Navy Shipbuilding: Significant Investments in the Littoral Combat Ship Continue Amid Substantial Unknowns about Capabilities, Use, and Cost
Published: 2013-07-22T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Navy's LCS consists of the ship-- called a seaframe--and mission packages, which provide combat capability. LCS is intended to be reconfigurable to perform three primary missions: surface warfare; mine countermeasures; and anti-submarine warfare. The Navy currently plans to buy 52 seaframes, including two variants being constructed at two U.S. shipyards, and 64 mission packages. The total estimated acquisition cost is about $40 billion in 2010 dollars.
GAO was asked to assess the status of the LCS program. This report examines (1) the progress and challenges associated with seaframe and mission module production, development, and testing; and (2) the soundness of the Navy's business case for the integrated LCS program. GAO analyzed Navy and contractor documents, toured shipyards and LCS ships, and interviewed DOD and Navy officials and contractor representatives.
section_title: What GAO Found
paragraphs: The Littoral Combat Ship (LCS) seaframe program continues to face challenges stemming from concurrent design, production, and testing activities. The Navy has taken steps to resolve problems with the lead ships, and the shipyards are beginning to realize benefits from facility improvements and experience. However, testing remains to be completed and the Navy is currently studying potentially significant design changes, such as increasing the commonality of systems between the two ship variants and changing ship capabilities. Changes at this point can compromise the positive impacts of shipyard learning, increase costs, and prolong schedules. The mission module program also has concurrency issues, and testing to date has shown considerable limitations in capabilities. The Navy is pursuing an incremental approach to fielding mission packages, but it has yet to finalize the requirements for each increment and does not plan to achieve the minimum performance requirements for the mine countermeasures and surface warfare packages until the final increments are fielded in 2017 and 2019, respectively.
The Navy continues to buy LCS seaframes and modules even as significant questions remain about the program and its underlying business case. Elements of the LCS business case, including its cost, the time needed to develop and field the system, and its anticipated capabilities have degraded over time. There are also significant unknowns related to key LCS operations and support concepts and the relative advantages and disadvantages of the two seaframe variants. The potential effect of these unknowns on the program is compounded by the Navy's aggressive acquisition strategy. By the time key tests of integrated LCS capability are completed in several years, the Navy will have procured or have under contract more than half of the planned number of seaframes. Almost half of the planned seaframes are already under contract, and the Navy plans to award further contracts in 2016, before the Department of Defense (DOD) makes a decision about full rate production of the ships. The Navy will not be able to demonstrate that mission packages integrated with the seaframes can meet the minimum performance requirements until operational testing for both variants (Freedom and Independence) is completed, currently planned for 2019. The Navy has also essentially bypassed two major acquisition reviews for mission modules, purchasing 8 of the 64 planned mission packages before gaining approval to enter the system development and initial production phases.
section_title: What GAO Recommends
paragraphs: To ensure that LCS investments are informed by key information, Congress should consider restricting funding for further ships until the Navy completes several studies about future LCS designs and capabilities. GAO is also making several recommendations, including that DOD limit future seaframe and mission package purchases until it achieves key acquisition and testing milestones. DOD disagreed with these recommendations, stating that slowing seaframe purchases would cause prices to rise and mission package purchases are needed to equip operational ships. GAO believes the Navy does not have adequate knowledge about LCS capabilities to support the planned procurement rate.

section_title: Letter
paragraphs: The Navy’s Littoral Combat Ship (LCS) is intended to be reconfigurable to  perform three different primary missions: mine countermeasures (MCM),  surface warfare (SUW), and anti-submarine warfare (ASW). The LCS  consists of two distinct parts—the ship itself (called a seaframe because  of its ability to carry interchangeable payloads similarly to an airframe)  and the interchangeable package of sensors and weapons that it carries  and deploys, called a mission package. The mission package provides  the majority of the ship’s combat capability. Mission packages are  composed of one or more mission modules and an aviation capability.  The Navy has contracted for 24 seaframes, consisting of two design  variants being constructed at two U.S. shipyards. The Navy has also  procured 8 mission packages, with plans to procure 2 more in 2013. In its  baselines, the Navy planned to spend over $40 billion in 2010 dollars  through fiscal year 2034 to acquire 55 LCS seaframes and 64 mission  packages—though it has since reduced the total number of seaframes to  52.
The Navy has accepted delivery of the first three seaframes, and has  spent several years completing various test and maintenance events on  the first two—USS Freedom (LCS 1) and USS Independence (LCS 2);  USS Fort Worth (LCS 3) was delivered in June 2012. During this time, we  and others have identified a number of problems with the seaframes and  their equipment, as well as challenges related to the development of  mission module technologies. In light of these issues, you asked us to  conduct a broad evaluation of the LCS program. This report addresses  the following: (1) the Navy’s progress in producing and testing LCS  seaframes and any remaining risks; (2) the Navy’s progress in  developing, producing, and testing LCS mission modules and any  remaining risks; (3) any risks in the Navy’s acquisition strategy for the  integrated LCS program.
To conduct our work, we evaluated the Navy’s acquisition strategies;  requirements documentation; concepts of operations; test and delivery  schedules; test plans; and life-cycle cost estimates for the two seaframe  variants and the mission modules. In addition, we interviewed the Under  Secretary of Defense for Acquisition, Technology and Logistics; the  Director, Operational Test and Evaluation; Deputy Directors for Cost  Assessment and Program Evaluation; the Director of Navy Staff; officials  from the Office of the Chief of Naval Operations (OPNAV, who represent  the sponsors of the LCS program); LCS program office officials; and  officials from Fleet Forces Command, LCS Squadron One, and the Third,  Fourth, Fifth, and Seventh Fleets; among others. We analyzed Navy and  contractor documentation on the seaframes and mission modules  programs related to development, production, testing, performance, and  fielding. We discussed this information with government and contractor  representatives responsible for managing these programs and testing key  LCS mission systems. We also visited both shipyards and toured the  three LCS ships that have been delivered to the Navy to date. A more  detailed description of our scope and methodology is presented in  appendix I.
We conducted this performance audit from April 2012 to July 2013 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.
subsections: section_title: Background
paragraphs: The concept for the LCS emerged in the late 1990s and early 2000s as  the Navy was trying to address two main needs. First, it had identified  existing and emerging capability gaps in its ability to defeat large numbers  of hostile small boats, sea mines, and quiet diesel-electric and nuclear- powered submarines, especially when these threats were present in the  shallow waters close to shore, which are known as the littorals. Second,  the Navy wanted to field an affordable utility ship that would be able to  handle some of the day-to-day tasks and responsibilities of the Navy,  including missions such as counter-piracy patrols and foreign nation  training exercises that are relatively low risk. As the number of frigates  has declined over time, these missions are increasingly being performed  by more expensive and capable ships—destroyers and cruisers—which  the Navy states are in high demand for more stressing operations. In  addition, an affordable ship class was needed if the Navy hoped to  maintain its fleet size while dealing with a tightening shipbuilding budget  for new surface combatants.
To fulfill these goals, the Navy settled on a set of novel concepts that  would be realized on a new class of ships—LCS. LCS would have  interchangeable mission systems in the form of mission modules rather  than fixed mission systems as is generally the case with other Navy  surface combatants. These modules would give the Navy flexibility to  change equipment in the field to meet different mission needs, and to  incorporate new technology to address emerging threats. LCS was also  envisioned as having a greatly reduced crew size compared to other ship  classes, which in turn would lead to lower costs for operations and  support. To balance these reduced manning levels with its operational,  maintenance, support, and administrative needs, the Navy developed a  new maintenance and support concept. Unlike other ships, LCS would  have no onboard administrative personnel and a limited ability to conduct  maintenance at sea; instead, it would rely heavily on shore-based  support. The Navy also opted to use a rotational crewing concept,  whereby multiple crews are assigned to one ship and rotate on and off  while the ship remains forward deployed. Rotational crewing is used on  the ballistic missile submarines, mine countermeasures ships, and  coastal patrol craft, but it is not widely used on U.S. Navy surface  combatants.
The Navy formally initiated the LCS acquisition program in 2004. At that  time, the LCS seaframe and mission modules acquisition efforts were  managed as one program. In 2011, the Navy requested that they be  separated into two programs managed by two distinct program offices,  which would fall under a newly formed Program Executive Office. The  LCS seaframe program office is responsible for the hull; various  command and control systems; core combat systems such as radars and  the 57-millimeter gun; and launch, handling, and recovery systems that  deploy mission module equipment. The mission modules program office  is responsible for buying and integrating the systems that come together  to form the three different mission packages—MCM, ASW, and SUW.
The Navy is procuring two different seaframe designs from shipbuilding  teams led by Lockheed Martin—which builds its ships at Marinette Marine  in Marinette, Wisconsin—and Austal USA in Mobile, Alabama. The two  designs reflect different contractor solutions to the same set of  performance requirements. The most notable difference is that the  Lockheed Martin Freedom variant (LCS 1 and other odd-numbered  seaframes, 3 through 23) is a monohull design with a steel hull and  aluminum superstructure, while the Austal USA Independence variant  (LCS 2 and other even-numbered seaframes, 4 through 24) is an  aluminum trimaran. This report refers to the Lockheed Martin ships as  the Freedom variant and the Austal USA ships as the Independence  variant.
Figure 1 shows the first two LCS seaframes.
Each seaframe has reconfigurable spaces where the mission modules  are carried. These spaces are equipped with standardized connections  for ship services including power and cooling. The mission module  designs are based on standard shipping containers that are outfitted with  a variety of unmanned systems, sensors, and weapons that can be  loaded onto and off of the seaframe. Mission modules are also  accompanied by an aviation detachment, consisting of a helicopter and its  flight and support crew, as well as vertical take-off unmanned aerial  vehicles. When the aviation detachment is embarked with a mission  module and the mission module crew, it is referred to as a mission  package. The Navy is fielding the mission packages in increments in  order to deliver capabilities faster. The Navy plans on fielding one ASW  increment and four MCM and SUW increments. The Navy will upgrade all  mission packages to the same configuration once the final increment of  each has been fielded. The Navy plans to buy 64 mission packages: 16  ASW packages, 24 MCM packages, and 24 SUW packages.
The Navy’s acquisition strategy for LCS seaframes has changed several  times over the past decade. The original plan was to fund one or two  initial ships—in what the Navy called a Flight 0 configuration—based on  the designs it selected through a conceptual design competition, and then  spend time experimenting with the seaframes and overall LCS concept.  This experimentation time was considered important to help inform what  the Navy wanted and needed in the seaframe, and also to help determine  if the LCS concept was feasible. Further, although both designs met the  Navy’s requirements, their significant differences lent even more  importance to the experimentation concept to inform a decision about  which seaframe design was better suited to meet the Navy’s needs. After  a down-select decision, the winning design was to be procured in larger  numbers, with any design changes incorporated into a new Flight 1  configuration. The Navy abandoned this strategy, however, after  concluding it would be unrealistic to expect the two competing shipyards  to build only one or two ships and then wait for the Navy to complete the  period of experimentation before awarding additional contracts. Instead,  the Navy opted to continue funding additional seaframes. This decision  meant that the Navy would buy a number of seaframes without having  completed the planned period of discovery and learning. The Navy has  made several other revisions to the LCS acquisition strategy over time,  including shifting back and forth between plans to down-select to one  seaframe design or to build both. Table 1 shows the evolution of the  Navy’s LCS acquisition strategy, and relevant contracting actions.
