Ford-Class Carriers: Lead Ship Testing and Reliability Shortfalls Will Limit Initial Fleet Capabilities
Released: 2013-09-05T00:00:00


Highlights: section_title: Why GAO Did This Study
paragraphs: The Navy plans to spend over $43 billion to produce three Ford-class aircraft carriers. The lead ship, CVN 78, is under construction, and preparation work is underway for the second, CVN 79. These ships will feature new technologies designed to increase capability and reduce crew size. GAO was asked to evaluate the progress of the Ford class. This report examines (1) technical, design, and construction challenges to delivering the lead ship within budget and schedule estimates; (2) the Navy's test strategy for demonstrating CVN 78's required capabilities; and (3) actions the Navy is taking to improve CVN 79 cost outcomes. GAO analyzed documents related to mission requirements, acquisition plans and performance, and testing strategies, and interviewed Department of Defense (DOD) and contractor officials.

section_title: What GAO Found
paragraphs: The Navy faces technical, design, and construction challenges to completing Gerald R. Ford ( CVN 78) that have led to significant cost increases and reduced the likelihood that a fully functional ship will be delivered on time. The Navy has achieved mixed progress to date developing CVN 78's critical technologies, such as a system intended to more effectively launch aircraft from the ship. In an effort to meet required installation dates aboard CVN 78, the Navy has elected to produce some of these systems prior to demonstrating their maturity--a strategy that GAO's previous work has shown introduces risk of late and costly design changes and rework, and leaves little margin to incorporate additional weight growth in the ship. In addition, progress in constructing CVN 78 has been overshadowed by inefficient out-of-sequence work, driven largely by material shortfalls, engineering challenges, and delays developing and installing critical technology systems. These events are occurring in a constrained budget environment, even as lead ship costs have increased by over 22 percent since construction authorization in fiscal year 2008--to $12.8 billion. Additional increases could follow due to uncertainties facing critical technology systems and shipbuilder underperformance.

The Navy's strategy for providing timely demonstration of CVN 78 capabilities is hampered by post-delivery test plan deficiencies, Joint Strike Fighter aircraft delays, and reliability shortfalls affecting key ship systems. Additional risk is introduced due to the Navy's plan to conduct integration testing of key systems with the ship at the same time as initial operational test and evaluation (IOT&E). This strategy will constrain opportunities to implement timely, corrective actions if problems are discovered with key ship systems. In addition, significant discoveries during IOT&E could delay demonstration of ship capabilities. The Joint Strike Fighter, intended to operate with the carrier, has faced delays, and there is the likelihood of costly retrofits to the ship to accommodate the aircraft after CVN 78 is delivered to the Navy. But even after the ship commissions, several key ship systems will continue to face significant reliability shortfalls that will likely increase costs to the government and limit the ship's mission effectiveness. The extent of these limitations will not be known until after IOT&E. GAO contemplated making a recommendation to delay CVN 78 commissioning until the ship successfully completes IOT&E. However, based on additional information provided by DOD, GAO decided not to include this recommendation in the report.

The Navy and shipbuilder are implementing process improvements aimed at reducing the cost of the follow-on ship, John F. Kennedy (CVN 79), ahead of the main construction contract award for that ship, currently planned for September 2013. CVN 79 is to be of nearly identical design to CVN 78. The shipbuilder plans to employ a new, more efficient build strategy, but remaining technical and design risks with the lead ship could interfere with the Navy's ability to achieve its desired cost savings for CVN 79. These uncertainties also affect the soundness of the Navy's current CVN 79 cost estimate, which is optimistic. These factors, when coupled with the existing sole source environment for aircraft carrier construction, may compromise the government's negotiating position for CVN 79.

section_title: What GAO Recommends
paragraphs: GAO recommends the Secretary of Defense take several actions aimed at ensuring Ford-class carrier acquisitions are supported by sound requirements and a comprehensive testing strategy, including conducting a cost-benefit analysis of required capabilities and associated costs. GAO is also recommending actions to improve the Navy’s knowledge about CVN 79 capabilities and costs before beginning contract negotiations. DOD concurred with one recommendation, partially concurred with three others, and did not concur with the recommendation to defer CVN 79’s detail design and construction contract award. GAO maintains that DOD’s current schedule for awarding this contract undermines the government’s negotiating position.

