Littoral Combat Ship and Frigate: Delaying Planned Frigate Acquisition Would Enable Better-Informed Decisions
Published: 2017-04-18T00:00:00

Fast Facts:
The Navy is moving away from its troubled Littoral Combat Ship program to a new ship—called the frigate—which is based on an LCS design with minor modifications.
The Navy's current approach requires that Congress make a significant commitment in 2017 to purchase 12 of these ships. However, we found that key frigate cost and design details will not be available to support Congress's decision.
We suggested that Congress delay this decision (worth about $9 billion) until more information is known about the frigate's cost, design, and capabilities. Doing so would result in a delay to the Navy's frigate award until at least fiscal year 2019.

Highlights:
section_title: Why GAO Did This Study
paragraphs: The Navy envisioned a revolutionary approach for the LCS program: dual ship designs with interchangeable mission packages intended to provide mission flexibility. This approach has fallen short, with significant cost increases, schedule delays, and reduced capabilities—some of which have yet to be demonstrated. The LCS acquisition approach has changed several times. The latest change led to the frigate—a ship that involves minor modifications to an LCS design.
The House report 114-537 for the National Defense Authorization Act for Fiscal Year 2017 included a provision for GAO to examine the Navy's plans for the frigate. This report examines the Navy's plans for the frigate acquisition as well as remaining opportunities for oversight. To conduct this work, GAO reviewed documentation and interviewed Department of Defense (DOD) officials, and leveraged prior GAO reports on shipbuilding and acquisition best practices.
section_title: What GAO Found
paragraphs: The Navy's current acquisition approach for its new frigate—a ship based on a Littoral Combat Ship (LCS) design with minor modifications—requires Congress to make significant program decisions and commitments in 2017 without key cost, design, and capability knowledge. In particular, the Navy plans to request authority from Congress in 2017 to pursue what the Navy calls a block buy of 12 planned frigates and funding for the lead ship, which the Navy intends to award in 2018. Approval of these plans would effectively represent the final decision for the entire planned buy of 40 LCS and frigates. According to the Navy's approved acquisition strategy, the frigates would still require annual appropriations, so Congress would maintain its oversight through its annual appropriation decisions; however, any decision to reduce or delay the program, should that become warranted, could nevertheless be more difficult as the Navy may point to losses in favorable block buy prices, as has been done previously with LCS.
The Navy's impending request presents a key opportunity for Congress to affect the way forward for the frigate program by ensuring the Navy possesses sufficient knowledge on cost, design, and capability before authorizing an investment of a potential $9 billion for a program that
• has no current formal cost estimate—independent or otherwise,
• will not begin key detail design activities until late fiscal year 2018,
• has significant unknowns in regards to operational performance of the ship upon which its design will be based, and
• based on the existing and planned shipyard workloads, has no industrial base imperative to begin construction in the Navy's planned time frame.
The Navy's previous frigate acquisition plans included achieving a higher degree of ship design knowledge before awarding the lead ship in fiscal year 2019, as the plans included significant detail design activities prior to contract award. As GAO has previously found, such an approach—which has been supported by shipbuilders—offers greater confidence in the understanding of design changes and how they will affect ship construction costs. Further, as GAO's work on best practices for program cost estimates suggests, the Navy's prior plans for frigate design efforts and an award in fiscal year 2019 would have provided more information on which to base a decision, including a better understanding of risks and costs. The previous plans also better aligned with LCS test plans to improve the department's understanding of the operational capability and limitations for each ship variant. This knowledge could then be used to inform the Navy's decision on which LCS-based design for the frigate it will pursue. In addition to the valuable knowledge to be gained by not pursuing the frigate in the planned 2018 time frame, the existing and planned LCS construction workload for both shipyards is another important factor to consider. Specifically, each shipyard has LCS construction demands that extend into 2021, suggesting no imperative for the Navy to award the frigate in 2018. Delaying the frigate award until at least fiscal year 2019—when more is known about cost, design, and capabilities—would enable better-informed decisions and oversight for this potential $9 billion taxpayer investment.
section_title: What GAO Recommends
paragraphs: Congress should consider not enacting authority pursuant to the Navy's request for a block buy of 12 frigates in fiscal year 2018 and delaying funding of the lead frigate until at least fiscal year 2019, when more information is available on the ship's cost, design, and capabilities. GAO also recommends that DOD delay its procurement plans until sufficient knowledge is attained. DOD partially concurred with the recommendation but is not planning to delay frigate procurement. GAO continues to believe the recommendation is valid.

