior 6 months 

provides an average measure of recent shipbuilder performance. Our 

analysis found recent drops from the established baseline in both monthly 

cost performance and the cost performance of the prior 6 months. The 

first shipbuilder performance report for the new construction contract was 

provided in October 2015, so a 6-month cost performance average could 

Current CVN 79 

Construction Performance 

Suggests Cost Estimate 

May Not Be Achieved
Page 30 GAO-17-575 Ford-Class Carriers

not be calculated until March 2016. Additional information supporting the 

GAO conclusions in this section may be found in the sensitive version of 

this report, which is available upon request for official use only to those 

with the appropriate need-to-know.

Shipbuilder contract performance reports identify several labor 

categories, such as sheet metal, insulation, and piping, where completed 

work has cost more than planned. In some of these categories, the 

shipbuilder may not realistically be able to improve labor efficiencies and 

complete certain work within the budget. Independent analysis from the 

Navy’s Supervisor of Shipbuilding also found that overall construction 

labor cost performance has been slowly degrading.25 The shipbuilder 

must complete future work more efficiently and below budget in order to 

compensate for recent performance issues. If current shipbuilder 

performance trends continue, CVN 79 is at risk of not being completed 

within the $11.4 billion cost cap.

Current reporting mechanisms, such as budget requests and the SAR, 

provide limited insight into the overall Ford-Class program and individual 

ship costs. Because the Navy has designated the entire Ford-Class 

program as a single major defense acquisition program, independent cost 

reviews have been infrequent and are not conducted for each ship before 

the Navy must request funding for ship construction. As a result, 

individual ships have received a significant portion of funding with limited 

information on program costs. Additionally, annual acquisition reports to 

Congress provide only aggregate program cost for all three ships 

currently in the class, a practice that diminishes transparency into 

individual ship costs. As a result of unreliable cost estimates and limited 

acquisition reporting, Congress has limited ability to oversee one of the 

most expensive programs in the defense portfolio.

 25Navy’s Supervisor of Shipbuilding is the Navy’s primary on-site representative at the 

private shipyards that build Navy ships, and is tasked with overseeing the shipbuilder’s 

production processes.

Ford Class Oversight 

Mechanisms Provide 

Limited Insight into 

Ship Costs
Page 31 GAO-17-575 Ford-Class Carriers

Because the entire Ford-Class program is considered a single major 

defense acquisition program, the Navy requested and received a 

significant portion of funding for each of the first three Ford-Class ships 

without an independent cost estimate to confirm the credibility of program 

estimates.26 An independent cost estimate is important because it 

provides an unbiased assessment of whether a program’s estimate is 

reasonable. DOD acquisition policy and federal statute state that

independent cost estimates for major defense acquisition programs are 

conducted at milestone events. In the case of the Ford-Class program, 

although each individual ship exceeds the $2.79 billion procurement cost 

threshold to be designated a major defense acquisition program, DOD 

considers the entire Ford-Class program—rather than each individual 

ship—as a major defense acquisition program. Therefore, independent 

cost estimates are not required for each individual ship and CAPE only 

developed independent cost estimates to support milestone events in 

2004 and 2015 for the Ford-Class program as a whole.

Figure 5 shows that the independent cost estimates have trailed behind 

the Navy’s funding requests and Congress’s authorization of advance 

procurement and construction funding.

 26A major defense acquisition program is an acquisition program that is estimated by the 

defense acquisition executive to require an eventual total expenditure for research, 

development, test, and evaluation of more than $480 million (in fiscal year 2014 constant 

dollars) or for procurement of more than $2.79 billion (in fiscal year 2014 constant dollars), 

or that is designated as a major defense acquisition program by the milestone decision 

authority. Department of Defense Instruction 5000.02, Operation of the Defense 

Acquisition System Encl. 1, Table 1 (Jan. 7, 2015).