section_title: Letter
paragraphs: The Navy is developing the Ford-class nuclear powered aircraft carrier to  serve as the future centerpiece of the carrier strike group, which  combines different types of ships together to gain and maintain sea  control. The Ford class is the successor to the Nimitz-class aircraft carrier  designed in the 1960s. The Ford class carriers will introduce several  advanced technologies that are intended to create operational efficiencies  while enabling higher sortie rates (operational flights by aircraft, such as  the Joint Strike Fighter) with reduced manpower compared to current  carriers. The Navy plans to invest over $43 billion to develop, design,  construct, and test three Ford class carriers. At present, the lead ship,  Gerald R. Ford (CVN 78), is under construction, and initial construction  activities are underway for the first follow-on ship, John F. Kennedy (CVN  79).

In 2012, the Navy reported a significant increase in its budget estimate for  construction of the lead ship. That ship is now expected to cost $12.8  billion—a $1.3 billion increase since 2011. This cost growth has led to  concerns about the Navy’s ability to deliver the three Ford-class aircraft  carriers as planned and with the promised levels of capability.

In light of these developments, you asked us to review the Navy’s  acquisition of the Ford class. Specifically, we (1) assessed technical,  design, and construction challenges the Navy faces in delivering the lead  ship, CVN 78, within current budget and schedule estimates; (2)  evaluated whether the Navy’s post-delivery test and evaluation strategy  for CVN 78 will provide timely demonstration of required capabilities; and  (3) identified actions the Navy is taking to improve cost outcomes for the  first follow-on ship, CVN 79, ahead of that ship’s upcoming contract  award for detail design and construction.

To assess technical, design, and construction challenges the Navy faces  in delivering CVN 78 within current budget and schedule estimates, we  reviewed Department of Defense (DOD) and contractor documentation to  identify technology development, design stability, and construction  activities. This documentation included Navy technology readiness  assessments and briefings, ship and key subsystem test plans, and  contract performance reports. To evaluate whether the Navy’s post- delivery test and evaluation strategy for CVN 78 will provide timely  demonstration of required capabilities, we reviewed the Navy’s draft  revision to the CVN 78 test and evaluation master plan, Joint Strike  Fighter performance reports and briefings, and reliability data for key CVN  78 systems. To identify actions the Navy is taking to improve cost  outcomes for CVN 79 ahead of that ship’s detail design and construction  contract award, we reviewed shipbuilder reports on lessons learned  constructing CVN 78, the Navy’s request for proposals for CVN 79 detail  design and construction, and CVN 79 construction plans. To corroborate  information for each of these objectives, we interviewed DOD officials and  contractor representatives responsible for Ford-class carrier  requirements, development, acquisition, and testing. A more detailed  description of our scope and methodology is presented in appendix I.

We conducted this performance audit from June 2012 to September 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 Navy intends for Ford-class nuclear-powered aircraft carriers to serve  as premier forward assets for crisis response and provide early striking  power during major combat operations. The Ford-class is expected to  feature a number of improvements over existing aircraft carriers that the  Navy believes will improve the combat capability of the carrier fleet while  simultaneously reducing acquisition and life cycle costs. These  improvements include the following:  increased sortie generation rates for the aircraft being deployed from  the carrier, a near threefold increase in electrical generating capability,  increased operational availability, and increased service life margins for weight and stability to support future  configuration changes to the ship over its expected 50-year service  life.

To facilitate these capability and efficiency gains, the Navy is developing  13 new, critical technologies for installation on Ford-class carriers. For  example, the ship includes a new electromagnetic aircraft launch system  (EMALS) to propel aircraft off the ship, an advanced arresting gear to  recover the aircraft, and an improved anti-aircraft missile system. It also  includes a new dual band radar, which integrates two radars operating on  different frequency bands to provide air traffic control, ship self-defense,  and other capabilities. Other technologies are intended to improve the  ship’s propulsion, supply (replenishment), water generation, and waste  disposal systems.