As indicated by table 2 below, the Navy has contracted for 24 LCS  seaframes to date. Under the block buy contracts it negotiated with the  two shipbuilders in November 2010, the Navy negotiated prices upfront  for the seaframes. However, the shipyards cannot proceed with work in  connection with the ships until the Navy provides written notice that funds  are available and have been obligated to the contract.
The Navy requested funding for LCS 17-20 in its fiscal year 2014 budget  request and plans to request funding for LCS 21-24 in its fiscal year 2015  request. In any given fiscal year, if funds are not available to fully fund the  ships planned for that year, the shipyards can renegotiate the prices and  delivery schedules for those ships and any additional ships covered by  the block buy contracts that have not yet started construction. However,  the target prices for the seaframes already funded and under construction  would not be affected and any remaining unfunded ships are not to be  considered terminated for the convenience of the government. According  to the Navy, the cost of the funded ships might still increase under this  scenario because of increases in the overhead costs applied to those  ships. The Navy and shipbuilders would share some of these costs and  the shipbuilders may have to absorb the remainder of these costs if the  increases cause the total seaframe construction cost to exceed the ceiling  price in the contract. The Navy expects to take delivery of the last  seaframes under these contracts in 2019. In 2013, the Navy announced it  was reducing the number of planned seaframe purchases from 55 to 52,  based on changing force structure requirements.
Board of Inspection and Survey, LCS Material Condition and Maintainability Report (July  13, 2012) and Office of the Chief of Naval Operations Review of the Navy’s Readiness to  Receive, Employ and Deploy the LCS Class Vessel, (March 9, 2012). infrastructure. The council’s chairman carries the authority of the Chief of  Naval Operations, and its first task was to develop a comprehensive plan  to address the recommendations in the independent studies and  concepts of operations (CONOPS) and doctrine issues needed to help  support the planned April 2013 deployment of LCS 1 to Singapore. The  first installment of the LCS Council’s plan was issued in January 2013  and the plan currently contains over 1,000 action items. In March 2013,  the Chief of Naval Operations added the Joint High Speed Vessel—also  constructed at Austal USA—to the LCS Council’s purview, citing the  unique challenges facing both classes.
One major activity identified in the LCS Council’s plan is for both  seaframe variants to complete testing to demonstrate their performance.  DOD acquisition policy requires defense acquisition programs execute  and complete developmental testing and operational testing.  Developmental testing is intended to assist in identifying system  performance, capabilities, limitations, and safety issues to help reduce  design and programmatic risks. Operational testing is intended to assess  a weapon system’s capability in a realistic environment when maintained  and operated by warfighters, subjected to routine wear-and-tear, and  employed in combat conditions. Operational testing also includes live-fire  testing, which provides timely assessment of the survivability and lethality  of a weapon system. Survivability tests are another type of test, which  demonstrate that the ship designs can safely absorb and control damage  and includes a full ship shock trial, where a manned ship is subjected to a  controlled, underwater explosion at sea. Statute requires a program to  complete realistic survivability tests and initial operational testing before  proceeding beyond low-rate initial production.
Prior to acceptance, ships are also typically required to go through  various trials to verify that requirements and specifications are met. An  acceptance trial is first conducted by INSURV to determine whether the  ship has been completed in accordance with the contract specifications  and is operationally ready. After further Navy tests and evaluations,  INSURV conducts a final contract trial to operationally demonstrate that  the ship’s systems satisfy material readiness conditions before the  contract period ends and it is delivered to the fleet. Following acceptance  and before initial deployment, the Navy also has the opportunity to make  any needed additional corrections or to fix any problems that may have  emerged in testing during a repair period called a post-shakedown  availability (PSA). LCS 1 has completed her trials and PSA; LCS 2 has  completed one PSA with a second one planned and has a remaining trial;  LCS 3 has had both trials and is now entering a PSA period.
section_title: Seaframe Quality and Cost Should Continue to Improve, but Delays Persist and Potentially Significant Design Changes Could Disrupt Production Efficiency
paragraphs: The Navy has made progress in addressing some of the early design and  construction problems on LCS 1 and LCS 2, and is obtaining better cost  performance from the shipyards on follow-on seaframes now that the  seaframes are in steady production. However, schedule delays persist.  Based on projected shipyard learning curve improvements, shipyard  performance can be expected to continue to improve over time. But, this  expected progress may be disrupted because the Navy is considering  new, potentially significant seaframe design changes that could disrupt  production efficiency and learning. Neither variant has yet completed  developmental testing to validate its performance or shock and  survivability testing. Late discoveries in testing while seaframes continue  to be constructed could lead to further design changes.
subsections: section_title: Navy Making Progress on Resolving Early Seaframe Quality Issues
paragraphs: The Navy has made progress in addressing some of the design and  quality issues that have arisen on the lead ships—LCS 1 and LCS 2. We  have previously reported that both ships had outstanding technical issues  at the time of delivery, and the Navy has continued to discover additional  problems. For example, 17 cracks were identified on LCS 1 following  delivery and after a period of operations; these had been predicted to  occur by Navy and contractor structural analyses. Of these 17 cracks, 16  were in the topside, or deckhouse structure, and one was found in the  hull. LCS 1 also has had issues with the failure of one of its gas turbine  engines, corrosion, and a leaking seal on the propulsion shaft. LCS 2,  which has spent much less time operating and has traveled fewer miles  than LCS 1, has not reported as many major problems, but the ship has  had corrosion in its waterjet propulsion systems that has required  additional money to correct.
According to the Navy and both shipbuilders, a number of design  changes have been implemented on the lead ships and the follow-on  ships of each variant to address and correct some of these problems. The  Navy repaired the cracks on LCS 1 and implemented design changes  (reinforcing weak areas) on LCS 3 and follow-on ships in the Freedom  class to prevent the stresses that led to cracking. The Navy has also  made changes to the configuration of several major ship systems,  including structure, propulsion, communications, electrical, and navigation  systems, to correct other problems. To reduce corrosion on both variants,  the Navy expanded the corrosion protection system on the Freedom- class variant and added new corrosion protection systems to the waterjet  propulsion systems of the Independence-class variant. The Navy also  made design changes to the mission module bay at the stern of the  Freedom variant to reduce corrosion and water build-up in that space. In  some instances, the Navy paid for these changes, while the contractor  paid in other instances.
Figure 2 identifies several of the significant design changes made to  follow-on ships of each variant as compared to prior ships.
The Navy and the shipyards told us that they have also taken steps to  address weight growth, particularly on LCS 1, but seaframe weight  remains a top technical risk for the program. Weight affects the speed  and stability of the ship, as well as how much it can carry. According to  Navy officials, LCS 1 experienced weight growth because the Navy  directed design changes after the initial ship design phases were  complete; the shipbuilder also underestimated the weight of paint and  installed parts. As a result, the Navy had to use some of the weight  margin allocated for future growth in order for the ship to meet the  minimum requirements for mission package carrying capacity. Program  officials also said that they had to implement design changes on LCS 1  and follow-on Freedom-variant ships to improve stability when damaged.  On LCS 1, the Navy added two external ballast tanks to the stern  following construction. For LCS 3 and subsequent Freedom-variant  seaframes, the Navy designed these tanks into the hull, which adds 9 feet  of length to the ship. This design change also provides added benefits of  additional internal volume for cargo and fuel, which increases the range of  this variant. While LCS 2 has also had issues with weight control, they  have not been as significant as those on LCS 1.
Program officials and shipyard representatives for both seaframes said  that they are actively managing the weight of the variants.  Representatives from both shipyards told us that they monitor seaframe  weight through a weight management plan, and all major design changes  now require an estimate of weight impacts. In addition, the Navy said that  weight control managers at each shipyard are responsible for weighing  equipment over 50 pounds that goes on the ship. The Navy also told us  that it has implemented design changes for lighter equipment and  materials, such as a new electric start system for the gas turbines and  gun fire control system. We requested updated copies of the contractually  required weight reports that the shipyard is supposed to develop and  provide to the Navy, but program officials told us these reports had been  sent back to the shipyards to correct issues with the quality of the  reported data that prevented these reports from being acceptable.
section_title: Cost, Production Efficiency, and Quality Have Started to Improve, but Schedule Delays Persist
paragraphs: LCS 1 and LCS 2, awarded under cost-reimbursable contracts, cost  significantly more than expected, which is often the case for lead ships of   The Navy awarded fixed-price contracts for the 2010 block- a new class.buy contracts. As part of contract negotiations, the shipyards submitted  estimated costs that decrease on each successive seaframe, with the  expectation that affordability would improve on subsequent seaframes.
The Navy attributes these cost improvements not only to the use of fixed- price contracts, but also to the shipyards’ experience building the ships.  Both shipyards have worked toward improving production processes  through the use of more automation and modularized assembly, as well  as by increasing the amount of equipment and hardware that they install  before the different large sections, or blocks, of the ship are assembled— a process called pre-outfitting. By increasing the level of pre-outfitting on  follow-on ships and decreasing labor hours spent building the ships,  production efficiency is gained. For example, both shipyards anticipate by  the third ship of the class, they will achieve approximately a 50 percent  reduction in the number of labor hours needed for ship completion.
Figure 3 depicts the actual and projected learning curves and pre- outfitting levels for both shipyards, where the data for LCS 1, 2, and 3 are  actual data and the rest are projections. As is shown, increasing pre- outfitting helps decrease labor hours.
The shipyards have also begun to realize the benefits of facility  improvements. The fiscal year 2010 block-buy contracts provide for the  shipyards to transition from building one LCS to a higher rate of  production, which necessitated facility expansions at both shipyards. For  example, Marinette Marine recently completed a 5-year, multi-million  dollar investment program that improved its fabrication facilities, including  its plate shop, panel line, and blast and paint facilities. According to  shipyard representatives, they have also improved the flow of production  through their facilities by eliminating 8 miles from their production  sequence, which saves time in the movement of ship blocks that have to  travel in the shipyard during construction. LCS 1 and LCS 3 were built in  a more static fashion, LCS 5 and LCS 7 will represent the transition to the  new production processes and buildings, and LCS 9 will be the first ship  built entirely in the upgraded facilities. Austal USA also completed a multi- million dollar facilities expansion, including building a new module  manufacturing facility. The yard also made production improvements,  including expanding its use of extruded aluminum panels for the decks  instead of welding individual sections, which Austal officials say could  save significant labor hours per ship.