Significant Funding 

Decisions Are Made Prior 

to Attaining Independent 

Cost Estimates
Page 32 GAO-17-575 Ford-Class Carriers

Figure 5: Ford Class Funding and Major Milestones and Independent Cost Estimates

CAPE developed its first independent cost estimate for CVN 78 in 2004 in 

support of the program’s Milestone B decision. However, at this point the 

program had already received $1.7 billion in advance procurement 

funding. For CVN 79, an independent cost estimate was not developed 

until May 2015 to support the Ford-Class program’s originally planned 

Milestone C. This occurred after the CVN 79 construction preparation 

contract was awarded and $6.0 billion of procurement funding had been 

received. As a result, no independent cost estimates were conducted 

during the 11-year period between these milestones. Program officials 

stated that CAPE reviewed NAVSEA 05C’s estimate in 2007 and 2010;

however, CAPE did not develop an independent cost estimate during 

those reviews to provide decision makers with an alternative estimate. 

During that time, the program received $15.1 billion in procurement 

funding. In particular, there was no current independent cost estimate to 

inform the Department of Navy’s President’s budget request for 
Page 33 GAO-17-575 Ford-Class Carriers

construction of CVN 78 in 2007, and no independent cost estimate prior 

to the budget request for construction of CVN 79 in 2012. Additionally, 

there was no independent cost review of CVN 79 before Congress raised 

the program cost cap from $8.1 billion to $11.5 billion in 2013.27

No independent cost estimate to date has included CVN 80, and before 

an independent cost estimate for CVN 80 is developed, the Navy will 

have received nearly $2.2 billion in advance procurement funding. 

According to guidance, CAPE will be required to develop an independent 

cost estimate, to include costs for CVN 80, for the Ford-Class program 

Milestone C now scheduled for fiscal year 2018. The Joint Explanatory 

Statement accompanying the National Defense Authorization Act for 

Fiscal Year 2016 required the Navy to assess the merits associated with 

using economic order quantity procurement with CVN 80 and CVN 81 

and the Navy has estimated savings of $1.3 billion by pursuing this 

strategy.28 However, since there will be no future milestone events for the 

program after the Milestone C scheduled for fiscal year 2018, CAPE will 

not be required to develop independent cost estimates for any follow-on 

ships in the class after CVN 80—including CVN 81, which may soon be 

added to the acquisition program baseline.

If each individual carrier were designated a separate major defense 

acquisition program, each ship would have its own milestone events.29

The Navy could align these milestones to correspond with major funding 

decisions—for example, prior to budget requests for advanced 

procurement funding, or prior to requesting funding to begin ship 

construction—and CAPE would develop independent cost estimates prior 

to these major milestones. Similarly, NCCA would also develop more 

frequent independent cost assessments that focus on each individual 

carrier. NCCA officials stated they have only conducted one review of the 

 27National Defense Authorization Act for Fiscal Year 2014, Pub. L. No. 113-66, § 121 

(2013).

28Economic order quantity procurement can decrease costs by buying in economically 

efficient quantities.

29Previous GAO reports recommended that major upgrades be designated major defense 

acquisition programs or subprograms in order to improve program oversight. See GAO, 

F-35 Joint Strike Fighter: Continued Oversight Needed as Program Plans to Begin 

Development of New Capabilities, GAO-16-390 (Washington, D.C.: Apr. 14, 2016); and 

Arleigh Burke Destroyers: Delaying Procurement of DDG 51 Flight III Ships Would Allow 

Time to Increase Design Knowledge, GAO-16-613 (Washington, D.C.: Aug. 4, 2016).
Page 34 GAO-17-575 Ford-Class Carriers

Ford-Class program since it began in 2000.30 In comparison, Air Force 

instruction requires the Air Force Cost Analysis Agency to conduct annual 

independent cost assessments of all major defense acquisition programs.

In February 2005, we recommended, and DOD concurred, that an 

independent review should occur with every acquisition of every aircraft 

carrier.31 But DOD has not implemented this recommendation, as 

demonstrated by the fact that no independent estimate was conducted 

prior to the start of CVN 79 construction and the request for construction 

funding. Given the fact that CVN 78’s costs have increased $2.4 billion 

and CVN 79 faces cost increases as well, more realism in the budget 

requests would help inform Congress about expected costs to the 

taxpayer for the Ford Class.