Aside from their own intrinsic capabilities, these technologies are also  intended to permit the Navy to implement favorable design features into  the ship. Key design features include an enlarged flight deck; a smaller,  aft-positioned island with fewer rotating radars than Nimitz-class carriers;  and a track-based, flexible infrastructure system that allows ship  compartments to be easily reconfigured to support changing missions  over time. The Navy is managing these technology development activities  across several different program offices and contractors, using quarterly  integrated product team meetings to track progress. Figure 1 highlights  the location of the 13 critical technologies on the ship.

The Navy’s strategy for acquiring a new class of carriers has changed  from its initial concept. Initially, the Navy employed an evolutionary  acquisition strategy, with technology improvements planned to be  introduced gradually with each successive carrier. The Navy established  the CVN(X) program in 1998 in support of this concept. Under the  CVN(X) program, introduction of new technologies would be spread over  three ships, beginning with the final Nimitz-class carrier, CVN 77, which  was authorized in fiscal year 2001 to begin construction, and continuing  over two, new design CVN(X) class carriers. In 2002, however, DOD  decided to restructure the CVN(X) program (renamed as CVN 21) and  accelerated plans for introducing new technologies on the first ship of the  new class. To support this acceleration, in 2004 the Navy increased its  planned research, development, test, and evaluation funding for the  program from $2.3 billion to $4.3 billion.Navy named the lead ship of the program (CVN 78) Gerald R. Ford, thus  initiating the Ford class.

In 2006, the Secretary of the  Due to their vast size and complexity, aircraft carriers require funding for  design, long-lead materials (such as nuclear propulsion plant  components), and construction over many years. To accomplish these  activities, the Navy awards contracts for two phases of construction— construction preparation and detail design and construction— underpinned by advance procurement and procurement funding.  Additional funding, termed “cost to complete” funding, may be needed to  cover unexpected cost growth that occurs during construction.

Figure 2 outlines the Navy’s budgeting and contracting strategies for the  Ford class. As indicated in the figure, construction preparation contracts  can be awarded several years after advance procurement funds are in  place, to allow for procurement of long-lead materials.

In September 2008, the Navy awarded a $4.9 billion cost-reimbursement  contract for detail design and construction of CVN 78 to Newport News  Shipbuilding. Cost-reimbursement contracts, also known as cost-plus  contracts, provide for payment of allowable incurred costs, to the extent  prescribed in the contract. This contract type places most of the risk on  the government, which may pay more than budgeted should incurred  costs be more than expected when the contract is signed.

The Navy expects to largely repeat the lead ship design for CVN 79, with  minor modifications, and to construct that ship under a fixed-price  incentive contract with the shipbuilder. Fixed-price incentive contracts  place increased risk on the contractor, which generally bears some  responsibility for increased costs of performance, including full  responsibility once the contract’s ceiling is exceeded. These contracts  include a negotiated target cost, target profit, and a formula for sharing  the risk of cost overruns between the buyer and the seller (sometimes  referred to as a shareline). Upon completion of performance, if the costs  incurred by the contractor have exceeded the target cost, then application  of the formula results in the contractor receiving a profit that is less than  the target profit, and may result in a net loss for the contractor. The Navy  has not yet determined the design parameters and contract type for CVN  80.

Congress has previously expressed concern about Ford-class carrier  costs. The John Warner National Defense Authorization Act for Fiscal  Year 2007 included a provision that established (1) a procurement cost  cap for CVN 78 of $10.5 billion, plus adjustments for inflation and other  factors, and (2) a procurement cost cap for subsequent Ford-class  carriers of $8.1 billion each, plus adjustments for inflation and other  factors.

Further, in August 2007, we reported that delays in Ford class technology  development could increase lead ship construction costs and lead to  potential reductions in capability at delivery. In addition, we found that  although the Navy had made considerable progress maturing CVN 78’s  design, significant schedule pressures in development of the ship’s critical  technologies could impede completion of the detailed phases of design  and potentially disrupt construction. We also found that the Navy’s cost  estimate used to develop the CVN 78 budget was optimistic. We  recommended actions to improve the realism of the CVN 78 budget  estimate, improve the Navy’s cost surveillance capability, and schedule  carrier-specific tests of the dual band radar. The Navy addressed some, but not all, of our recommendations.

As is typical for all ships, Ford-class carrier construction is conducted  over several phases:

Block fabrication: Metal plates are welded together into elements  called blocks. Blocks are the basic building units for a ship, and when  completed they will form completed or partial compartments, including  accommodation spaces, engine rooms, and storage areas.