Navy program office and INSURV officials, as well as shipyard  representatives, have described seaframe quality as improving.  Deficiencies identified by INSURV vary in significance, and INSURV  classifies these issues into three parts based upon the professional  judgment of the inspectors. Part 1 deficiencies are intended to represent  very significant deficiencies that are likely to cause the ship to be  unseaworthy or substantially reduce the ability of the ship to carry out its  assigned mission. Starred cards are a subset of Part 1 deficiencies that,  in INSURV’s view, require correction or a waiver by the Chief of Naval  Operations before the ship is delivered to the Navy. Part 2 deficiencies  are considered less significant issues that do not meet the criteria for a  Part 1 deficiency, but should be corrected to restore the ship to required  specifications. Part 3 deficiencies are generally categorized as those that  prevent the ship from meeting Navy standards but are cost prohibitive to  fix. Our analysis shows that the number of defects remaining at the time  the ships were delivered to the Navy declined significantly from LCS 1 to  LCS 3, but the number of seaframes delivered to date is too small to  determine if this is a trend. LCS 2 has only had a partial acceptance trial,  and LCS 4 has not yet conducted its acceptance trial (currently scheduled  for June 2013), so the quality data on the Independence variant is limited  and cannot yet be compared with follow-on seaframes. As of March 2013,  both LCS 1 and LCS 2 each have seven outstanding starred cards that  had not yet been resolved. Issues include the launch, handling, and  recovery system on LCS 1 and the rescue boat and the way in which the  engineering control system manages system trouble alarms on LCS 2.
Figure 4 shows the number of Part 1, 2, and 3 deficiencies and starred  cards for each of the three delivered seaframes, showing a reduction in  deficiencies between LCS 1 and LCS 3.
One area of seaframe production that continues to be problematic is  schedule performance for reasons related and unrelated to the LCS  program. The lead ships were each delivered almost 2 years after their  initial planned delivery dates due to various design and construction  issues. LCS 3 delivered 2 months ahead of its contractually required date,  but the next five ships are expected to deliver, on average, 7 months late.  Representatives at Marinette Marine told us that LCS 5 and LCS 7 are  both delayed due in part to a commercial ship that is behind schedule and  blocking shipyard workflow. At Austal USA, LCS 4 has been delayed  several times due to use of less-skilled labor and delays in obtaining  production drawings. LCS 6 and LCS 8 are expected to be delayed due to  the shipyard’s transition to its new production line and the workers’  relative inexperience with it. The Navy has adjusted its delivery schedule  for future ships to take into account these delays and does not envision  further delays beyond LCS 8.
Figure 5 shows the total construction time for LCS 1 through LCS 8 and  their delivery delays.
Even as production is underway at the two shipyards, the Navy is  evaluating various options for changes to LCS seaframe designs. The  program office has several studies ongoing to evaluate changes to the  seaframes, communication networks, combat management systems, and  hull, mechanical, and electrical systems. Shipyard experience, which  translates into reduced labor hours expended per ship, is based on  building repeat copies of similar ships, and design changes can disrupt  this learning. To date, the number of design changes that the Navy is  implementing on the two variants has been decreasing.
Figure 6 depicts the decrease in design changes on both variants.
However, the Navy is now considering a series of potentially significant  design changes to accommodate larger crews than initially anticipated,  increase commonality between the seaframe variants and with other  Navy ships, and increase the ships’ combat capabilities, among others.  For example, prior to the deployment of LCS 1 to Singapore, the Navy  added 20 extra berths to the ship and intends to make a similar change to  LCS 2. However, the Navy did not add equivalent amounts of crew  storage space; the ships will also require additional water and sanitation  systems and food storage to meet Navy standards. The Navy is now  evaluating how to make these additional berths better suited to both  variant designs. The Navy also has a number of technical studies  underway that could affect design, including an OPNAV study on potential  capability changes and a requirements analysis for a notional LCS Flight  1 seaframe, and a Naval Sea Systems Command Flight 1 technology  assessment study. According to Navy program office officials, some of  these changes could increase the acquisition cost of the seaframes due  to disrupting shipyard learning and could also increase operations and  support costs, due to factors such as additional crew. Other changes,  such as moving to more common equipment among both variants, could  reduce operations and support costs due to reducing the number of  unique spare parts that have to be maintained and different training  required for maintenance and training.
The design changes that the Navy is evaluating include the following:
Changes to increase commonality: Many of the systems on the two  seaframe variants are not common. Both contractors choose different  ways of optimizing the cost and performance of the seaframes they  proposed to the Navy. When the Navy chose to buy both variants, it  committed to buying ships with differing equipment. Some systems  are not common between the LCS variants, but are common with  other ships in the fleet; others are not common with any other Navy  ship. DOD’s office of Cost Assessment and Program Evaluation  stated in its 2011 independent cost estimate of LCS seaframes that if  the Navy down-selected to one variant and sold or decommissioned  the variant that was not selected, it could have saved approximately  $2.2 billion in operations and support costs in fiscal year 2010 dollars.  A lack of commonality may also hinder effective and efficient  maintenance, training, manning, and logistics. One of the Navy’s high  priority changes is to select a common combat management system  for both seaframes, since the different systems limit the ease with  which sailors can operate each variant. The combat management  system is an architecture that uses computers to integrate sensors  (such as a radar) with shipboard weapon systems. INSURV identified  36 out of 52 major systems that should be made common between  the two variants, and the Navy is currently evaluating the business  case for each of these changes.
Changes to add capability and changes to requirements: The  Navy is assessing the possibility of increasing the combat capability of  the seaframe by adding or enhancing onboard weapon systems and  command, control, and intelligence systems, such as radar and  satellite communications systems. The Navy is also assessing  potentially changing some LCS requirements. For example, a senior  LCS council official stated that the Navy is considering a potential  reduction in the speed requirement for some seaframes. While this  could require significant changes to the seaframe designs and  therefore increase the program’s acquisition cost, it might allow  removing the gas turbines needed for high speeds, and thus could  increase range and available payload space. Also, DOD directed the  program office to develop an “irregular warfare” module, which  includes medical and humanitarian relief supplies such as hospital  beds and training facilities. Congress has not yet appropriated funding  for this effort. The Navy is also considering additional mission  modules for intelligence, surveillance, and reconnaissance and  expeditionary warfare. The purpose of LCS’s modular design is to  help to ease the integration of new capabilities, but if additional power  or cooling is needed or if changes are needed in the seaframe itself,  design changes could be required.
Changes to LCS build specifications: The Navy used American  Bureau of Shipping rules to develop the functional designs of the LCS.  In addition, the Navy has approved build specifications that are the  variant specific contract requirements for detail design and  construction. The Navy ended its relationship with the American  Bureau of Shipping for surface combatants in June 2012, according to  Navy officials, in order to save money. Ending this relationship should  not on its own affect the build specifications for the ships currently  under contract. Any requirements changes developed for a new Flight  1 LCS will require changes to the existing Navy-approved variant- specific build specifications. Representatives from both shipyards told  us that changing the build specification during production could result  in cost increases and a potential regression in learning while workers  learned how to build to the new specifications.
We have previously reported that incorporating design changes during  construction may disrupt a shipyard’s optimal construction sequence,  requiring additional labor hours beyond current forecasts. In addition,  when ship construction is initiated before a stable design is achieved, the  risk of costly rework and out-of-sequence work increases. Program officials told us they will evaluate the business case for each of the  changes when deciding if and when to implement them. For some  changes, the officials noted that potential reductions in operations and  support costs could justify making them as soon as possible. Navy  officials also emphasized that in other cases, it may make sense for the  Navy to wait until its next contract for seaframes planned for fiscal year  2016 to avoid production disruptions during the current block buy.
section_title: Testing Incomplete on Both Seaframe Variants
paragraphs: The Navy has not completed testing of either seaframe, and late  discoveries of deficiencies could result in further design changes. Most  notably, LCS 2 has not completed its acceptance trials or developmental  and combat system testing, even though the Navy accepted delivery of  the ship in 2009. In addition, neither variant has completed  developmental testing or undergone shock and survivability testing. In  2012, the Director, Operational Test and Evaluation (DOT&E) noted that  limited testing on LCS 2 precluded his office from further assessing that  variant’s capabilities and any deficiencies. Operational testing and  survivability testing are required by statute to be completed prior to a  program proceeding into full rate production. Due to the unique designs of  the two variants, the Navy still has outstanding gaps in its knowledge  about how these designs will perform in certain conditions. Testing is  required to resolve these gaps and to validate assumptions and models.
LCS 1 and LCS 2 followed an unusual trial and acceptance process  because, according to the seaframe program office, they were funded as  research, development, test, and evaluation ships that were intended for  experimentation and the Navy wanted to get them fielded as soon as  possible. LCS 1 had a special trial in lieu of a final contract trial. LCS 2  completed a partial acceptance trial in 2009, but it has not yet been  presented for a second trial. Instead, it proceeded to an early 21-week  post-shakedown availability, which typically occurs approximately a year  after acceptance and is used to correct deficiencies and make needed  improvements. The Navy plans to combine the second half of the LCS 2  acceptance trial and the final contract trial into one special trial in the  summer of 2013. LCS 3 was funded with procurement money, and has  followed a more traditional acceptance process, and it is expected that  the follow-on seaframes will do the same.
The limited testing to date has revealed deficiencies with core ship  systems on both variants, including performance problems with the 57- millimeter guns and the integrated capability of the combat systems.  Testing has also revealed multiple single points of failure, meaning there  are systems that lack redundancy, which could cause a system  shutdown, on both LCS variants. This problem could become more  pronounced in mission module testing. Most notably, the launch,  handling, and recovery systems and hydraulic systems that are integral to  launching the mission module vehicles lack back-up systems, and the  ships have limited available space to carry spare parts or tools.
The Navy discovered another significant problem during testing on LCS 1  that led to a design change. The aluminum ramp that is used to launch  and recover vehicles from the ship started to deform when the crew left  the SUW module’s inflatable boat on the ramp during transit, contrary to  procedure. This in turn compromised the door seal on the stern of the  ship and allowed water to get into the waterborne mission area. The Navy  had intended the boat to sit in a cradle next to the ramp while in transit so  it could be rapidly deployed and to be lifted into place for launch with an  overhead crane system. The crew however, found that this approach  tripled the time it took to launch the boat, to approximately 20 minutes.  The Navy directed that the ramp on LCS 1 be replaced with a steel  version prior to its deployment.
The Navy still has knowledge gaps on several other aspects of seaframe  performance because testing has been deferred or delayed. For example,  the combat management system software on LCS 2 was delivered  incomplete. The combat management system contractor stated that the  system was delivered with less functionality than planned due to  developmental challenges and the Navy’s urgency to have the ship  delivered. The combat system trials for LCS 4 will be the first time that the  full capability of the system will be tested in a realistic environment, and  the final combat management system software build and a hardware  upgrade will not be available until LCS 6. When we visited LCS 2 in  December 2012, the crew still had questions about the combat  management system and radar because they had little operational  experience with either, and because the weapon and sensor capabilities  have not been integrated into the combat system. In addition, neither LCS  1 nor LCS 2 has gone through Combat System Ship Qualification Trials  which can be part of operational testing. These tests represent an  opportunity to verify and validate combat and weapon systems  performance for new ships, and the Navy and test entities use data  collected to issue warfare qualifications and certifications. Navy program  officials believe that they have conducted testing that is at least as  rigorous as Combat System Ship Qualification Trials during the  developmental testing phase. DOT&E officials disagree, emphasizing that  operational effectiveness and suitability can be assessed only through  operational testing.