The Navy totals Ford-Class performance measures for all three FordClass ships in the SAR, a practice that diminishes transparency and 

encumbers oversight efforts. The SAR is a statutorily-mandated, 

comprehensive acquisition summary required for major defense 

acquisition programs.32 DOD submits SARs to Congress for program 

oversight purposes. The SAR for the Ford Class is prepared in 

accordance with the current Ford-Class acquisition program baseline—

which is approved for three ships (CVN 78 to CVN 80). As a result, the 

Navy reports combined average unit costs for the three ships annually, 

rather than preparing separate reports for individual ships. The program 

office noted that costs for non-recurring engineering and EMALS apply to 

the entire Ford-Class program and cannot be easily allocated to individual 

ships. While this is true, most costs are for ship procurement, which is 

budgeted specifically for each ship. Reporting combined average unit 

costs obscures individual ship cost growth and does not provide insight 

into cost performance against the specific cost caps Congress has 

mandated for each ship.

Further, this practice is in contrast to Nimitz-Class ships, which were 

reported by individual hull in the SAR, with the exception of CVN 72 and 

 30NCCA was not required to review the Ford-Class program prior to 2009, so 2015 was 

the first opportunity to conduct an independent cost assessment for a milestone event.

31GAO, Defense Acquisitions: Improved Management Practices Could Help Minimize Cost 

Growth in Navy Shipbuilding Programs, GAO-05-183 (Washington, D.C.: Feb. 28, 2005).

3210 U.S.C. § 2432.

Program Selected 

Acquisition Reports 

Obscure Individual Ship 

Cost Growth
Page 35 GAO-17-575 Ford-Class Carriers

CVN 73, and CVN 74 and CVN 75, which were procured under single 

contracts. Navy officials could not provide an explanation for why SAR 

reporting changed.

The effect of the current practice of reporting combined average unit 

costs for the three Ford-Class ships is clear when considering the Navy’s 

reported procurement costs for the class. The 2015 SAR reported a 

decline in the base year program and average procurement unit costs for 

the class, when actual costs for CVN 78 have increased.33 This reported 

decline is driven by a decrease in the estimated costs for CVN 80. 

However, since an independent cost estimate for CVN 80 has not yet 

been developed, it is possible that the anticipated ship savings have not 

been accurately estimated and will not compensate for cost growth in 

CVN 78 and CVN 79.

Principle 15 in Standards for Internal Control in the Federal Government

states that management should externally communicate the necessary 

quality information to achieve the entity’s objectives.34 As a result of the 

combined Ford-Class reporting, program managers are not externally 

communicating the necessary quality information to achieve their 

program’s objective. Reporting the program cost by hull for the FordClass program would allow for enhanced oversight—which is necessary 

given the magnitude of the investment required for each ship. It would 

also allow Congress more visibility into the cost performance of each ship 

against the legislated cost caps.

Additionally, cost and funding summaries for individual ships would allow 

more transparency into the cost trade-offs of each ship.35 Federal 

standards for internal control note that the information program managers 

communicate to overseers, namely Congress, should include significant 

matters relating to risks, changes, or issues that affect the program’s 

internal control system. Internal control standards further note that 

managers should select appropriate methods of communication for 

external parties. Further, while the statute governing the SAR does not 

 33Program and average procurement unit costs in the SAR are reported in fiscal year 

2000 constant dollars.

34GAO, Standards for Internal Control in the Federal Government, GAO-14-704G 

(Washington, D.C. Sept. 10, 2014).

35GAO has ongoing work regarding Navy decisions to defer shipbuilding work to the postdelivery and outfitting phase, including work deferral for CVN 78.
Page 36 GAO-17-575 Ford-Class Carriers

require reporting on individual aircraft carriers, it requires that the SAR 

provide information that the congressional defense committees need to 

perform their oversight functions. Reporting cost and funding information 

by individual hull would provide more transparency on cost tradeoffs and 

cost drivers, which would improve the committees’ ability to perform 

oversight.36 Reporting ship costs individually in the SAR would also allow 

program managers to separately baseline, track, and manage each ship’s 

cost. Without this more granular level of reporting, Congress and DOD 

cannot determine the amount and cause of cost growth for each ship.