section_title: Letter
paragraphs: The Navy initially envisioned a revolutionary approach to the Littoral  Combat Ship (LCS) program. Unlike other surface combatant programs,  LCS consists of two different ship design variants (called seaframes) built  by two separate shipyards. The ships have interchangeable mission  packages carrying equipment for three mission areas—surface warfare,  anti-submarine warfare, and mine countermeasures. To execute the  program, the Navy deviated from traditional shipbuilding acquisition in  hopes of rapidly delivering ships to the fleet. The consequences of this  approach are well known today—costs to construct the ships have more  than doubled from initial expectations, with promised levels of capability  unfulfilled and deliveries significantly delayed. Since 2014, two  Secretaries of Defense have stepped in to address concerns with the  combat capability of LCS. First, Secretary Chuck Hagel questioned the  appropriate capability and quantity of the LCS in February 2014 and  directed the Navy to re-evaluate its small surface combatant capability  needs. Acknowledging capability and affordability concerns, the Navy— with the Secretary of Defense’s approval—then changed course in late  2014 to pursue an LCS with minor modifications, now called a frigate.  Second, in December 2015 Secretary Ashton Carter, expressing concern  that the Navy had prioritized ship quantities over delivering combat  capability, directed the Navy to reduce the total purchase of LCS and  frigates from 52 to 40 ships.
Today, with 28 LCS delivered, under contract, or funded, the Navy plans  to wind down the LCS program—with the last contract awards expected  in 2017—and pivot to acquisition of the frigate. In 2018, the Navy plans to  select one of the two LCS shipbuilders—referred to as a downselect—to  construct the frigate, and will ask Congress this year to authorize  acquisition plans for 12 frigates and funding for construction of the lead  ship. The House Armed Services Committee report on a bill for the  National Defense Authorization Act for Fiscal Year 2017 included a  provision for us to examine the Navy’s plans for the frigate. This report  assesses (1) the extent to which the frigate’s planned capabilities offer  improvements, if any, over the LCS; and (2) the Navy’s plans for the  frigate acquisition as well as remaining opportunities for oversight.
To conduct our work, we reviewed documentation from and interviewed  Navy and other Department of Defense (DOD) officials responsible for  overseeing LCS and frigate program management, design, development,  acquisition, and testing. This included assessment of plans and activities  related to LCS and the frigate. In addition, we leveraged from past GAO  reports on the LCS program from 2005 through 2016, as well as from our  broader work on Navy shipbuilding and acquisition reform initiatives.  Details on prior recommendations related to LCS and the frigate that we  made in previously issued reports are included in appendix II.  Additionally, more details on the objectives, scope, and methodology for  our past work can be found in the issued reports, which are cited in  appendix III.
We conducted this performance audit from October 2016 to April 2017 in  accordance with generally accepted government auditing standards.  Those standards require that we plan and perform the audit to obtain  sufficient, appropriate evidence to provide a reasonable basis for our  findings and conclusions based on our audit objectives. We believe that  the evidence obtained provides a reasonable basis for our findings and  conclusions based on our audit objectives.
subsections: section_title: Background
paragraphs: Under the current LCS program, two shipyards are building an equal  number of two different versions of the LCS seaframe: Lockheed Martin  builds the Freedom variant at Fincantieri Marinette Marine in Marinette,  Wisconsin, and Austal USA builds the Independence variant in Mobile,  Alabama. Table 1 shows the status of LCS seaframe acquisition,  including the LCS with minor modifications, referred to as a frigate.
When the Navy first conceived of the LCS in the early 2000s, the concept  was that two shipbuilders would build prototypes based on commercial  designs. The Navy planned to experiment with these ships to determine  its preferred design variant. This experimentation strategy was  subsequently abandoned. The Navy determined that, based on cost  considerations, it would be impractical to have the two competing  shipyards 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 without having completed the planned period of discovery and  learning. The Navy has made several other revisions to the LCS  acquisition strategy over time, some in response to direction from the  Office of the Secretary of Defense. These have included changes over  time regarding whether the Navy would downselect to one seaframe  design. Although it might be expected that a new acquisition concept  would require some adjustments over time, the LCS program has evolved  significantly since it began, as shown in figure 1.