The Navy has also not yet conducted ship shock trials and total ship  survivability trials. The Navy plans to conduct the total ship survivability  trials in fiscal years 2014 and 2015 for the Freedom and Independence  variants, respectively. The Navy delayed survivability tests from fiscal  year 2011 to 2014 so that it could have time to complete damage  scenario analysis. Shock trials for both variants have also been delayed  by 1 year to fiscal year 2016, so they can be conducted with LCS 5 and  LCS 6. The Navy considers these ships the most representative ships of  each class for shock trial purposes because they include all the design  changes from the early ships. DOT&E has reported concerns that the  Navy deployed LCS 1 without completing shock qualification of many  components, including gas turbines and switchboards.
Survivability testing is important because it can reveal equipment or  system failures that may necessitate class-wide design changes.  According to DOT&E, there are knowledge gaps related to LCS designs  and structures, in particular the potential vulnerability of an aluminum ship  structure to weapon-induced blast and fire damage. The Navy is planning  to conduct surrogate tests with aluminum structures in fiscal years 2013  and 2014 to help address these knowledge gaps. LCS is built to a limited  survivability standard, and, like material support ships, mine  countermeasures ships, and patrol combatants, it is not expected to  operate in the most severe or hostile environments. DOT&E has reported  that the LCS is not expected to maintain mission capability after taking a  significant hit in a hostile combat environment. Program officials state that  LCS meets the survivability requirements to which the ship was designed.
section_title: Navy Acquisition of Mission Modules Is Risky Due to Inadequately Defined Early Increments and Continued Developmental Difficulties
paragraphs: The Navy’s acquisition approach for mission modules is risky for three  reasons: (1) the Navy continues to buy early increments of mission  packages that lack defined requirements and clear definition of  incremental cost, schedule, and performance goals; (2) developmental  testing to date continues to identify problems with system performance;  and (3) concerns persist about the overall effectiveness of each mission  package. While the program is following an evolutionary acquisition  strategy and plans to deliver improving levels of capability over several  increments, the program continues to buy modules for mission packages  without first documenting the level of performance that it expects for each  increment. By the time the Navy demonstrates that it can meet the  minimum—termed “threshold”—requirements identified in the LCS  programs’ capability development document in the final increments, it will  have already bought 24 MCM and SUW mission packages. Further,  developmental testing to date—especially for the systems comprising the  MCM mission package—has shown continued performance problems.  Some of these systems do not meet their own performance requirements,  which does not provide assurances that LCS-specific threshold  requirements targets will be met when they are operated together in a  mission package. Internal Navy studies and wargames have also raised  concerns with the overall effectiveness of each package based on  inherent seaframe or module limitations.
subsections: section_title: Navy Has Not Yet Fully Defined Early Increments
paragraphs: The Navy is pursuing an evolutionary acquisition strategy for the mission  packages. This means that it plans to deliver improving levels of  capability over several mission package increments. The Navy’s  threshold performance requirements as currently defined in LCS  requirements documentation will be met only when the final increment of  each package is completed, and not by each individual increment. DOD  acquisition guidance permits this approach, stating that the objective is to  balance needs and available capability with resources, and to put  capability into the hands of the user quickly. It also states that the  success of the strategy depends on consistent and continuous definition  of requirements, and the maturation of technologies that provide  increasing levels of capability. Some of the mission module systems are  pre-existing programs that predate the LCS program by up to 10 years or  more. Therefore, these systems have their own requirements  documentation, including threshold levels that they are expected to meet.  However, because the Navy has not defined LCS-specific requirements  for each mission package increment, it is unknown how the requirements  for these separate systems will contribute to the broader LCS capability  once they are integrated into a mission module.
DOD’s 2003 acquisition guidance, in place when the LCS program was  initiated in 2004, did not require programs to establish separate threshold  and objective values for each increment. Therefore, the LCS mission  package requirements are not defined for each increment; the  requirements documentation defines only the end-state threshold  requirement (i.e., at the final increment) for each package. However,  DOD’s 2008 revision to its acquisition guidance added new requirements  for programs that use an evolutionary acquisition approach. Specifically,  individual increments are now defined as providing a “militarily useful and  supportable operational capability.” The guidance now requires each  increment to have its own set of threshold and objective (known as  “target”) values set by the user. These values are important because they  provide the parameters for future operational testing. In most cases, the  military utility of a system is assessed based on its ability to meet the end  user’s threshold values for each key performance parameter that is set  forth in its approved requirements documents. Although this new  guidance was not in effect when the LCS program acquisition approach  was approved, the revision indicates that DOD now expects programs to  define threshold requirements for all increments.
The Navy program office believes that each mission package increment  will provide more capability than the existing systems they are to replace.  The program also expects that the capabilities of the MCM and SUW  packages will improve significantly between increments I and IV, including  in key metrics such as the clearance rates for certain mines, number of  surface boat threats that can be negated, and the range at which the LCS  will be able to engage these surface threats. However, DOT&E officials  told us that they do not believe the Navy has adequate knowledge about  how integrated mission module systems onboard an LCS will perform in  an operational environment to be certain of this fact. Further, without  documented requirements for each increment, there is no roadmap  setting forth the path from the current, below-threshold level of capability  to the expected threshold level for the final increments. Program and  OPNAV officials have stated that the current plan is for each increment to  have documented requirements in the form of capability production  documents, to be approved by the Joint Requirements Oversight Council  starting in mid calendar year 2013. Recognizing that the absence of  documented requirements for the early increments poses a challenge for  operational testers, OPNAV has drafted incremental performance  clarification letters for Increment II SUW and Increment I MCM mission  packages. These letters identify the requirements that the mission  package should be tested against in initial operational testing. According  to DOT&E officials, the Navy will have to update its test and evaluation  master plan to incorporate phases of operational testing for all increments  of mission package capability to be deployed for use in combat.
Both the 2003 and current DOD acquisition guidance state that each  increment is to have an acquisition program baseline by Milestone B. This  baseline establishes program goals—thresholds and objectives—for cost,  schedule, and performance. The mission module program’s Milestone B  review is currently scheduled for late fiscal year 2013, though this date  has already slipped several times. Program officials have stated that they  do not intend to fully define the goals for each increment in the Milestone  B acquisition program baseline. In particular, they stated that they  consider the entire mission modules program to be a single increment  and as such, they believe that there can be only one cost estimate for the  entire program, and not cost estimates for each mission package  increment. USD AT&L officials told us that they returned a draft of the  Navy’s mission module acquisition program baseline for further revision  because it did not provide enough detail about costs and schedules for  each increment. It is important to note that the structure of the mission  modules program complicates cost estimation. For example, the Navy’s  cost estimators told us the lack of a cost estimate for each increment is, in  part, due to the difficulty of allocating the development cost of the  modules to each increment. The structure of the program also makes it  difficult to determine the full cost of fielding the LCS capability, since the  program office incorporates some systems that were developed and  funded by other Navy sponsors, and these development costs are  reported separately by the other programs and not by the LCS program.  Though this type of arrangement is not unique to the LCS program, 42  percent of systems in the LCS mission packages do not have their  research, development, test, and evaluation costs included in the LCS  mission modules estimate.
section_title: Challenges Persist in Mission Module Development
paragraphs: Developmental testing to date—especially for MCM mission package  technologies—has shown continued performance problems which do not  provide assurances that threshold requirements will be ultimately met in  the final increment. These developmental challenges are notable given  that the Navy believes many of these systems to already be mature, and  some predate the LCS program. Further, these challenges are in  developmental testing, not operational testing which is a more  representative assessment of capability. In addition, continual schedule  delays have resulted in the Navy not being able to field capabilities as  quickly as planned. Specifically, the Navy has seen a delay in fielding  Increment I of the SUW and MCM mission packages by 2 and 3 years,  respectively, as compared to the test plans that it submitted in 2008.
Table 3 shows some of the delays in fielding mission module capability.
The MCM mission package—intended to detect, classify, localize, and  neutralize enemy sea mines while keeping the LCS and her sailors out of  the mine field by using remotely operated vehicles—will not meet the  threshold capability specified in the current LCS capability development  document until Increment IV is fielded, currently planned for 2017.  Further, most systems are behind schedule for initially planned fielding  dates. The third increment of the package is planned to provide both  minehunting, initially fielded with Increment I, and minesweeping  capabilities. Minehunting is the process of using sensors to localize and  identify individual mines for avoidance or later neutralization.  Minesweeping uses either acoustic and magnetic emissions to detonate  mines designed to target a ship’s acoustic or magnetic signature (called  influence mine sweeping) or a physical device to cut the tether of moored  mines so that they float to the surface, where they can be detonated or  recovered for intelligence purposes (called mechanical minesweeping).  Navy mine warfare officials stated that minehunting is the preferred mode  of clearing mines since it is more precise, but that minesweeping is  sometimes the only option due to time or environmental constraints.  While the Navy has taken delivery of three Increment I MCM packages  and plans to receive one additional Increment I package in fiscal year  2013, very few of its capabilities have been effectively demonstrated to  date. The modules in the package have experienced difficulties during  development and significant shortfalls in performance, and two key  systems have been cancelled due to safety concerns while deployed from  a helicopter. In response, the Navy has taken a number of actions, as  follows:  It is exploring ways to improve the performance of module  subsystems, implementing several pre-planned product improvement  programs.
It has reduced key performance requirements thresholds for average  mine clearance rates for early increments from the requirements  defined in the capability development document.
It has modified operational tactics, such as requiring multiple searches  to correlate results. The modified tactics address some performance  problems, but add significantly more time to minehunting operations  or cover less area.
It has decided to delay the retirement of the mine countermeasures  ships the LCS is to replace by 3 years due to expected delays in  mission module deployment.
Figure 7, an interactive graphic, shows the planned systems and  employment of the MCM mission package. See appendix III for the  overview graphic from figure 7. The Navy states that the threshold  capability defined in the capability development document will be met by  Increment IV.
Four of the Increment I systems—the AN/AQS-20A sonar, the Remote  Multi-Mission Vehicle (RMMV), the Airborne Laser Mine Detection  System, and the Airborne Mine Neutralization System—being procured  from different system contractors, have experienced difficulties during  tests. Two of them face difficulties significant enough to warrant a change  in planned operational tactics to compensate for poor performance.  Operational testing will be required to fully assess these tactics, the  systems, and the contributions that they make to the mission package.