The experiences of the Ford-Class program are well known. We have 

reported for many years on the program’s challenges that contributed to 

nearly $2.4 billion in cost growth for the lead ship. Even as construction of 

CVN 78 was just getting underway in 2007, we noted key risks in the 

Ford-Class carrier program and pointed out the optimism in the cost 

estimate. CVN 79’s cost estimate appears to suffer from similar optimism, 

indicating that lessons were not learned from the lead ship in this regard. 

NAVSEA 05C’s CVN 79 estimate is not realistic, as it does not accurately 

capture actual program risks. As a result, CVN 79 is likely to experience 

cost growth beyond the congressionally mandated cost cap and will 

require additional program funding. Congress designed the cost cap in 

order to encourage the program to adhere to its cost estimate. However, 

the cost cap for CVN 79 was established without the input from a program 

cost estimate. Consequently, instead of the program cost estimate 

informing the cost cap, the cost cap informed the program cost estimate. 

Developing a new CVN 79 cost estimate would allow the program to have 

a more realistic budget that accurately reflects current shipbuilder 

performance.

Further, the infrequent independent cost estimates result in Congress 

being asked to commit billions of dollars to the program before key 

information is available. As a result, individual ships receive billions of 

dollars in funding before a realistic cost is determined, at which point 

there are fewer opportunities to identify cost efficiencies or potential 

tradeoffs. More frequent independent cost reviews would identify risks for 

program cost growth sooner, allowing actions to be taken.

 36When DOD makes a change in the content of a SAR (as would be the case if DOD 

started reporting information by individual ship for the Ford Class), the statute governing 

the SAR requires DOD to submit a notice of the change to the Committees on Armed 

Services of the Senate and House of Representatives. 10 U.S.C. § 2432.

Conclusions
Page 37 GAO-17-575 Ford-Class Carriers

Finally, although each individual ship far exceeds the threshold for being 

a major defense acquisition program, the entire Ford Class, rather than 

each ship, is considered a major defense acquisition program, and thus 

there is less oversight over individual ships as a result of infrequent 

independent cost reviews and consolidated SAR reporting. Reporting cost 

and funding summaries in the SAR individually for each ship would allow 

Congress insight into individual ship cost growth and any tradeoffs that 

are made to stay within cost caps. Additional information on ship costs 

would allow for the Navy and Congress to develop a realistic acquisition

strategy and budget for the Ford-Class program.

We recommend the Secretary of Defense direct the Secretary of the Navy 

to take the following three actions:

• To ensure the Milestone Decision Authority has an accurate and 

credible cost estimate for the Milestone C program review, NAVSEA 

05C should update the cost estimate for CVN 79 as part of the FordClass program life-cycle cost estimate. This estimate should be 

prepared in accordance with cost estimating best practices and 

include current shipbuilder performance data. 

• NCCA should review the new CVN 79 cost estimate as part of the 

planned independent cost assessment. 

• Further, the Secretary of Defense should direct the CAPE to 

include the new CVN 79 cost estimate as part of the planned 

independent cost estimate, which should form the basis of the 

program budget request. If the independent cost estimate for CVN 

79 should exceed the cost cap, the Navy should submit to 

Congress a request to revise the cost cap.

• Starting with CVN 80, NAVSEA 05C should develop program lifecycle cost estimates for each individual ship in the Ford-Class 

program baseline. 

• Development of these estimates should be provided at milestone 

reviews that should be aligned with major aircraft carrier funding 

events. In particular, for CVN 80, a program life-cycle cost 

estimate should be developed prior to the request for ship 

construction funding. 

• For all ships in the class after CVN 80, a program life-cycle cost 

estimate should be aligned with milestone reviews that correspond 

with the receipt of any advance procurement funding and the first 

year of the request for ship construction funding. These estimates 

Recommendations for 

Executive Action
Page 38 GAO-17-575 Ford-Class Carriers

should be prepared in accordance with best practices and 

updated regularly with actual cost data. 