As figure 1 indicates, the Navy now plans to buy LCS with minor  modifications, which it refers to as frigates. This change to the acquisition  strategy followed an analysis in 2014 by a Navy task force (known as the  Small Surface Combatant Task Force) that was completed in response to  direction from the then Secretary of Defense to identify options for a more  capable small surface combatant.
section_title: Planned Frigate Capabilities Provide Improvements over LCS, but Will Likely Carry Forward Some LCS Design Limitations
paragraphs: In seeking a frigate concept that would improve upon the capabilities  provided by LCS, the Navy selected an LCS concept—referred to as a  minor modified LCS. This concept, which Navy leadership believed would  offer cost, schedule, and shipbuilding advantages, also was assessed as  the least capable option considered for the LCS successor. The Navy has  noted that the selected design provides some improvements, such as  multi-mission and over-the-horizon missile capabilities, at a relatively  lower cost than other options by leveraging the existing LCS shipyards  and vendors. However, the Navy’s chosen frigate design will presumably  carry forward some limitations inherent to its LCS origins, such as space  limitations and equipment that has posed maintenance and logistics  challenges.
subsections: section_title: Affordability and LCS Shipbuilding Considerations Were Prevailing Factors in Selecting Minor Modified LCS Design
paragraphs: The Navy’s Small Surface Combatant Task Force charged with exploring  alternatives to the LCS presented Navy leadership with a number of  options, from which the Navy chose the option of a minor modified LCS  based on cost, schedule, and industrial base stability factors. As we found  in June 2016, the task force concluded that the Navy’s desired capability  requirements could not be met without major modifications to an LCS  design or utilizing other non-LCS designs. When presented with this  conclusion, senior Navy leadership directed the task force to explore what  capabilities might be more feasible on a minor modified LCS. In response  to this direction, the task force created two additional LCS options with  minor modifications. These options provided a multi-mission capability  instead of the single-mission capability of LCS and retained the modular  mission package characteristic of the LCS program (i.e., ability to more  readily swap mission systems in and out). In developing these  alternatives, the task force also found that it was feasible to permanently  install an over-the-horizon missile to offer longer range surface warfare  capability, plus a lightweight towed torpedo countermeasure and multi- function towed array sonar to offer some anti-submarine warfare  capability. However, these improvements would still need to be  augmented by an LCS surface warfare or anti-submarine warfare mission  package to provide the full suite of LCS capability. The task force found  that it was not technically feasible to include additional vulnerability  capabilities (i.e., capabilities to improve the ship’s ability to sustain battle  damage and still perform its mission) beyond adding armor protection to  some vital spaces. Task force documentation also stated that in  developing these alternative LCS options with minor modifications, some  capabilities, like speed, had to be traded.
Ultimately, the Navy chose—and the Office of the Secretary of Defense  approved—a frigate concept based on a minor modified LCS, despite the  task force’s findings that it was the least capable small surface combatant  option considered. Navy leadership indicated this decision was based on  LCS’s relatively lower cost and quicker ability to field, as well as the ability  to upgrade remaining LCS and maintain stability in the LCS industrial  base and vendor supply chain.
section_title: Frigate Will Have Improved Capabilities over LCS, but Is Constrained by Its Design Concept
paragraphs: In selecting the minor modified LCS concept, the Navy has made trade- offs in refining the capabilities of the frigate, prioritizing lethality and  survivability improvements. The Navy noted that as part of the refinement  process, the frigate program office identified additional capacity in the  LCS designs that has enabled improvements to the ship’s planned  capabilities. In particular, the Navy stated that the program office  determined that full surface warfare and anti-submarine warfare  capabilities could be included in baseline frigate plans, as opposed to the  partial capabilities that were found to be possible by the Small Surface  Combatant Task Force analysis. Table 2 presents an overview of  capability changes the Navy has planned for the frigate, as compared to  LCS, and the expected effect of those changes.
However, we found in June 2016 that the Navy’s planned frigate  upgrades will not include significant improvements in certain survivability  areas. Further, the Navy sacrificed capabilities that were prioritized by  fleet operators. For example, when asked in engagement sessions by the  Small Surface Combatant Task Force, fleet operators consistently  prioritized a range of 4,000 nautical miles, but the selected LCS concept  with minor modifications was noted to have a minimum range requirement  of 3,000 nautical miles. The Navy asserted that it is working with the  prospective frigate shipbuilders to achieve a range more consistent with  the priorities of fleet operators.
The Director, Operational Test and Evaluation (DOT&E) has noted that  the Navy’s proposed frigate design is not substantially different from LCS  and does not add much more redundancy or greater separation of critical  equipment or additional compartmentation, making the frigate likely to be  less survivable than the Navy’s previous frigate class. Additionally, the  Navy plans to make some similar capability improvements to existing and  future LCS, narrowing the difference between LCS and the frigate. As we  found in June 2016, the proposed frigate will utilize the offensive anti- submarine or surface warfare capabilities that are already part of the LCS  mission packages, so while the frigate will have multi-mission capability  that LCS lacks, the capabilities of the individual mission packages will be  consistent with what is available for LCS. Though specific details are  classified, there are only a few areas where there are differences in  frigate warfighting capability compared to the LCS.