Assembly and outfitting of blocks: Blocks are generally outfitted  with pipes, brackets for machinery or cabling, ladders, and any other  equipment that may be available for installation at this early stage of  construction. This allows a block to be installed as a completed unit  when it is welded to the hull of the ship. Installing equipment at the  block stage of construction is preferable because access to spaces is  not limited by doors or machinery, unlike at later phases.

Block erection: Blocks are welded together to form grand blocks,  which are then erected with other grand blocks in a drydock.

Launch: Once the ship is watertight and the decision is made to  launch—or float the ship in water—the ship is then towed into a quay  or dock area where final outfitting and testing of machinery and  equipment such as main engines will occur. Afterwards, the ship  embarks on sea trials where performance is evaluated against the  contractually required specifications and overall quality is assessed.

Delivery: Following sea trials, the shipyard delivers the ship to the  buyer (Navy).

Commissioning: Following delivery, the act or ceremony of  commissioning a ship marks its entry into active service.

DOD acquisition policy requires major defense acquisition programs,  including shipbuilding programs, to execute and complete developmental  testing, reliability growth testing, initial operational test and evaluation  (IOT&E), and live-fire testing activities:

Developmental testing is intended to assist in the maturation of  products, product elements, or manufacturing or support processes.  For ship technologies, developmental testing typically includes robust  land-based testing activities prior to introducing the technology to a  maritime environment.

Reliability growth testing is an integral part of the systems  engineering process for a weapon system. Simply stated, reliability is  the ability of a system and its parts to perform its mission without  failure, degradation, or demand on the support system under a  prescribed set of conditions. Program managers are responsible for  developing reliability growth curves for weapon systems, which outline  a series of intermediate goals that are tracked through test and  evaluation events until minimum reliability requirements are satisfied.  In addition, program managers and operational test agencies are  responsible for assessing and reporting on the reliability growth  required for a system to achieve its minimum reliability requirements  during IOT&E. The Navy measures reliability for key CVN 78 systems  in terms of mean (average) time between failures and average  number of cycles between critical mission failures.

IOT&E—a major component of operational testing—is intended to  assess a weapon system’s capability in a realistic environment when  maintained and operated by sailors, subjected to routine wear-and- tear, and employed in combat conditions against a simulated enemy  who fights back. During this test phase, the ship is exposed to as  many actual operational scenarios as possible—a process that  reveals the weapon system’s capabilities under stress. IOT&E for  CVN 78 will take place after the shipbuilder completes construction  and delivers the ship to the Navy.

Live-fire testing provides timely assessment of the survivability  and/or lethality of a weapon system as it progresses through its  design and development. For ships, two major components of this  testing are the full-ship shock trial and total ship survivability trial. The  Navy defines a full-ship shock trial as an at-sea trial conducted to  identify any unknown weakness in the ability of the ship to withstand  specified levels of shock from underwater explosions. The Navy  defines a total ship survivability trial as an at-sea, scenario-based  assessment of the ability of the ship and crew to control damage,  reconfigure, and attempt to reconstitute mission capability after  damage.

DOD also establishes two key milestones for introducing new weapon  systems, including ships, to the warfighter: initial operational capability  and full operational capability.

Initial operational capability (or initial capability) for a weapon  system is, in general, attained once some units and/or organizations  in the force structure scheduled to receive the system have received it  and have the ability to employ and maintain it. For CVN 78, initial  capability closely follows the completion of combat system ship  qualification trials, which are a series of technical and training events  conducted aboard newly commissioned warships.

Full operational capability (or full capability) generally represents  the point when all units and/or organizations in the force structure  scheduled to receive the system have received it and have the ability  to employ and maintain it. For CVN 78, full capability closely follows  the completion of joint task force exercises, which are designed to test  the carrier’s ability to operate in hostile, complex environments  alongside other U.S. and coalition forces. The purpose of these  exercises is to prepare the carrier for an upcoming deployment.