• The Secretary of Defense should further direct the CAPE to 

develop independent cost estimates for these ships prior to the 

listed events. 

• The Secretary of the Navy should direct NCCA to conduct 

independent cost assessments for these ships prior to the listed 

events.

• To improve insight into cost changes for individual ships in the Ford 

Class, the program office should prepare cost summary and funding 

summary sections for each individual ship in the class as part of the 

SAR for the overall Ford-Class program.

We provided a draft of this report to DOD for comment. In its written 

comments, which are reprinted in appendix III, DOD concurred with much 

of the report. DOD agreed that an accurate cost estimate for CVN 79 is 

essential to support the Milestone C review for the program, but did not 

concur with revising the cost cap should the CVN 79 cost estimate 

exceed the current cost cap, stating that it will use the cost estimate to 

determine whether the current cost cap is at risk and if additional cost 

mitigation strategies are needed. While we understand that the program 

would want to evaluate and balance the cost risks, we continue to believe 

that the cost cap is meant to reflect the program’s baseline. If the 

department chooses not to request that Congress update the cost cap, 

then the cost cap is driving the cost estimate and not vice versa, 

increasing the likelihood that the cost estimate will not reflect realistic 

assumptions, such as regarding the number of labor hours needed to 

construct the ships. We will review the updated CVN 79 cost estimate to 

determine whether it accurately reflects likely program costs.

DOD agreed to develop program life-cycle cost estimates for each 

individual ship according to our recommended timelines. However, DOD 

stated that it will not be able to meet the timeline for CVN 80 since the 

request for ship construction funding has already been submitted and the 

first program life-cycle cost estimate is still being prepared to support the 

program review in fiscal year 2018. DOD stated it will follow our 

recommendation for all subsequent ships.

In response to agency comments, we revised one of our draft 

recommendations, specifically regarding reporting in the SAR. DOD 

informed us that submitting a separate SAR report for each individual ship 

Agency Comments 

and Our Evaluation
Page 39 GAO-17-575 Ford-Class Carriers

would result in duplicative information. We subsequently revised the 

recommendation to focus on cost and funding data for each ship within 

the overall Ford Class SAR. We believe this change will improve the 

transparency of individual ship costs without imposing burdensome or 

duplicative reporting requirements. DOD noted that the department 

currently provides progress reports to Congress on costs for CVN 78 and 

CVN 79. While true, the SAR is the primary statutorily required means for 

DOD to report on program status. And as our report notes, at present the 

SAR does not include any cost information on individual ships. Grouping 

costs of all Ford-Class ships together does not provide Congress with an 

adequate level of insight to monitor this approximately $40 billion 

program. Further, the current progress reports do not include CVN 80.

Our recommendation would ensure that Congress receives insight into 

the costs of each existing and planned Ford Class ship.

In addition, DOD provided technical comments that were incorporated as 

appropriate.

We are sending copies of this report to the appropriate congressional 

committees, the Secretary of Defense and the Secretary of the Navy. In

addition, the report is available at no charge on the GAO website at 

http://www.gao.gov.

If you or your staff have any questions about this report, please contact 

me at (202) 512-4841 or mackinm@gao.gov. GAO staff who made key 

contributions to this report are listed in appendix IV.

Michele Mackin

Managing Director

Acquisition and Sourcing Management
Appendix I: Scope and Methodology

Page 40 GAO-17-575 Ford-Class Carriers

This report assesses cost drivers for the lead ship in the Ford Class, the 

quality of the Navy’s Ford-Class cost estimates, and the cost insights 

provided by Ford-Class reports. The scope of our work primarily focused 

on the Gerald R. Ford (CVN 78) and the John F. Kennedy (CVN 79), as a 

complete cost estimate has not yet been established for the Enterprise 

(CVN 80). Specifically, we assessed (1) the drivers of CVN 78 cost 

growth; (2) the extent to which the CVN 79 cost estimate is reliable and 

addresses known cost risks from the performance of the lead ship; and 

(3) the extent to which oversight mechanisms—including annual budget 

requests and selected acquisition reports—provide insight into total ship 

costs and budget execution.