AN/AQS-20A Sonar: This sonar is the primary system for LCS  minehunting, which is the process of using sensors to locate individual  mines in the water column that will be neutralized at a later time or  avoided. This is a pre-existing system, and the program is over 20  years old. During 2011 and 2012 developmental testing, this system  experienced problems in achieving some of the threshold  requirements defined in the system’s own requirements documents. In  particular, this testing showed that the system faces challenges with  accurately determining the vertical location, or distance from surface,  of the mine in the water. The system also detected a large number of  false contacts exceeding Navy limits in two of three search modes,  meaning that it falsely identified non-mine objects as mines. In order  to mitigate these two deficiencies, the Navy has modified its mine  warfare tactics. For example, LCS operators will now use a technique  whereby the system re-examines specific contacts and collects  additional data to help eliminate false contacts. This tactic is effective  in improving performance, but takes considerably more time—in some  cases taking twice as long—and correspondingly limits the platform  clearance rate. The Navy is also funding a performance improvement  effort to correct these deficiencies via hardware and software  upgrades to the system. According to the system’s contractor, these  upgrades are the first redesign of the AN/AQS-20A sonars since  1994. According to the contractor, some of the 30 units that the Navy  has already purchased out of a planned inventory of 94 will be backfit  with these improvements.
Remote Multi-Mission Vehicle: The RMMV is an unmanned semi- submersible vehicle that tows the AN/AQS-20A sonar (together they  are called the Remote Minehunting System). RMMV testing has  revealed reliability shortfalls over the past 5 years. While recent efforts  have improved reliability, the system still falls short of what is  required. Operational testing in 2008 demonstrated the RMMV had a  mean time between failures (ability to function before an operational  mission failure occurred) of only 7.9 hours, well short of its  requirement of 75 hours. The Navy and system’s contractor  implemented a reliability growth plan in 2010, and system redesign  efforts have improved performance. Follow-on RMMV testing  demonstrated the system’s mean time between failures has improved  to 45 hours. The contractor and the Navy have continued to work on  further performance improvements, but there is disagreement about  their effectiveness. According to the contractor, mean time between  failures improved to 64 hours during 509 hours of system testing  concluded in November 2011. However, DOT&E officials reported that  this improvement was predicated on limited test data collected in a  minimally stressing operational environment. In addition, since the  testing did not involve an RMMV integrated with the LCS, they believe  it is difficult to draw any meaningful conclusions from these results.  The most recent Navy developmental tests of an MCM module  operated from an LCS were completed in December 2012. These  vehicles experienced higher than predicted failure rates, requiring  considerable corrective maintenance by support personnel. The Navy  plans to begin procuring vehicles in 2017, but has already purchased  10 baseline units that will need to be backfit with improvements.
Airborne Laser Mine Detection System: This is a laser-based  system mounted on a helicopter that searches the water column to  locate floating and near-surface mines. Test results have show that  this system has significant problems with meeting some of the  threshold requirements defined in its own requirements documents,  including demonstrating the required ability to detect and classify  mines at certain depths. The system also generates a high number of  false positives, which require additional investigation. That is, it often  incorrectly classifies non-mine objects, such as glints from the laser  reflecting off the water surface, fish, or man-made objects (e.g., litter),  as mines. As with the AN/AQS-20A sonar, the Navy is modifying its  tactics to use multiple passes over the area to help correlate data and  address these shortcomings, but while this tactic improves  performance, Navy test reports identify that it also greatly increases  the amount of time required to search for mines. The Navy is also  funding additional system improvements to correct this deficiency. In  November 2012, Navy testers reported that the system did not  demonstrate the expected level of maturity and failed to meet several  requirements, presenting a high risk to operational testing. In spite of  its poor performance, the Navy has accepted delivery of 7 units and  plans to procure an additional 15 units as part of a request for  proposals due in July 2013.
Airborne Mine Neutralization System: This is an underwater system  that is deployed by a helicopter and controlled from the helicopter  through a fiber optic cable; it moves underwater to target and destroy  mines using onboard explosive neutralizers. Developmental testing  has revealed problems with the system accurately locating mines;  according to the contractor, this is due to the movement of both the  water and the sensor, making it appear that the mines are also  moving. The system contractor has developed new software to  address this issue. Developmental testing also demonstrated  problems with loading and unloading the system from the helicopter  due to inadequate clearance under the launch and retrieval system.  According to Navy test officials, if this situation is not corrected prior to  operational testing, planned for fiscal year 2014, it may be a major  deficiency impacting the MCM package’s ability to meet search and  clearance rates. According to the Navy, it has designed an alternative  load and handling device for the Airborne Mine Neutralization System.
Technological and operational problems issues have led Navy officials to  cancel other MCM systems and to make investments to replace the lost  capability. For example, the Rapid Airborne Mine Clearance System—a  cannon designed to destroy mines near the water’s surface that was  initially intended to be fielded in 2011—was cancelled due to performance  problems. The Navy may replace this capability with a modified Airborne  Mine Neutralization System by 2017. According to Navy and contractor  officials, this system has performed well in preliminary testing.  Additionally, DOD concerns with the safety of towing the Organic Airborne  and Surface Influence Sweep system from the MH-60 helicopter led the  Navy to defund this system, which was planned for Increment III. The  Unmanned Surface Vehicle with Unmanned Surface Sweep System will  replace this system in Increment III. The Navy also decided to no longer  tow the AN/AQS-20A sonar from the MH-60 for the same safety reasons.  Navy officials told us that they had not envisioned frequently using the  sonar in this manner, so they said it should not have a major impact on  capability.
Program office officials have stated that they believe the first increment  LCS MCM mission package will not only be more effective than the  existing mine countermeasures fleet, but that it will also, importantly,  remove the sailors from dangerous minefields, as is currently required to  perform the mission. However, the LCS uses a performance metric that is  not used by the existing fleet, so comparing performance is difficult.  Specifically, for the LCS the Navy measures performance through a  “sustained area coverage rate” metric that evaluates performance based  on the amount of mines identified and/or cleared from a set area of water  within a certain time. While the Navy states that this metric more  accurately reflects operational requirements, it is a new approach and is  not how the legacy fleet measures performance so direct comparisons  are difficult. Further, no Increment I module has yet been tested in an  operational environment, so its expected performance has not been  validated. Additionally, DOT&E and Navy officials told us that the model  used to predict MCM performance has in the past contained optimistic or  unrealistic assumptions.
The LCS will also lack any minesweeping capability until Increment III,  which is a capability found in the current fleet. The existing mine  countermeasures ships or allied ships may be needed to supplement the  LCS if minesweeping is required before Increment III is fielded. Another  difference from the legacy fleet is that LCS is planned to only deploy an  influence sweep system. LCS does not currently have a requirement to  employ a mechanical sweep system like that used by the existing mine  countermeasures fleet. An influence sweep system will not detonate  contact mines which are designed to detonate when they come into  physical contact with a ship, so a mechanical system may be required in  areas where contact mines are expected. Finally, the Navy notes that  LCS will not have an “in-stride” capability—or an ability to find and  neutralize mines at the same time—like the legacy fleet, since the LCS  sensor data requires post-mission analysis before moving to the  neutralization phase.
The SUW mission package—intended to detect, track, and engage small  boat threats; escort ships; and protect operating areas—will not meet the  threshold capability defined in the LCS capability development document  until 2019, when Increment IV is planned to be fielded. The Navy has  taken delivery of four SUW mission packages, each including two 30- millimeter guns and 2 11-meter rigid-hulled inflatable boats that  accommodate boarding teams. The program plans to introduce a surface- to-surface missile in Increment III and a more capable missile in  Increment IV.
Figure 8, an interactive graphic, depicts the systems and employment of  the SUW mission package. See appendix III for the overview graphic from  figure 8.
Navy and DOD weapons testers identified a number of concerns with  SUW systems based on testing conducted with the Increment II mission  module on the Freedom-class variant in 2012. DOT&E identified reliability  problems with the 30-millimeter gun and associated combat system that  need to be addressed if the module is to achieve its desired level of  performance. The Navy has established a review board to investigate any  additional changes required to correct any deficiencies.
The Army’s cancellation of its Non Line-of-Sight Launch System which  had been planned for LCS means that the Navy may not be able to field a  surface-to-surface missile as part of the SUW module that meets all the  requirements of the SUW package until Increment IV. This missile was  envisioned as critical to defeating surface threats at greater distances  from the ship, and was cancelled in May 2010 due to technical problems,  associated test failures, and rising costs. The Navy assessed over 50  potential missile replacements for LCS, and in January 2011 selected the  Griffin IIB missile as an interim solution based, in part, on it costing half of  the Non Line-of-Sight Launch System. The program now intends to  purchase one unit with a total of eight Griffin IIB missiles, to be fielded in  2015, which leave other SUW module equipped ships with a limited ability  to counter surface threats. However, Navy officials told us that they may  reconsider this plan because of funding cuts related to sequestration.  According to OPNAV, funding for Griffin development and testing has  been suspended for the remainder of fiscal year 2013. OPNAV and the  LCS program office, with LCS Council oversight, plan to investigate using  a more cost-effective, government-owned, surface-to-surface missile  system that would provide increased capability, including increased  range. According to Navy program officials, the deployment of the  Increment IV missile could also be delayed by over a year because  funding reductions have delayed early engineering work and proposal  development for the missile contract.
The current ASW mission package is early in development, and is not  intended to be fielded until 2016. The initial increment was delivered in  2008, but the Navy cancelled the increment after analysis showed the  module did not contribute significantly to ASW capabilities. Based in part  on that analysis, the Navy changed the requirements for the mission  package to include a more effective and in-stride search capability  (searching while moving) that could be used for deep water escort  missions of high-value ships and submarines. The newly configured ASW  mission package—still called Increment I and currently planned to be the  only ASW increment—was designed to provide these capabilities using a  completely different set of sensors and systems, and because it is  designed to meet threshold requirements, will not require an incremental  approach. The Navy highlights this ability to implement a shift in  requirements as an example of the benefits of LCS’s modular design, in  that it allowed for an easy interchange of systems and modification of  planned capabilities. The planned technologies—consisting of a variable  depth sonar, multi-function towed sonar array, and towed torpedo  defense capability—are considered mature, and some are already  operational in other navies. It will be several years, however, before the  technologies are integrated into the planned LCS configuration. According  to the mission modules program office, the variable depth sonar  performed well during early testing when it was being towed off a  research vessel, and the Navy expects it to offer a high level of ASW  capability.
Figure 9, an interactive graphic, depicts the current concept for the ASW  mission package. See appendix III for the overview graphic from figure 9.