In addition, DOD acquisition policy requires the development of a life  cycle cost estimate for weapon systems. A cost estimate is a summation  of individual cost elements—using established methods and valid data— to estimate the future costs of a program, based on what is known today.  Cost estimates are necessary for many reasons: to support decisions  about funding one program over another, to develop annual budget  requests, to evaluate resource requirements at key decision points, and  to develop performance measurement baselines. The management of a  cost estimate involves continually updating the cost estimate with actual  data as they become available, revising the estimate to reflect changes,  and analyzing differences between estimated and actual costs. The Navy  completed its initial life cycle cost estimate for CVN 78 in 2004, which  largely underpinned initial budget requests for that ship. Since that time,  the Navy has periodically updated that cost estimate and also recently  developed a cost estimate for CVN 79 detail design and construction.

Finally, the Defense Federal Acquisition Regulation Supplement (DFARS)  requires certain contracts, to include the Ford class contract, to include a  clause requiring the contractor to maintain a government-validated  earned value management system and to provide monthly contract   Earned value management is a  performance reports to the government.program management tool for assessing cost and schedule performance.  It goes beyond simply comparing budgeted costs to actual costs. It  measures the value of work accomplished in a given period and  compares it with the planned value of work scheduled for that period and  with the actual cost of work accomplished. By using the metrics derived  from these values to understand performance status and to estimate cost  and time to complete the work, earned value management can alert  program managers to potential problems sooner than expenditures alone  can.

section_title: Technology, Design, and Construction Challenges Pose Risk to Lead Ship Cost and Schedule Outcomes
paragraphs: While construction of CVN 78 is more than halfway complete, the Navy  and shipbuilder must still overcome significant technology development,  design, and construction challenges in order to deliver a fully functional  ship to the fleet at the currently budgeted cost of $12.8 billion and the  February 2016 delivery date. However, several critical technologies— provided to the shipbuilder by the Navy—have encountered  developmental delays and, subsequently, have not yet reached a level of  maturity that will enable them to be effectively incorporated onto the ship.  These delays are most evident in the land-based test programs for these  technologies, which are lagging significantly behind schedule. At the  same time, the ship’s design stability—a key factor in controlling future  cost growth—is contingent on critical technologies maturing in the  configurations currently anticipated. In addition, construction inefficiencies  at the shipyard have delayed—and threaten additional delays to—ship  launch and delivery. These combined challenges and uncertainties  suggest that more cost growth could occur for CVN 78.
subsections: section_title: Some Critical Technologies Are Mature, but Others Face Significant Land- Based Testing Delays
paragraphs: At present, the Navy assesses 7 of CVN 78’s 13 critical technologies as  mature, meaning that they have been proven in an operational  environment. The shipbuilder has begun installing the remaining 6  technologies on the ship even though their capabilities are not yet fully  proven. This strategy introduces the risk of late and costly design  changes aboard the ship. Specifically, progress continues to lag for  several systems that are integral to the ship achieving its intended  mission capabilities.

Our previous work has shown that good acquisition outcomes are  achieved through a knowledge-based approach to product development  that demonstrates high levels of knowledge before significant  commitments are made. In essence, knowledge supplants risk over time.  In this approach, developers make investment decisions on the basis of  specific, measurable levels of knowledge at critical junctures before  investing more money and advancing to the next phase of acquisition.  Shipbuilding programs are no exception. As we have previously reported,  leading commercial ship buyers and shipbuilders retire program risks,  including technology risk, prior to signing a contract. Demonstrating the  maturity of critical technologies—by testing representative prototypes in  realistic environments—is a key component to reducing these risks.

DOD uses technology readiness levels (TRL) to describe the maturity of  critical technologies in programs. Technologies with TRLs below 6 are at  a stage of development where only components or a basic proof of  concept of the system have been validated. Technologies developed into  representative prototypes and successfully tested in a relevant  environment meet requirements for TRL 6. Technologies developed into  actual system prototypes (full form, fit, and function) and tested in an  operational environment meet requirements for TRL 7. We have  previously reported that TRL 7 constitutes low risk for starting a product  development and, for shipbuilding programs, should be achieved for  individual technologies prior to detail design contract award.  Consequently, our assessment of CVN 78 technologies refers to  technologies that have reached TRL 6 and TRL 7 as approaching  maturity and as mature, respectively. Technologies exceeding TRL 7  represent actual systems that have been proven to work in final form and  under expected (TRL 8) or actual (TRL 9) mission conditions. Table 1  summarizes the planned capabilities and development status of current  Ford-class technologies and DOD’s assessment of TRLs since contract  award in 2008.