Since the frigate will be based on an LCS design, it will likely carry  forward some LCS design limitations. For example, LCS is configured to  support up to 98 personnel, including core and mission package crew and  an aviation detachment. Navy officials have stated that the frigate is being  designed for a crew of 130. However, given the space limitations on LCS  and the fact that the frigate will be based on one of the two LCS designs,  achieving this significant increase in crew size could prove challenging.  Additionally, barring Navy-directed changes to key mechanical systems,  the frigate will carry some of the more failure-prone LCS equipment, such  as some propulsion equipment, and will likely carry some of the LCS- unique equipment that has challenged the Navy’s support and logistics  chain.
section_title: Accelerated Frigate Acquisition Plans Require Significant Procurement Commitments Without Key Cost, Design, and Capability Knowledge
paragraphs: Current acquisition plans for the frigate require Congress and the Navy to  make significant decisions and potential future commitments of about $9  billion—based on early budget estimates—without key program  knowledge. The Navy plans to request authority from Congress in 2017 to  use what the Navy refers to as a block buy approach for all 12 planned  frigates and request funding for the lead frigate as part of the fiscal year  2018 budget request. Because of recent changes to the acquisition  approach that hastened the frigate award, the decisions that Congress  will be asked to make in 2017 will not be informed by realistic cost  estimates or frigate-specific detail design knowledge that helps solidify  cost and construction expectations. Further, Congress will not possess  critical information on LCS performance in testing that would increase  understanding of the operational capability of LCS, which provides the  design foundation for the frigate. The Navy’s award decision planned for  2018 will be informed by formal cost estimate information, but like  Congress, the Navy will lack detail design knowledge and have more  limited information on LCS’s operational capability than would have been  available for the previously planned fiscal year 2019 frigate award. And  finally, the current and planned LCS construction demands at both LCS  shipyards that extend into 2021 suggest no schedule imperative exists  that would require the Navy to request or to receive authority in 2017 for  the frigate or to award the lead ship in 2018 as currently planned.
subsections: section_title: Cost Uncertainty and a Compressed Schedule Impose Risk to Frigate Program
paragraphs: The frigate acquisition plan has undergone notable changes since late  2015, for various reasons. As it now stands, an accelerated schedule  effectively prevents the Navy from being able to provide Congress with a  current, formal cost estimate for the frigate—independently completed or  otherwise—before Congress is asked to make significant commitments to  the program. Navy officials previously stated that the frigate is expected  to cost no more than 20 percent—approximately $100 million—more per  ship than the average LCS seaframes, though this was an initial estimate.
However, our recent work has shown that LCS under construction have  exceeded contract cost targets, with the government responsible for  paying for a portion of the cost growth. Regarding expected costs for the  frigate, prior LCS context is important to consider. When faced with the  prospect of a downselect to one LCS variant in 2010, the two shipbuilders  provided competitive pricing that propelled the Navy to continue  production at both shipyards. Those prices have not yet been achievable.
According to frigate program officials, under the current acquisition  approach, the Navy will award contracts in fiscal year 2017 to each of the  current LCS contractors to construct one LCS with a block buy option for  12 additional LCS—not frigates. Then, the Navy plans to obtain proposals  for frigate-specific design changes and modifications from both LCS  contractors in late 2017 that will be used to upgrade the LCS options to  frigates. The Navy intends to evaluate pricing and technical factors for the  proposed frigate upgrade packages and award frigate construction to one  contractor based on a best value determination. This frigate downselect  to one of the LCS shipyards is planned to occur in summer 2018. Figure 2  illustrates how the Navy plans to modify the fiscal year 2017 LCS contract  to convert the ships in the block buy options to frigates.
Navy officials explained that the frigate acquisition plan changed  substantially in response to a Secretary of Defense memorandum issued  in December 2015 that directed the Navy to revise its LCS and frigate  acquisition plans. This included direction to reduce the total number of  LCS and frigates from 52 to 40, downselect to one ship design, and  award the frigate in fiscal year 2019. The Navy subsequently revised its  plans to include a downselect decision, but also decided to accelerate the  award of the lead frigate from fiscal year 2019 to 2018 as a replacement  for awarding a single LCS in 2018. Table 3 shows the changes that have  occurred since that memorandum.