Internal Navy reports sponsored by the Chief of Naval Operations and  insights gleaned from Navy tabletop wargame exercises have raised  several concerns about the limitations of the LCS mission modules. For  example, the concept of employment for the MCM mission package  currently does not include embarked explosive ordinance disposal teams  that are used on the existing mine countermeasures fleet, though the  Navy has told us that LCS could carry such personnel and that they are  investigating how to integrate this capability. These personnel are able to  not only render safe or to destroy mines, but can also exploit found mines  for intelligence value, and OPNAV has identified their absence as a  capability gap. In addition, Navy reports, wargames, and DOD Cost  Assessment and Program Evaluation officials that evaluate the LCS  program have identified classified concerns with the capability or planned  capability and employment of the SUW, MCM, and ASW mission  packages. Further, since LCS has only a self-defense anti-air warfare  capability, it will require protection from a cruiser or destroyer in more  advanced anti-air warfare environments, which reduces the LCS’s ability  to operate independently and occupies the time of more capable surface  combatants that might be better employed elsewhere. For the ASW  mission package, DOD Cost Assessment and Program Evaluation  officials have raised concerns about the new ASW configuration’s deep- water escort capabilities, stating that LCS is not designed to be survivable  enough to stay and defend the escorted ship if potential adversaries  attack. Further, OPNAV officials told us that with this new configuration  the LCS will still be able to conduct littoral ASW, but that the water depths  in which the LCS could operate may be limited because of the depths  required to support deploying the towed arrays. Any changes to improve  the capability of LCS in these areas could result in design changes and  cost increases.
section_title: Significant Questions Remain Regarding the LCS Business Case As the Navy Commits to Producing More Ships and Modules
paragraphs: The Navy continues to buy LCS seaframes and modules even as  significant questions remain about the program and its underlying  business case. Elements of the LCS business case, including its cost, the  time needed to develop and field the system, and its anticipated  capabilities have degraded over time. There are also significant  unknowns related to key LCS operations and support concepts that could  affect the cost of the program and soundness of the business case.  Finally, the Navy continues to pursue an acquisition strategy that is not  aligned with acquisition milestones intended to ensure that sufficient  knowledge is in place before resources are committed. By the time key  tests of integrated LCS capability and survivability are completed in  several years, the Navy will have procured or have under contract more  than half of the planned number of seaframes.
subsections: section_title: Key Elements of the LCS Business Case Have Degraded, Remain Unproven, and Continue to Evolve
paragraphs: A business case is part of a knowledge-based approach to acquisition  that, in its simplest form, is demonstrated evidence that the warfighter’s  needs are valid and that they can best be met with the chosen concept,  and the chosen concept can be developed and produced within existing  resources—that is, proven technologies, design knowledge, adequate  funding, and adequate time to deliver the product when it is needed. Key  elements of the business case on which the LCS program was predicated  have degraded, remain unproven, and continue to evolve.
LCS has ended up being more costly and taking longer to field than  initially planned. LCS was intended to be an affordable ship at $220  million per seaframe. But, due to cost growth and schedule delays on  which we have previously reported, LCS will be more expensive than  originally planned. program twice, first to $460 million and then to $480 million per ship.  The Navy also wanted to accelerate the process of moving from design to  fielding of LCS as opposed to prior ships. In the 2004 LCS capability  development document, the Navy expected an initial operational  capability to be fielded in 2007, 3 years after program initiation. According  to the Navy, the LCS achieved initial operational capability in 2013, 9  years after program initiation, with the deployment of LCS 1 to Singapore  with an installed mission package.
GAO, Navy’s Ability to Overcome Challenges Facing the Littoral Combat Ship Will  Determine Eventual Capabilities, GAO-10-523 (Washington, D.C.: Aug. 31, 2010).
subsections: section_title: Lower Expectations about the System’s Capabilities
paragraphs: Navy expectations of LCS capability have weakened over time. We  analyzed several iterations of validated LCS requirements documents on  which the program was initially justified, as well as various system  descriptions from program office documentation and several iterations of  the two LCS CONOPS documents. We found that descriptions of how  capable LCS will be and how it will be operationally employed have  changed over time. Expected capabilities have lessened from optimistic,  early assumptions of high levels to more tempered and reserved  assumptions in recent documentation. While more explicit examples of  specific capabilities that changed are classified, table 4 depicts some of  the more significant unclassified examples of the changes in Navy  statements about LCS’s capability from early in the program to today.
Our analysis of LCS documentation has also shown that there are a  number of broad unknowns related to the LCS concepts that remain  unproven and which, until resolved, will make it difficult to determine if the  LCS business case is sound and whether the system can meet the  warfighter needs within available resources. Several of the key concepts  that underpin the program—such as employing modular weapon systems,  highly reduced manning levels, and heavy reliance on off-ship  maintenance and administrative support—represent innovative  approaches that have not been used before by the Navy and have not yet  been validated through operations. The Navy’s 2011 warfighting  CONOPS for LCS reflect these unknowns, stating in several places that  the Navy will determine how to employ LCS only once it has gained  operational experience. Navy Fleet Forces officials also told us that there  is not yet any LCS-specific doctrine on how an LCS is to be operated.  Similarly, the operational support-focused platform wholeness CONOPS  state that annual updates are expected because LCS crewing, training,  and support strategies are constantly evolving. Some of these questions,  discussed in table 5, are likely to have impacts on the ongoing LCS  acquisition, including what seaframe variant should be purchased and  how the ships will actually be operated and supported.
Changes to any of the above concepts could affect the LCS program and  employment of the ships. For example, if the Navy learns that one  seaframe variant is more useful in certain mission sets or operating areas  than the other, the Navy could down-select to a single design or change  planned seaframe procurement quantities. While the Navy is currently  buying both variants, Navy program officials, as well as the LCS Council  chair, state that all options are under consideration for the next planned  contract award in fiscal year 2016. Similarly, if the Navy determines that  mission package swaps are no longer feasible, the ratio of mission  packages to seaframes that the Navy plans on buying may need to be  reconsidered. Finally, the LCS Council chair told us LCS performance  requirements might change, with potential areas including reduction in  required top speeds and increases in lethality.
There is also still significant uncertainty related to the cost of acquiring,  fielding, and operating the LCS because of unknowns about the future  designs of the seaframes and mission modules, and the Navy’s manning  and maintenance strategy. While the current blocks of seaframes are  being built under fixed price contracts, any major changes to the design  and/or capabilities of future LCS seaframes and modules can result in  additional research and development funding being required and  increased procurement costs. A down-select decision—which the Navy  has not yet ruled out—would also have implications on costs for both  procurement and operations. Similarly, if the mission module program  continues to add or remove systems the acquisition costs for the modules  may also change. In addition, as with other major weapon systems  programs, operating and support (O&S) costs represent the primary life- cycle cost driver for the LCS program. Table 6 depicts several areas of  uncertainty that could affect LCS O&S costs.
At the Milestone B decision for the seaframe program, the Navy  estimated O&S costs to account for 62 percent of the program’s life-cycle  cost estimate, or $87 billion of $124 billion in total ownership costs  through fiscal year 2057. The Navy’s point estimate for the LCS  seaframe program total life-cycle cost estimate was at the 10 percent  confidence level, meaning that there is a 90 percent chance that the costs  could be different—and likely higher based on the data—than the point  estimate. The confidence level is an output of the statistical risk analysis  of the parameters and assumptions used to build the point estimate. If  Navy leadership chose a higher confidence level, the resulting estimate  would have been higher. The uncertainty reflected by this estimate was  largely driven by unknowns in O&S costs and a lack of actual data about  how LCS will operate on which to base estimates. Over the years, we  have reported that many programs overrun their budgets because original  point estimates are unrealistic. While no specific confidence level is  considered a best practice, we have reported that experts agree that  program cost estimates should be budgeted to at least the 50 percent  confidence level, but budgeting to a higher level (for example, 70 percent  to 80 percent, or the mean) is now common practice. The Navy believes  that it was likely budgeted at higher than the 10 percent confidence level  with DOD’s 5-year future years defense program, but did not provide a  percentage. Further, it stated that the majority of the estimate is outside of  the future years defense program and has not been budgeted for yet.  The Navy’s estimate for LCS total life cycle costs ranges from  approximately $108 billion at a 0 percent confidence level up to  approximately $170 billion at a 100 percent confidence level.
As a result of the O&S unknowns, the Navy will not be able to more  accurately estimate LCS O&S costs until after it obtains and analyzes  operational data obtained over the course of several deployments of both  variants and after it finalizes its LCS manning and maintenance  strategies. As data continues to be gathered and more seaframes are  deployed the quality of the data will continue to improve. Though the  Navy provided estimates for LCS-specific support concepts, it has little or  prior experience with these concepts on which to build accurate  estimates. Navy cost estimators told us that the initial LCS O&S estimates  were derived from O&S costs for other Navy surface combatants like the  Arleigh Burke class destroyers and the Oliver Hazard Perry class frigates  which were then adjusted for LCS specific concepts such as crew size,  maintenance and training and other O&S activities. However, they also  told us that until some of these concepts are refined and actual data is  obtained, it will be difficult to establish a more reliable estimate.
section_title: Production of Seaframes and Modules Is Proceeding without Key Knowledge about LCS Capabilities
paragraphs: The Navy plans to make significant investments in seaframes and  mission modules before completing testing designed to demonstrate  whether the integrated ship can perform its intended missions. In addition  to awarding contracts for almost half of the entire planned number of  seaframes ahead of testing results, the Navy plans to procure more than  half of the SUW and MCM mission packages before it demonstrates they  meet LCS’s minimum performance requirements for their respective  missions. Specifically, by 2010, the Navy had awarded contracts for 24 of  the 52 planned seaframes, and it plans to award additional contracts in  2016, 3 years before it completes operational testing needed to prove the  performance of the integrated seaframes and fully capable mission  modules.
As discussed above, when the Navy awarded the contracts for the first 24  seaframes, neither of the two variants had completed developmental  testing, and based on the current schedule, operational testing of the  integrated capability (seaframes with mission packages) will not be  completed until 3 years after the next planned contract award. The Navy  does not expect to complete developmental testing for both variants until  2015, survivability testing until 2015, and full ship shock trials until 2016.  Results of these tests could result in identification of design deficiencies,  and the Navy will have limited time to act on this knowledge prior to  awarding its next block buy contracts for seaframes, currently scheduled  for fiscal year 2016. Further, the Navy expects to procure at least 31 of  the 64 planned mission packages while concurrently conducting  developmental and operational tests on LCS 2 and LCS 3. Operational  testing is currently projected to be completed in 2019, 3 years after the  Navy plans to award its next seaframe contracts. This testing will  represent the first time that the capability of the seaframes—equipped  with mission packages that meet the threshold requirements defined in  the capability development document—will be fully demonstrated in an  operational environment.
The LCS will execute its operational testing in phases. Each planned  increment of capability for each mission package will be tested on both  seaframes. Operational testing will be considered complete when the final  increments of all the modules have been tested on each seaframe. Based  on the current acquisition strategy, the Navy will have bought 24  seaframes, 9 SUW mission packages, and 7 MCM mission packages  when the first phase of operational testing begins in fiscal year 2014. This  approach puts the Navy at risk of acquiring a large number of seaframes  with limited capability or having to retrofit a large number of systems if  problems are discovered in testing. DOT&E has also noted that  operational testing planned for fiscal year 2014 may not be successfully  completed or may be delayed because of performance problems  identified during developmental testing. Any delays to even these early  operational test events will further limit the information the Navy has to  support its ongoing acquisition decisions, and increases risks that the  Navy will buy systems that cannot meet requirements.
Table 7 shows the Navy’s planned seaframe contract activities and actual  and planned purchases, mission package procurements, and operational  test dates.
We have previously reported that this type of concurrent testing and  production can lead to cost growth and schedule delays on acquisition  programs. For example, we reported in 2012 that most of the Joint Strike  Fighter program’s instability was the result of highly concurrent  development, testing, and production activities. We also reported that  the Missile Defense Agency’s decisions to move into production without  verifying performance led to extensive retrofits, redesigns, delays, and  cost increases. The Navy’s current acquisition strategy for LCS puts it at  similar risk.