As indicated in the table, the Navy has largely retired the risks posed by  the reverse osmosis desalinization, plasma arc waste destruction, and  nuclear propulsion/electric plant systems. These technologies are  currently at TRL 7 or higher and were mature even before the CVN 78  contract award for detail design and construction. However, other critical  technologies were immature at contract award and still must undergo  extensive testing before reaching maturity. These technologies moved  through development with lower-than-desired levels of knowledge and  subsequently faced technical, design, and production challenges. For  example, three systems integral to the ship’s ability to execute its mission  assignments—the volume search radar, advanced arresting gear, and  EMALS—were immature at CVN 78 detail design and construction  contract award in 2008. These systems continue to experience  disruptions in development and delays in the land-based testing that is  needed to assess their levels of maturity. In contrast to the knowledge- based approach used by leading commercial ship buyers, the Navy, in an  effort to meet required installation dates aboard CVN 78, elected to  produce these systems prior to demonstrating their maturity. More  information about the status of these three critical technologies follows:

Volume search radar: Prior to the CVN 78 detail design contract  award, the Navy had only built, tested, and integrated prototype  components of the volume search radar in controlled laboratory  environments. As we previously reported, these tests revealed  deficiencies related to key components of the radar. Under the  Navy’s 2008 program schedule, the volume search radar was to be  developed and tested as part of the Zumwalt-class destroyer program  and was expected to approach maturity following land-based testing  in fiscal year 2009. The radar would then participate in combat system  integration testing with the other major component of the dual band  radar, the multifunction radar, and eventually demonstrate maturity as  part of Zumwalt-class destroyer at-sea testing in fiscal year 2014. In  2010, however, to reduce Zumwalt-class construction costs, the Navy  removed the volume search radar from the destroyer program and  suspended remaining land-based testing, leaving key Ford-class  testing requirements unaddressed. The Navy subsequently  transferred remaining development work to the Ford class program  and planned to resume land-based testing in fiscal year 2012 using an  actual production unit of the radar—but contracting delays pushed the  start of this testing out to fiscal year 2013. As a result of this delay,  and the Navy’s desire not to slow down the current radar installation  schedule for CVN 78, remaining land-based testing will be completed  in fiscal year 2014, 4.5 years later than originally planned, using a less  capable developmental radar array than the actual production  configuration that will be installed on CVN 78. The Navy has also  scheduled shipboard testing beginning in fiscal year 2016 to complete  additional volume search radar testing not executed on land. This  testing schedule increases the risk that discovery of problems with the  system will trigger costly design changes and rework aboard the ship.

Advanced arresting gear: Prior to CVN 78’s detail design contract  award, the advanced arresting gear completed early verification tests  to prove out the system’s concept, along with some component  testing. Under the Navy’s 2008 program schedule, this system was  scheduled to execute the following land-based testing program: (1)  extended reliability testing in fiscal year 2009 to demonstrate  integration of high risk subcomponents and produce reliability growth  data; (2) environmental qualification testing between fiscal years 2009  and 2011, which would verify the system’s suitability; (3) jet car track  site testing—where the system arrests jet-engine-propelled vehicles  that travel down a railway with different physical loads and speeds— between fiscal years 2010 and 2011 to validate the system’s full range  of performance; and (4) runway arrested landing site testing between  fiscal years 2011 and 2012, which would verify aircraft compatibility  and performance with the system. Progress has proven slower than  anticipated, however. Deficiencies affecting five major components,  plus software, have contributed to several redesigns of the system  since 2007. Most recently, the Navy and its contractor redesigned and  remanufactured the energy absorbing “water twister” components of  the system, which turned out to be costly, time consuming processes  that have delayed installation of these units aboard the ship.  Consequently, the Navy has delayed the start of runway arrested  landing site testing—required to mature the advanced arresting gear  technology—until fiscal year 2014. Under this revised testing  schedule, the Navy now expects to complete land-based  developmental testing, 2.5 years later than initially planned, by fiscal  year 2015—after it has installed the full system aboard CVN 78.