A consequence of the Navy’s accelerated frigate schedule is increased  risk to the government because it refigures a commitment to buy ships in  advance of adequate knowledge—a continuation of premature  commitments by the LCS program.
section_title: Limited Detail Design Knowledge Available to Inform Frigate Award Decision Increases Risk of Cost and Schedule Growth as Design Matures
paragraphs: The Navy plans to award frigate construction to one shipyard before detail  design activities specific to the frigate begin, which—as we previously  have found—can result in increased ship prices and reduced  understanding of how design changes will affect ship construction costs.  Detail design enables the shipbuilders to visualize spaces and test the  design as the granularity of the design for individual units, or zones, of the  ship comes into focus. The Navy had plans in 2015 to have each LCS  shipyard conduct frigate detail design activities in fiscal year 2018. This  improved understanding of the frigate design was then going to be  available to support the Navy’s construction contracts to both shipyards  for frigates in fiscal year 2019. However, as we noted above, the Navy  changed course in response to direction from the Secretary of Defense  and currently plans for a downselect award in 2018. The reduced contract  award timeline led the Navy to abandon its plans to conduct detail design  activities before contract award; the current plan is to begin detail design  after the frigate downselect award and complete design activities before  beginning construction.
The Navy has noted that LCS’s design is already complete and many  areas of the frigate will be common to LCS—greater than 60 percent  according to the frigate program office. However, with no detail design  activities specific to the frigate upgrades planned until after the frigate  shipbuilder is chosen by the Navy, the procurement activities—including  shipbuilder proposal development, the Navy’s completion of a  construction cost estimate, and finalization of the target cost for  constructing the lead frigate—will not be informed by a more complete  understanding of the frigate-specific design. Our work on best practices  for program cost estimates has found that over time, cost estimates  become more certain as a program progresses—as costs are better  understood and program risks identified. Further, we found in August  2016 that even Navy shipbuilders acknowledged the benefits of having  detail design knowledge available to inform decisions. Specifically, the  two shipbuilders for the Navy’s newest configuration of the Arleigh Burke  class destroyers—DDG 51 Flight III—agreed that allowing more time for  the design to mature, via detail design, would provide greater confidence  in their understanding of the Flight III-specific design changes and how  the changes will affect ship construction costs. By completing more detail  design activities prior to procuring a ship, the Navy—and shipbuilders— are better positioned for procurement and construction.
We also found in June 2016 and February 2005 that awarding a contract  before detail design is completed—though common in Navy ship  acquisitions—has resulted in increased ship prices. For example, the  Navy negotiated target prices for construction of the lead San Antonio  class ship (LPD 17) and the first two follow-on ships (LPD 18 and LPD  19) before detail design even began, preventing the Navy from leveraging  information that would be gained during detail design when negotiating  target prices for these three ships. In contrast, the Navy’s Virginia class  and Columbia class submarine programs had or planned to have a high  level of design complete prior to the award of the lead ship construction  contract, thus enabling the government to benefit from the knowledge  gained from detail design in negotiating prices for construction.
Along with a shift away from detail design activities prior to the frigate  award and a shortened time frame before the award, the Navy moved  away from its planned government-driven design process to a less  prescriptive contractor-driven design process, adding potential risk. This  approach is similar to what the Navy used for the original LCS program,  whereby the shipyards were given performance specifications and  requirements and systems that would be provided by the government, but  then selected the design and systems that they determined were best  suited to fit their designs in a producible manner. Program officials told us  that this new approach should yield efficiencies; however, history from  LCS raises concern that this approach for the frigate similarly could lead  to the ships having some non-standard equipment, with less commonality  with LCS and the rest of the Navy’s ships.
section_title: Significant LCS Testing Remains to Demonstrate Operational Capability Relevant to the Frigate
paragraphs: In addition to the prevailing cost and design unknowns that pose risk to  the Navy’s accelerated frigate acquisition plans, uncertainties remain  regarding the operational capabilities of LCS that are relevant to the  frigate. Some testing of operational capability already has been  performed for LCS seaframes and the surface warfare mission package;  however, the Navy does not plan to demonstrate operational capability in  initial operational test and evaluation for the final surface warfare mission  package until 2018 or demonstrate operational capability through initial  operational test and evaluation for the anti-submarine warfare mission  package until 2019. Additionally, the Navy has not demonstrated that LCS  will achieve its survivability requirements—the LCS program office is  planning for the final survivability assessment report to be completed in  fiscal year 2018.