To identify the drivers of CVN 78 cost growth and what, if any, challenges 

remained for the lead ship as it approached delivery, we reviewed an 

Office of the Under Secretary of Defense memorandum to the Secretary 

of the Navy, Navy memorandums to members of Congress, and program 

office briefings to Congress. In addition, we analyzed Navy budget 

submissions. We also relied on our prior work evaluating the Ford-Class 

program to supplement the above analyses.1 To further corroborate 

documentary evidence and gather additional information in support of our 

review, we conducted interviews with relevant Navy officials from the 

Program Executive Office, Aircraft Carriers.

To assess the reliability of CVN 79’s cost estimate, we determined the 

extent to which the estimate was consistent with best practices as 

identified in GAO’s Cost Estimating and Assessment Guide.2 We 

examined documents supporting the cost estimate, such as the CVN 79 

estimate brief, memorandum, and other documents that contain cost, 

schedule, and risk information, as well as relevant Department of Defense 

(DOD) and Navy policies. We met with Navy personnel responsible for 

developing the cost estimate to understand the processes used by the 

cost estimators, to clarify information, and to allow the program to provide 

additional documentation to support the estimate. Because we did not 

have direct access to the CVN 79 cost model, we observed portions of 

the model during a presentation and discussion with Navy cost 

 1

GAO, Ford Class Aircraft Carrier: Poor Outcomes Are the Predictable Consequences of 

the Prevalent Acquisition Culture, GAO-16-84T (Washington, D.C.: Oct. 1, 2015). See 

Related GAO Products at the end of this report for a complete list of prior reports on the 

Ford-Class program.

2

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: Mar. 2, 2009).

Appendix I: Scope and Methodology
Appendix I: Scope and Methodology

Page 41 GAO-17-575 Ford-Class Carriers

estimators. Finally, we examined Navy cost estimating guidance to 

determine whether the Navy complied with the guidance in developing the 

CVN 79 estimate. In addition, to inform our analysis of how well the CVN 

79 cost estimate addresses known cost risks from the performance of 

CVN 78, we relied on our prior work evaluating the Ford-Class program.3

To further corroborate documentary evidence and gather additional 

information in support of our review, we conducted interviews with 

relevant DOD and Navy officials responsible for developing and updating 

the Ford-Class cost estimates, such as the Office of Cost Assessment 

and Program Evaluation; Naval Center for Cost Analysis; Naval Sea 

Systems Command’s Cost Engineering and Industrial Analysis Group; 

Program Executive Office, Aircraft Carriers; CVN 78 and 79 program 

offices; Aircraft Launch and Recovery program office; and the Program 

Executive Office, Integrated Warfare Systems.

To determine how oversight mechanisms provide insight into Ford-Class 

ship costs and budget execution, we examined Navy budget requests and 

Selected Acquisition Reports (SAR), to assess the transparency of cost 

information. We reviewed the budget requests and the SARs to identify 

cost information. To further corroborate documentary evidence and 

gather additional information in support of our review, we conducted 

interviews with relevant Navy and contractor officials responsible for 

managing the technology development and construction of CVN 78, such 

as the Program Executive Office, Aircraft Carriers; CVN 78 and CVN 79 

program offices; and the Naval Sea Systems Command’s Cost 

Engineering and Industrial Analysis Group. We also held discussions with 

officials from the Office of the Assistant Secretary of the Navy Financial 

Management and Comptroller and the Congressional Budget Office.