The LCS acquisition strategy has led to major acquisition decisions being  made well before key DOD acquisition milestones that provide the  framework for oversight. For example, Milestone B for Navy shipbuilding  programs typically authorizes detailed design and construction for lead  ships. For LCS, the Under Secretary of Defense for Acquisition,  Technology and Logistics (USD AT&L) authorized the final system design  at Milestone A, which typically marks the initiation of a shipbuilding  program’s technology development efforts, and Milestone B was not held  until after the Navy had procured nearly half the planned number of  seaframes. Figure 10 depicts the how the LCS program compares with  the typical acquisition framework for shipbuilding programs.
More recently, USD AT&L rescinded the requirement for the seaframe  program to have a Milestone C review, and also delayed the full-rate  production decision for seaframes from 2015 to 2019 because the Navy  will not be able to meet statutory criteria dependent on the completion of  operational testing until then. Statutes require the Secretary of Defense to  provide that a program complete realistic survivability testing and initial  operational testing before proceeding beyond low-rate initial production.
Statute defines low rate initial production for naval vessel programs, such  as the LCS seaframe program, as production of the minimum quantity  that is feasible while preserving mobilization of the production base. For  the LCS seaframes program, USD AT&L has defined low-rate initial  production as the first 24 seaframes. Unless the Navy changes its plans,  its intention to award contracts for seaframes 25 and beyond in 2016 will  exceed the low-rate initial production quantity 3 years prior to the full-rate  production decision and prior to the completion of operational testing.  While DOD acquisition policy does allow for decision authorities to tailor  information requirements and the acquisition process to achieve cost,  schedule, and performance goals, the Navy’s acquisition decisions on the  LCS program are significant because each DOD acquisition milestone  has associated criteria that are supposed to act as internal controls to  prevent the premature commitment of resources before certain  knowledge has been attained. The timing of this next planned seaframe  contract award has also led USD AT&L and DOT&E to question the  meaningfulness of the seaframe’s full-rate production decision. Even  though the milestone decision has been delayed, the Navy plans to  continue purchasing seaframes, and if current plans come to fruition the  Navy will have over half the planned seaframes under contract in the  program’s low-rate initial production phase.
The Navy has also made procurement decisions and committed  resources to mission module production well in advance of acquisition  milestones, essentially bypassing two major reviews. The Navy has  procured 8 of 64 planned mission packages before Milestone B, which is  when programs are typically authorized to begin system design and  demonstration efforts, or Milestone C, which is when programs are  typically authorized to begin low-rate production. Making procurement  decisions prior to these milestones—in essence, while the mission  module program is still in the pre-low rate production phase—increases  program risk because oversight organizations will not have yet approved  key documents, including the acquisition program baseline, requirements  documents, and test and evaluation master plan required for Milestone  B. The Navy planned to hold Milestone B for the mission modules  program in fiscal year 2011, but it has been delayed until at least the third  or fourth quarter of fiscal year 2013 because USD AT&L has not yet  approved the acquisition program baseline. USD AT&L has delayed the  decision until the Navy produces stronger linkages between the mission  modules and the seaframes program and establishes metrics for  individual mission package increments. In the meantime, the Navy  continues to procure additional mission packages. The mission modules  program office stated that the program’s milestone decision authority has  approved production of mission packages in order to keep pace with  production of seaframes. In 2012, USD AT&L delegated the responsibility  of milestone decision authority for the mission modules program from his  office to the Secretary of the Navy.
In order to enhance oversight of the LCS seaframes and mission modules  procurements, the USD AT&L has established that the Defense  Acquisition Board—the department’s senior-level forum for advising USD  AT&L on critical decisions concerning selected programs—will conduct  annual in-process reviews of the integrated LCS programs beginning in  December 2012 and to be held each September thereafter. There will  also be a Defense Acquisition Board review to coincide with the release  of the request for proposals for seaframes LCS 25 and beyond.  Additionally, USD AT&L has established that the Navy shall provide  metrics to monitor progress in quarterly reports. These oversight  mechanisms should provide USD AT&L opportunities to make decisions  about future LCS procurements, but the information will ultimately be  limited by the amount of operational test data available at the time.
section_title: Conclusions
paragraphs: The current LCS program is not the program envisioned over a decade  ago. Initial cost estimates have been significantly exceeded; the Navy has  not been able to field the ship or its planned capabilities much more  rapidly than prior programs, as planned; and the supporting business  case continues to evolve—including key unknowns such as how the ship  will be used and manned. Further, the Navy will not be able to  demonstrate that the LCS can meet the threshold capabilities defined in  its requirements documentation with mission packages integrated with the  seaframes until 2019. Until the Navy has solidified its requirements and  concepts for LCS, neither Congress nor the Navy can be certain that the  LCS is the right system to meet the warfighters’ needs. Much is still  unknown under the new concept the Navy has set forth. The Navy has a  great deal of learning to do about the ships, the integrated capability that  they are intended to provide when equipped with the mission packages,  and how the overall LCS concept will be implemented. The deficiencies  identified in this report are not criticisms of progress in the sense that  things should have gone smoother or faster. At issue, rather, is the  misalignment of the program’s progress with acquisition decisions, and  with key decisions being made well before requisite knowledge is  available.
The apparent disconnect between the LCS acquisition strategy and the  needs of the end user suggests that a pause is needed. The Chief of  Naval Operations, representing the end user (the fleet), has sponsored  several technical studies that raise fundamental questions about whether  the program, as envisioned, will meet the Navy’s needs. The results of  additional, ongoing studies which are expected to be completed over the  course of the next year or so may result in changes to the program. And  the chair of the vice admiral-level LCS Council has stated that all options  are on the table for the future of the program. In the meantime, the  acquisition of seaframes and mission packages continues, and the  program office shows no signs of slowing its next planned set of seaframe  contracts. This disconnect between requirements and acquisitions  increases the risk that the Navy is not wisely spending its resources. The  Navy’s request for funding for 4 additional seaframes (numbers 17-20) in  its fiscal year 2014 budget request suggests that taxpayer money will be  committed to 24 seaframes before important information is known about  how the ship will be used. Congress is in a position to slow funding for  these additional seaframes, pending the results of the technical studies  that are already underway.
In addition, the Navy’s approach of procuring the assets before the results  of testing—which could potentially lead to design changes—is contrary to  acquisition best practices. The work of assessing the results operational  testing of seaframes, mission packages, and the integrated ship, as well  as ensuring that cost estimates are well-informed and requirements  validated, should not be rushed in an effort to adhere to the current  schedule of awarding the next planned seaframe contract in fiscal year  2016. Doing so could lead to the Navy risking taxpayer investments of  over $40 billion in 2010 dollars in systems that may not provide the  expected—and yet to be fully defined—militarily useful capability.
Also, the Navy’s planned approach of acquiring additional seaframes prior  to a formal DOD full rate production decision limits the ability of oversight  entities, including USD AT&L, DOT&E, and Congress, to be adequately  informed and able to influence the Navy’s actions. Equally important, if  the Navy commits to a large quantity of additional seaframes before  incorporating all of the lessons learned from fleet experimentation, it may  end up buying equal quantities of both seaframes, when one variant may  be in fact more suitable than the other. Likewise, the Navy’s continued  acquisition of mission packages that do not meet threshold requirements,  and in the absence of a defined approach to meet these requirements in  the future, is not in accordance with best practices or DOD guidance, and  increases the risk that the Navy could buy a number of mission modules  that are not militarily useful.
The Navy also still has a number of key decisions to make that could  impact the design of the seaframes—such as increasing the level of  manning onboard, adding additional combat capability, and moving  towards ship system commonality—and that could significantly change  cost estimates for the ship. The Navy may also learn via operational  experience that each variant has better suitability to certain mission sets,  which could influence the mix of future ships that it buys. This knowledge  will likely not be attained until after several operational deployments with  both seaframe variants employing all three mission packages. If the Navy  signs contracts for another large block of ships in 2016 while these major  questions remain, it increases the likelihood of continued design instability  and production inefficiencies, as well as potentially fielding a reduced  capability at a higher cost.
section_title: Matters for Congressional Consideration
paragraphs: 1.  To ensure that the Navy has adequate knowledge to support moving  forward with future seaframe construction, Congress should consider  restricting future funding to the program for construction of additional  seaframes until the Navy:  completes the ongoing LCS technical and design studies, determines the impacts of making any changes resulting from  these studies on the cost and designs of future LCS seaframes,  and reports to Congress on cost-benefit analyses of changes to the  seaframes to change requirements and/or capabilities and to  improve commonality of systems, and the Navy’s plan moving  forward to improve commonality.  2.  To ensure that information on the relative capabilities of each  seaframe variant is communicated in a timely and complete manner,  Congress should consider requiring DOD to report on the relative  advantages of each variant in carrying out the three primary LCS  missions. This report should be submitted to Congress prior to the  planned full-rate production decision and the award of any additional  seaframe contracts.
section_title: Recommendations for Executive Action
paragraphs: To ensure that, going forward, relevant oversight entities are able to  provide appropriate decision-makers with additional insight into future  contract awards for seaframes, we recommend that the Secretary of the  Defense direct the Secretary of the Navy to take the following two actions:  1.  If the Navy is approved by USD AT&L to award additional seaframe  block buy contracts for LCS 25 and beyond, ensure that it only  procures the minimum quantity and rate of ships required to preserve  the mobilization of the production base until the successful completion  of the full-rate production decision review. The award of any additional  seaframe contracts should be informed by a new independent cost estimate conducted by DOD’s Cost  Assessment and Program Evaluation office, and a re-validated capabilities development document.  2.  Prior to the full-rate production decision and the award of any  additional seaframe contracts, report to Congress on the relative  advantages of each seaframe variant for each of the three mission  areas.
To facilitate mission module development and ensure that the Navy has  adequate knowledge to support further module purchases, we  recommend that the Secretary of the Defense direct the Secretary of the  Navy to take the following two actions:  3.  Ensure that the Acquisition Program Baseline submitted for the  mission modules Milestone B establishes program goals—thresholds  and objectives—for cost, schedule, and performance for each  increment per current DOD acquisition policy.  4.  To ensure that the purchase of mission modules do not outpace key  milestones, buy only the minimum quantities of mission module  systems required to support operational testing.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD for review and comment. In its  written comments, which are included in appendix II, DOD non-concurred  with two recommendations, partially concurred with one, and concurred  with one. We also provided relevant portions of the draft report to the  shipbuilders and several contractors developing mission module  technologies, and incorporated their technical comments as appropriate.