While preliminary results from full ship shock trials in 2016—live fire  testing of the survivability of LCS and its subsystems against underwater  shocks (i.e., explosions)—suggest some positive findings, DOT&E  continues to have questions about LCS’s survivability against more  significant underwater shocks. Comprehensive reporting on the results of  shock testing is not expected until later in 2017, which should provide a  better understanding of any issues with the seaframes’ response to  underwater shock that have implications for the frigate design.
In addition to shock trials, both LCS variants sustained some damage in  trials completed in rough sea conditions. Although the Navy indicated that  the results of these trials have been incorporated into the structural  design of both prospective frigate variants, the Navy has not completed  its analytical reports of these events. Results from air defense testing also  indicate capability concerns, and both seaframe variants were found to  have significant reliability and maintainability issues during several tests  and trials. Further, DOT&E has expressed concern that LCS  effectiveness with its mission packages remains undemonstrated, which  means questions persist about the LCS’s ability to perform many of its  missions. These unknowns, in turn, will be carried over to the frigate  program until the mission package capabilities that will also be employed  by the frigate are fully demonstrated on the LCS.
section_title: The Navy’s Planned Block Buy Approach Requires Early Commitment and Could Reduce Flexibility
paragraphs: DOD has made some progress with the frigate acquisition approach over  the last year that is consistent with a recommendation we made in June  2016. Specifically, we recommended that the Secretary of Defense  require that before a downselect decision is made for the frigate, the  program must submit appropriate milestone documentation, such as an  independent cost estimate and a plan to incorporate the frigate into  DOD’s Selected Acquisition Reports that are provided to Congress. The  frigate’s requirements have been finalized, with Joint Requirements  Oversight Council approval received for its capabilities development  document in 2016, and the Navy is in the process of establishing a  service cost position. DOD’s Office of Cost Assessment and Program  Evaluation also plans to complete an independent cost estimate in fiscal  year 2018.
Still, if current acquisition plans hold, the Navy will ask Congress to  consider authorizing what the Navy calls a block buy of 12 frigates and  funding the lead frigate when the fiscal year 2018 budget is proposed.  This authorization decision involves potential future commitments of  about $9 billion based on early budget estimates. As indicated in table 4,  the Navy’s request for authority from Congress appears premature, since  significant uncertainties will remain for the cost and design changes  needed to turn an LCS into a frigate, and relevant questions regarding  LCS operational capability will remain unresolved. For example, under the  Navy’s current plans, no formal cost estimate is expected to be completed  before Congress is asked to make such a decision. Our prior work on  best practices in weapon system acquisition has emphasized the  importance of attaining key knowledge regarding cost, design, and  capability expectations before making major commitments.
While a block buy contracting approach may provide cost savings and  other benefits for an acquisition program, it also may present challenges,  such as reduced funding flexibility. For example, the LCS block buy  contracts provide that a failure to fully fund the purchase of a ship in a  given year would make the contract subject to renegotiation. DOD has  pointed to this as a risk that the contractors would demand higher prices if  DOD deviated from the agreed to block buy plan. Thus, once the frigate  block buy contract is authorized and funded, DOD and Congress may  once again have a notable disincentive to take any action that might delay  procurement. This has been the case with LCS, even when it became  apparent that the program was underperforming.
section_title: Existing and Planned Shipyard Construction Workloads for LCS Suggest No Schedule Imperative to Begin Frigate Acquisition in 2018
paragraphs: The existing and planned LCS construction workloads at both shipyards  suggest that a request in 2017 to authorize the frigate (with the fiscal year  2018 budget request) may not only be premature, but also unnecessary.  Although the Navy has argued that pausing LCS production would result  in loss of production work and start-up delays to the frigate program,  current schedule delays for LCS under construction and the projected  schedules for the yet-to-be-awarded LCS show that both shipyards have  substantial workloads remaining that could offset the need to award the  frigate in 2018 as planned. The Navy’s concern about shipyard workload  also does not account for the possibility of continued delays in the  delivery of LCS.
Deliveries of almost all LCS under contract at both shipyards (LCS 5-26)  have been delayed by several months, and, in some cases, close to a  year or longer. Despite having had 5 years of LCS construction to help  stabilize ship delivery expectations, the program did not deliver four LCS  in fiscal year 2016 as planned. As figure 3 depicts, delays that have  occurred for previously funded ships have resulted in a construction  workload that extends into fiscal year 2020. This prolonged workload,  when combined with the two LCS awarded in 2016 and two more LCS  that have been authorized by congressional conferees and the Navy  plans to award in fiscal year 2017, takes construction at both shipyards  into 2021.