We conducted this performance audit from December 2015 to March

2017 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 

 3

GAO, Ford-Class Aircraft Carrier: Congress Should Consider Revising Cost Cap 

Legislation to Include All Construction Costs, GAO-15-22 (Washington, D.C.: November 

20, 2014); Ford-Class Carriers: Lead Ship Testing and Reliability Shortfalls Will Limit Initial 

Fleet Capabilities, GAO-13-396 (Washington, D.C.: Sept. 5, 2013); and Defense 

Acquisitions: Navy Faces Challenges Constructing the Aircraft Carrier Gerald R. Ford 

within Budget, GAO-07-866 (Washington, D.C. Aug. 23, 2007). 
Appendix I: Scope and Methodology

Page 42 GAO-17-575 Ford-Class Carriers

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Assessment of CVN 79 Cost 

Estimate

Page 43 GAO-17-575 Ford-Class Carriers

The GAO Cost Estimating and Assessment Guide (GAO-09-3SP) was 

used as criteria in this analysis1

. For this guide, GAO cost experts 

assessed measures consistently applied by cost-estimating organizations 

throughout the federal government and industry and considered best

practices for the development of reliable cost estimates. We analyzed the 

cost estimating practices used by the Navy against these best practices. 

For our reporting needs, we collapsed these best practices into four 

general characteristics for sound cost estimating, which include: welldocumented, comprehensive, accurate, and credible. The cost estimating 

analysis was also based on interviews with Navy officials and the Navy’s 

written responses regarding their implementation of the 12-step costestimating process.

After reviewing documentation the Navy submitted for its cost estimate, 

conducting numerous interviews, and reviewing relevant sources, we 

determined that the CVN 79 cost estimate substantially met one and 

partially met three of the four characteristics of a reliable cost estimate, 

shown in table 6. We determined the overall assessment rating by 

assigning each individual rating a number: Not Met = 1, Minimally Met = 

2, Partially Met = 3, Substantially Met = 4, and Met = 5. Then, we took the 

average of the individual assessment ratings to determine the overall 

rating for each of the four characteristics. The resulting average becomes 

the Overall Assessment as follows: Not Met = 1.0 to 1.4, Minimally Met = 

1.5 to 2.4, Partially Met = 2.5 to 3.4, Substantially Met = 3.5 to 4.4, and 

Met = 4.5 to 5.0. A cost estimate is considered reliable if the overall 

assessment ratings for each of the four characteristics are substantially or 

fully met. If any of the characteristics are not met, minimally met, or 

partially met, then the cost estimate does not fully reflect the 

characteristics of a high-quality estimate and cannot be considered 

reliable.

See table 6 for a high level summary of each best practice and the 

reasons for the overall scoring.

 1

GAO, GAO Cost Estimating and Assessment Guide: Best Practices for Developing and 

Managing Capital Program Costs, GAO-09-3SP (Washington, D.C.: March 2009) 

Appendix II: Assessment of CVN 79 Cost 

Estimate

Summary of the GAO 

Methodology Used to 

Perform Cost 

Estimating Analysis

GAO High-Level Analysis
Appendix II: Assessment of CVN 79 Cost 

Estimate

Page 44 GAO-17-575 Ford-Class Carriers

Table 6: Summary Assessment of Navy’s Cost Estimate Compared to Best Practices

Characteristic Overall 

assessmenta Best practice Individual assessment

Comprehensive Substantially met The cost estimate includes all life-cycle costs. Met

The cost estimate completely defines the program, reflects the 

current schedule, and is technically reasonable.

Substantially met

The cost estimate work breakdown structure is product-oriented, 

traceable to the statement of work/objective, and at an 

appropriate level of detail to ensure that cost elements are 

neither omitted nor double-counted.

Substantially met

The estimate documents all cost-influencing ground rules and 

assumptions. 

Partially met

Well-documented Partially met The documentation should capture the source data used, the 

reliability of the data, and how the data were normalized.

Partially met

The documentation describes in sufficient detail the calculations 

performed and the estimating methodology used to derive each 

element’s cost.

Minimally met

The documentation describes step by step how the estimate was 

developed so that a cost analyst unfamiliar with the program 

could understand what was done and replicate it.

Minimally met

The documentation discusses the technical baseline description 

and the data in the baseline is consistent with the estimate.

Met

The documentation provides evidence that the cost estimate was 

reviewed and accepted by management.

Partially met

Accurate Partially met The cost estimate results are unbiased, not overly conservative 

or optimistic, and based on an assessment of most likely costs.