DOD non-concurred with the bulk of our first recommendation, pertaining  to the quantity and rate of ships to be purchased under the contracts for  LCS 25 and beyond. DOD stated that unnecessarily reducing production  to a minimum sustaining rate would cause the price to the government to  increase, with no value added to the program. While pricing of the  individual seaframes is important, we believe there is greater risk in  awarding additional seaframe contracts before key knowledge is gained  about the LCS’s integrated capabilities and how the ship will be operated.  As we note in our report, when the Navy plans to award the next  seaframe contracts, in fiscal year 2016, it will not have the benefit of this  important knowledge, as operational testing is scheduled for completion  in fiscal year 2019. DOD also stated that no major design changes are  planned to the seaframes. But we found that there is, in fact, potential for  such changes. As we note in our report, a number of ongoing technical  and design studies, as well as the Navy’s plans to move to a common  combat management system and to increase the manning on the ships,  are likely to require design changes. DOD agreed with the portion of our  recommendation related to the need for an independent cost estimate to  inform the planned 2019 full-rate production decision. Regarding the  portion of the recommendation related to the need for a re-validation of  the capabilities development document, DOD stated that the Joint Staff,  along with the Navy, will conduct a requirements assessment study. It is  not clear from DOD’s response, however, whether this study will meet the  intent of our recommendation, which is to ensure that the level of  capability provided by LCS is militarily useful given the warfighter’s  current capability needs and that continued investment in the program is  warranted. We continue to believe that a more formal revalidation of the  capabilities development document, through the Joint Requirements  Oversight Council, would achieve this goal.
DOD stated that it concurred with our second recommendation, regarding  a report to Congress on the relative advantages of each seaframe variant  for each of the three mission areas prior to the award of any additional  seaframe contracts.  However, DOD’s response does not directly address  our recommendation. DOD stated that the Navy can, if requested by  Congress, provide a report on the performance of each seaframe variant  and mission modules against current LCS requirements. While this may  provide useful information, it would not address the relative advantages of  the variants in performing the three primary LCS missions as we  recommended. As noted in our report, Navy officials have stated that one  variant may be better suited to certain missions or tasks than the other.  We would expect DOD’s report to Congress to contain this type of  information to ensure that Congress is fully aware of the advantages and  disadvantages of each seaframe variant and how these might influence  future procurements. To help ensure that Congress is informed of the  relative advantages of each variant prior to key upcoming decisions about  future procurements, we added a second Matter for Congressional  Consideration to this report.
DOD partially concurred with our third recommendation, regarding the  establishment of cost, schedule, and performance goals for each mission  module increment. DOD responded that the mission module program’s  Acquisition Program Baseline will include cost, schedule, and  performance thresholds and objectives, but stated that the entire program  consists of a single increment. This statement is inconsistent with how  DOD defines performance requirements and how it plans to conduct  operational testing for the mission modules program, both of which reflect  individual increments. In addition, as discussed in our report, current DOD  acquisition policy defines each increment of a capability, such as a  weapon system, as a “militarily useful and supportable operational  capability.”  Defining cost, schedule, and performance thresholds and  objectives for each mission package increment would provide DOD and  the Navy with information needed to effectively monitor the development  of the increments and a baseline against which to measure performance.
DOD did not concur with our fourth recommendation, that the Navy buy  only the minimum quantities of mission module systems required to  support operational testing. DOD stated that the Navy must procure  mission packages at a rate necessary to support (1) developmental and  operational testing of the two seaframe variants with each mission  module increment, (2) fleet training needs, and (3) operational LCS ships.  The purpose of our recommendation is to facilitate mission module  development and, at the same time, ensure that the Navy has adequate  knowledge before it purchases additional modules to operationally deploy  on LCS ships. Further, DOD’s comments did not address the primary  rationale for our recommendation—that the Navy is buying mission  modules before it has met key acquisition policy and testing requirements  and acquired the knowledge needed to validate that they work as  intended. Instead, the pace of mission module procurements is based, in  part, on the need to equip LCS ships currently under construction; that is,  well before the ships would be available to be outfitted with module  capabilities. As our recommendations point out, the way to mitigate the  acquisition risks for the LCS program is not to maintain or speed up the  current pace of procurements, but rather to adjust procurement plans to  better align with the timing of operational test data availability.
The Navy also provided technical comments, which we incorporated as  appropriate. The Navy also made three main points in these comments.  First, the Navy stated that its experience in operating the LCS—over  100,000 nautical miles steamed on LCS 1 and 2 together—and  conducting test events to date has provided enough information to give  the Navy confidence that it understands the performance of the LCS and  the program’s potential risks. However, much of the experience the Navy  has gained with LCS has been either with just a seaframe, or with partial  or developmental versions of mission modules—not with complete,  integrated, and capable mission packages. We do not believe that these  activities are a substitute for or provide the same knowledge about LCS  capabilities as operational testing. The Navy also disagreed with our  characterization of the LCS business case as “degraded,” stating that the  program still meets the requirements defined in its capability development  document. While this is true, several key assumptions about how the LCS  would operate—that formed the initial business case—have changed. As  we note in the report, the Navy’s own internal assessments of LCS  capabilities support this conclusion. Finally, the Navy stated that the initial  increments of the mission packages are based on mature technologies  and will provide a level of performance that exceeds the Navy’s current  capabilities and that subsequent increments will largely fill today’s gaps in  warfighting capability. As our report states, the Navy is still addressing  development challenges with initial mission package increments, and  their performance has not been validated in operational testing. The exact  capabilities of subsequent increments is unclear because the Navy has  not defined performance requirements for each increment or provided a  roadmap for how they will meet LCS capability needs.
As agreed with your offices, unless you publicly announce the contents of  this report earlier, we plan no further distribution until 3 days from the  report date. At that time, we will send copies to appropriate congressional  committees, and 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. Contact points for our Offices  of Congressional Relations and Public Affairs may be found on the last  page of this report. GAO staff who made key contributions to this report  are listed in appendix IV.
section_title: Appendix I: Objectives, Scope, and Methodology
paragraphs: To assess the Navy’s progress in producing and testing the seaframes,  we analyzed Navy and contractor documentation including design reports  and construction progress briefings that addressed performance. To  identify design changes and to understand the impact of these changes to  the construction processes for seaframes, we reviewed Littoral Combat  Ship (LCS) contracts and change orders; master planning schedules for  LCS 3 through LCS 8; Supervisor of Shipbuilding reports; reports to  Congress; and Board of Inspection and Survey reports. We also reviewed  information from contractors outlining process improvements and capital  investments at each of the LCS shipyards aimed at increasing capability  and capacity needed to support efficient construction of LCS seaframes.  To evaluate testing and system suitability and survivability, we reviewed  test reports and test progress briefings. Further, we conducted interviews  with relevant Navy and industry officials responsible for managing the  design and construction of LCS seaframes, such as the LCS seaframe  program office; LCS Program Executive Office; Supervisor of  Shipbuilding; American Bureau of Shipbuilding; Lockheed Martin, General  Dynamics, and Austal USA (LCS prime contractors); and Marinette  Marine and Austal USA (LCS shipbuilders). We also held discussions  with LCS technical authorities, testing agents, and requirements officers  from Naval Sea Systems Command; Board of Inspection and Survey;  Director, Operational Test and Evaluation; and Commander, Navy  Operational Test and Evaluation Force. We also met with officials from  Cost Assessment and Program Evaluation, including the deputy directors.  To observe some of the identified deficiencies and corrections on the LCS  seaframes, we visited and toured LCS 1, LCS 2, and LCS 3. To  understand how LCS was being integrated into the fleet, we met with  officials from LCS Squadron One; Fleet Forces Command; and Third,  Fourth, Fifth, and Seventh Fleets.
To assess the Navy’s progress developing, producing, and testing the  mission modules, we reviewed documents that outline LCS mission  module plans and performance, including program schedules; LCS  requirements documentation; classified mission module analyses; and  recent test reports for surface warfare (SUW) and mine countermeasures  (MCM) systems. We held discussions with Navy program offices; and  with key contractors for the mission module systems that comprise  Increment I of the MCM mission package and the contractor developing  the Griffin missile, and saw examples of systems from these modules. We  also met with officials from the office of the Director, Operational Test and  Evaluation; Navy’s Commander of Operational Test and Evaluation  Force; Naval Undersea Warfare Center; Naval Surface Warfare Center;  Naval Mine and Anti-Submarine Warfare Command; and Navy Space and  Naval Warfare Systems Command.
To evaluate the Navy’s business case for the LCS program and risks in  the Navy’s acquisition strategy, we reviewed documents on the cost,  capabilities, and potential use of the LCS. This included documentation  related to LCS requirements, threats, and capability gaps, as well as the  LCS Warfighting and Platform Wholeness concept of operations. We also  analyzed warfighting and sustainment wargame reports; the Board of  Inspection and Survey’s “LCS Material Condition and Maintainability”  report; and the office of the Chief of Naval Operations’ “Review of the  Navy’s Readiness to Receive, Employ and Deploy the LCS Class Vessel”  report. We reviewed LCS cost estimates, including the seaframes  independent cost estimate, and program lifecycle cost estimates for  seaframes and mission modules. To understand the level of unknowns  and potential changes with the program, we met with officials from the  LCS Council including the Director of Navy Staff, and reviewed the LCS  Program of Actions and Milestones document. To understand the  conceptual underpinnings of the LCS program, we met with officials from  the Naval War College and the Naval Warfare Development Command.  To understand the role of the fleet in defining the LCS concept and their  participation in the LCS wargames, we met with officials from LCS  Squadron One; Fleet Forces Command; and the officials from the Third,  Fourth, Fifth, and Seventh Fleets.
To assess the Navy’s acquisition strategy for the integrated LCS program,  we reviewed LCS acquisition strategies from 2007, 2008 and 2010;  acquisition decision memos; program briefings; Navy reports to  Congress; acquisition program baselines; test and production schedules;  and contracts for both seaframe variants. We also reviewed relevant  sections of Title 10 of the U.S. Code and the Department of Defense’s  acquisition policy for acquisition programs, and compared these  guidelines to the Navy’s approach for acquiring the LCS. Additionally, we  interviewed officials from the Office of the Secretary of Defense, including  the Under Secretary of Defense for Acquisition, Technology and Logistics  and the Director, Operational Test and Evaluation; the Joint Staff; and the  Navy, including the seaframes and mission modules program offices; the  LCS resource sponsor in the Office of the Chief of Naval Operations; and  the Director of Navy Staff. Using this information, we identified how the  LCS acquisition strategy changed over time, and assessed how these  changes affected the alignment between the LCS programs’ key test  events, such as initial operational test and evaluation; program reviews,  such as the full rate production decision; and investment decisions,  particularly contract awards. Finally, we leveraged previous GAO  reporting on the LCS dating back to 2005 to provide historical context for  these changes, and more recent GAO reports identifying challenges  resulting from concurrent testing and production activities.
We conducted this performance audit from April 2012 to July 2013 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.
section_title: Appendix II: Comments from the Department of Defense
section_title: Appendix III: Mission Package Overview Illustrations from Interactive Figures
paragraphs: This appendix includes the overview graphics from interactive figure 7,  figure 8, and figure 9.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact name above, the following staff members made  key contributions to this report: Ron Schwenn (Assistant Director); Diana  Moldafsky (Assistant Director); Jessica Drucker; Kristine Hassinger;  Amber Keyser; C. James Madar; W. Kendal Roberts; Roxanna Sun;  Robert Swierczek; Molly Traci; Hai Tran; and Nathan Tranquilli.