With 13 LCS in various phases of construction (LCS 9, 11-22) and 3 more  (LCS 23, 24, and 26) set to begin construction later in fiscal year 2017,  delaying a decision on the frigate until fiscal year 2019 would enable the  Navy and the shipbuilders to improve knowledge on cost, design, and  operational capability of LCS that relates directly to the frigate. This, in  turn, would offer Congress an opportunity to be better informed on the  expectations for the frigate before committing substantial taxpayer funds  to this program.
section_title: Conclusions
paragraphs: The Navy’s impending fiscal year 2018 budget request presents a key  opportunity for Congress to affect the way forward for the frigate program  by ensuring the Navy possesses sufficient knowledge on cost, design,  and capability before authorizing an investment of a potential $9 billion for  a program that has no current formal cost estimate—independent or otherwise, will not have begun key detail design activities, has significant unknowns in regards to operational performance of the  ship upon which it will be based, and based on the existing and planned shipyard workloads, has no  industrial base imperative to begin construction in the Navy’s planned  time frame.
The block buy pricing the Navy expects to receive from LCS contractors  in 2017 will be for the basic LCS seaframes that the Navy has  acknowledged do not meet its needs. As we stated above, the two LCS  shipbuilders—when faced with the prospect of a downselect in 2010— provided competitive pricing that propelled the Navy to continue  production at both shipyards. Those prices have not been shown to be  achievable. Even if LCS prices offered once again appear favorable, the  ships ultimately are intended to be frigates, and the upgrade cost—to be  proposed by the shipyards later—is a significant unknown.
A decision by Congress to authorize the block buy of 12 frigates is  effectively the final decision for the entire planned buy of 40 LCS and  frigates. According to the Navy’s approved acquisition strategy, the  frigates would still require annual appropriations and Congress could thus  conduct oversight of the program through that process; however, it will  likely be more difficult to make decisions to reduce or delay the program  should that become warranted, as the Navy may point to losses in  favorable block buy prices, as has been done previously with LCS.
We recognize that the Navy had to revise its frigate acquisition plans  based on the Secretary of Defense’s direction to reduce quantities and  select a single ship design. However, the direction did not necessitate an  acceleration of the frigate procurement and the corresponding shift away  from a planned approach that would have provided substantially improved  cost, design, and capability information to inform the frigate acquisition  decisions. Reverting back to a frigate award in fiscal year 2019 would  provide time to complete realistic cost estimates, build detail design  knowledge, and make significant progress in understanding the  operational capability and limitations of LCS, upon which the frigate  design will be based.
section_title: Matter for Congressional Consideration
paragraphs: To ensure sound frigate procurement decisions, Congress should  consider not enacting authority pursuant to the Navy’s request for a block  buy of 12 frigates in the fiscal year 2018 budget and consider delaying  funding of the lead frigate until at least fiscal year 2019 when sufficient  cost, design, and capability knowledge is expected to be available to  inform decisions.
section_title: Recommendation for Executive Action
paragraphs: To ensure the department and the shipbuilders have sufficient knowledge  of the frigate’s anticipated cost and design during the procurement  process, the Secretary of Defense should direct the Secretary of the Navy  to delay frigate procurement plans and the award of the lead frigate  contract until at least fiscal year 2019 when cost estimates will be  completed, detail design could be underway, and significant progress will  have been made in demonstrating through testing the operational  capabilities of LCS that are relevant to the frigate.
section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD for review and comment. Its  written comments are reprinted in appendix I of this report. DOD partially  concurred with our recommendation to delay procurement plans and the  award of the lead frigate contract until sufficient cost, design, and  capability knowledge is available to inform decisions.
In its response, DOD acknowledged that the Navy’s final contract  decision includes risks, but stated that it believes the current plan offers  an acceptable tradeoff between technical and affordability risks. DOD  highlighted two actions that it believes will allow the department to assess  program risk before moving forward: (1) annual frigate program review  activities in 2017 intended to ensure risks are understood prior to the  release of the formal frigate request for proposals, and (2) the planned  completion of an independent cost estimate in fiscal year 2018 by the  Office of Cost Assessment and Program Evaluation, which is expected to  inform a 2018 annual program review prior to a contract award.
While these are positive oversight actions, the assessments of design risk  and maturity for these reviews will lack any frigate-specific detail design  information, which leads us to maintain that waiting until at least fiscal  year 2019 to procure the first ship and to make decisions on future frigate  procurements would provide DOD and Congressional decision-makers  with a more comprehensive understanding of frigate cost, design, and  capability expectations before making substantial commitments to the  program. This lack of knowledge, coupled with the ongoing and planned  LCS construction workload at both shipyards, present, in our view, a  compelling rationale for delaying a frigate decision.