Partially met

The estimate has been adjusted properly for inflation. Partially met

The estimate contains few, if any, minor mistakes. Minimally met

The cost estimate is regularly updated to reflect significant 

changes in the program so that it is always reflecting current 

status.

Minimally met

Variances between planned and actual costs are documented, 

explained, and reviewed. 

Minimally met

The estimate is based on a historical record of cost estimating 

and actual experiences from other comparable programs. 

Partially met

The estimating technique for each cost element was used 

appropriately. 

Partially met
Appendix II: Assessment of CVN 79 Cost 

Estimate

Page 45 GAO-17-575 Ford-Class Carriers

Characteristic Overall 

assessmenta Best practice Individual assessment

Credible Partially met The cost estimate includes a sensitivity analysis that identifies a 

range of possible costs based on varying major assumptions, 

parameters, and data inputs.

Partially met

A risk and uncertainty analysis was conducted that quantified the 

imperfectly understood risks and identified the effects of 

changing key cost driver assumptions and factors.

Partially met

Major cost elements were cross-checked to see whether results 

were similar.

Minimally met

An independent cost estimate was conducted by a group outside 

the acquiring organization to determine whether other estimating 

methods produce similar results.

Partially met

Source: GAO analysis of Navy’s data. | GAO-17-575

a

Not Met - Navy provided no evidence that satisfies any of the criterion, Minimally Met – Navy 

provided evidence that satisfies a small portion of the criterion, Partially Met – Navy provided 

evidence that satisfies about half of the criterion, Substantially Met – Navy provided evidence that 

satisfies a large portion of the criterion, and Met – Navy provided complete evidence that satisfies the 

entire criterion.
Appendix III: Comments from the Department 

of Defense

Page 46 GAO-17-575 Ford-Class Carriers

Appendix III: Comments from the 

Department of Defense
Appendix III: Comments from the Department 

of Defense

Page 47 GAO-17-575 Ford-Class Carriers
Appendix III: Comments from the Department 

of Defense

Page 48 GAO-17-575 Ford-Class Carriers
Appendix IV: GAO Contact and Staff 

Acknowledgments

Page 49 GAO-17-575 Ford-Class Carriers

Michele Mackin, (202) 512-4841 or mackinm@gao.gov

In addition to the contact named above, key contributors to this report 

were Diana Moldafsky, Assistant Director; Jessica E. Karnis; Juana S. 

Collymore; Burns C. Eckert; Marcia Fernandez; Laura Greifner; Kristine 

Hassinger; Karen Richey; and Roxanna Sun.

Appendix IV: GAO Contact and Staff 

Acknowledgments

GAO Contact

Staff 

Acknowledgments
Related GAO Products

Page 50 GAO-17-575 Ford-Class Carriers

Defense Acquisitions: Assessments of Selected Weapon Programs. 

GAO-17-333SP. Washington, D.C.: March 30, 2017.

Defense Acquisitions: Assessments of Selected Weapon Programs. 

GAO-16-329SP. Washington, D.C.: March 31, 2016.

Ford Class Aircraft Carrier: Poor Outcomes Are the Predictable 

Consequences of the Prevalent Acquisition Culture. GAO-16-84T. 

Washington, D.C.: October 1, 2015.

Defense Acquisitions: Assessments of Selected Weapon Programs. 

GAO-15-342SP. Washington, D.C.: March 12, 2015 [Reissued on April 9, 

2015].

Ford-Class Aircraft Carrier: Congress Should Consider Revising Cost 

Cap Legislation to Include All Construction Costs. GAO-15-22. 

Washington, D.C.: November 20, 2014.

Ford-Class Carriers: Lead Ship Testing and Reliability Shortfalls Will Limit 

Initial Fleet Capabilities. GAO-13-396. Washington, D.C.: September 5, 

2013.

Defense Acquisitions: Navy Faces Challenges Constructing the Aircraft 

Carrier Gerald R. Ford within Budget. GAO-07-866. Washington, D.C. 

August 23, 2007.

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