DOD also separately provided technical comments on our draft report.  We incorporated the comments as appropriate, such as to provide  additional context in the report. In doing so, we found that the findings  and message of our report remained the same. In some cases, the  department’s suggestions or deletions were not supported by the  preponderance of evidence or were based on a difference of opinion,  rather than fact. In those instances, we did not make the suggested  changes.
We are sending copies of this report to the appropriate congressional  committees, the Secretary of Defense, the Secretary of the Navy, and  other interested parties. In addition, this 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 III: Related GAO Products
paragraphs: Littoral Combat Ship and Frigate: Slowing Planned Frigate Acquisition  Would Enable Better-Informed Decisions. GAO-17-279T. Washington,  D.C.: December 8, 2016.
Littoral Combat Ship and Frigate: Congress Faced with Critical  Acquisition Decisions. GAO-17-262T. Washington, D.C.: December 1,  2016.
Littoral Combat Ship: Need to Address Fundamental Weaknesses in LCS  and Frigate Acquisition Strategies. GAO-16-356. Washington, D.C.: June  9, 2016.
Littoral Combat Ship: Knowledge of Survivability and Lethality Capabilities  Needed Prior to Making Major Funding Decisions. GAO-16-201.  Washington, D.C.: December 18, 2015.
Littoral Combat Ship: Navy Complied with Regulations in Accepting Two  Lead Ships, but Quality Problems Persisted after Delivery. GAO-14-827.  Washington, D.C.: September 25, 2014.
Littoral Combat Ship: Additional Testing and Improved Weight  Management Needed Prior to Further Investments. GAO-14-749.  Washington, D.C.: July 30, 2014.
Littoral Combat Ship: Deployment of USS Freedom Revealed Risks in  Implementing Operational Concepts and Uncertain Costs. GAO-14-447.  Washington, D.C.: July 8, 2014.
Navy Shipbuilding: Opportunities Exist to Improve Practices Affecting  Quality. GAO-14-122. Washington, D.C.: November 19, 2013.
Navy Shipbuilding: Significant Investments in the Littoral Combat Ship  Continue Amid Substantial Unknowns about Capabilities, Use, and Cost.  GAO-13-738T. Washington, D.C.: July 25, 2013.
Navy Shipbuilding: Significant Investments in the Littoral Combat Ship  Continue Amid Substantial Unknowns about Capabilities, Use, and Cost.  GAO-13-530. Washington, D.C.: July 22, 2013.
Defense Acquisitions: Realizing Savings under Different Littoral Combat  Ship Acquisition Strategies Depends on Successful Management of  Risks. GAO-11-277T. Washington, D.C.: December 14, 2010.
National Defense: Navy’s Proposed Dual Award Acquisition Strategy for  the Littoral Combat Ship Program. GAO-11-249R. Washington, D.C.:  December 8, 2010.
Defense Acquisitions: Navy’s Ability to Overcome Challenges Facing the  Littoral Combat Ship Will Determine Eventual Capabilities. GAO-10-523.  Washington, D.C.: August 31, 2010.
Littoral Combat Ship: Actions Needed to Improve Operating Cost  Estimates and Mitigate Risks in Implementing New Concepts.  GAO-10-257. Washington, D.C.: February 2, 2010.
Best Practices: High Levels of Knowledge at Key Points Differentiate  Commercial Shipbuilding from Navy Shipbuilding. GAO-09-322.  Washington, D.C.: May 13, 2009.
Defense Acquisitions: Overcoming Challenges Key to Capitalizing on  Mine Countermeasures Capabilities. GAO-08-13. Washington, D.C.:  October 12, 2007.
Defense Acquisitions: Plans Need to Allow Enough Time to Demonstrate  Capability of First Littoral Combat Ships. GAO-05-255. Washington, D.C.:  March 1, 2005.
section_title: Appendix IV: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
paragraphs: Michele Mackin at (202) 512-4841 or mackinm@gao.gov.
section_title: Staff Acknowledgments
paragraphs: In addition to the contact above, Diana Moldafsky, Assistant Director;  Pete Anderson; Jacob Leon Beier; Laurier Fish; Kristine Hassinger; C.  James Madar; Sean Merrill; LeAnna Parkey; Anne Stevens; and Robin  Wilson made key contributions to this report.