EMALS: Unlike the other critical technologies discussed above, this  system was approaching maturity prior to the CVN 78 detail design  contract award because the Navy had built and tested competitive  prototypes of the system as part of the contractor selection process  for EMALS development in 2004. Under the Navy’s 2008 program  schedule, land-based testing for the system was scheduled to occur  between fiscal years 2008 and 2011. However, technical issues  affecting the EMALS power interface and conversion systems, among  other deficiencies, have slowed progress. The Navy’s 2012  development schedule calls for land-based testing to continue into  fiscal year 2014, which, upon completion, the Navy expects will  mature the EMALS technology. In the meantime, however, significant  numbers of EMALS components have already been produced,  delivered to the shipbuilder, and installed on CVN 78—even though  the functional requirements, performance, and suitability of the system  remain unproven.

Although the Navy has encountered land-based testing delays totaling 2.5  to 4.5 years each for the volume search radar, advanced arresting gear,  and EMALS critical technologies, it has elected to not adjust the CVN 78  construction schedule to compensate for these delays. As a result, the  Navy and its shipbuilder are constructing CVN 78 with less knowledge  about the ship’s critical technologies than it deemed appropriate at  contract award in 2008. As the disparity between land-based testing and  construction schedules persists—or worsens—the Navy faces significant  risk of unbudgeted cost growth arising from technical discoveries late in  construction. Figure 3 illustrates changes to the CVN 78 construction  schedule and to land-based testing programs for critical technologies that  have been incurred since the 2008 detail design and construction contract  award.

Since the CVN 78 contract was awarded in 2008, the Navy and  shipbuilder have made progress stabilizing and completing the Ford-class  design. The Ford class represents the first time that the shipbuilder has  used a 3D, computer-aided design product model to generate the design  of an entire aircraft carrier. The product model generates a detailed  design, allowing engineers to visualize the arrangement of spaces and  systems. The design is also fed into a simulated 3D environment that  allows engineers, planners, and construction workers to validate the  design and build strategy by conducting virtual “walkthroughs.” These  tests validate elements of the design prior to construction, thereby  avoiding potentially costly rework.

In our work on shipbuilding best practices, we found that achieving design  stability before start of fabrication is a key step that leading shipbuilders  and ship buyers follow to ensure their vessels deliver on-time, within  planned costs, and with planned capabilities. Leading commercial firms  assess a ship design as stable once all basic and functional design  activities have been completed. Basic and functional design refers to two- dimensional drawings and 3D computer-aided models (when employed)  that fix the ship’s hull structure; set the ship’s hydrodynamics; route all  major distributive systems including electricity, water, and other utilities;  and identify the exact positioning of piping and other outfitting within each  block of the ship. At the point of design stability, the shipbuilder has a  clear understanding of the ship structure as well as electrical, piping, and  other systems that traverse individual blocks of the ship. To achieve  design stability, shipbuilders need suppliers (also called vendors) to  provide complete, accurate system information prior to beginning basic  design. This vendor-furnished information describes the exact dimensions  of a system or piece of equipment going into a ship, including space and  weight requirements, and also requirements for power, water, and other  utilities that will have to feed the system.

In designing and constructing a new ship, the Navy seeks to preserve “service life  allowances”—room for weight growth after the vessel enters service—in order to provide  room to take on new, heavier equipment over the ship’s life cycle. The Navy generally sets  service life allowances for a new ship’s overall weight and for its vertical center of gravity  (stability). For the Ford class carrier, these minimum margins are 5.0 percent of full load  displacement in long tons and 1.5 feet, respectively. still in development—including the volume search radar, advanced  arresting gear, and EMALS technologies. According to shipbuilder  representatives, additional weight growth to the advanced arresting gear  was of particular concern and could trigger a need for future structural  and space modifications around the installed system. Further, until the  advanced weapons elevators, joint precision approach and landing  system, and evolved sea sparrow missile weapons link each demonstrate  maturity, the likelihood of additional design changes to CVN 78 persists.

In addition, as construction progresses, the shipbuilder is discovering  “first-of-class” type design changes, which it will use to update the model  prior to the follow-on ship construction. To date, several of these design  changes have related to EMALS configuration changes, which have  required electrical, wiring, and other changes within the ship. Although the  Navy reports that these EMALS-related changes are nearing completion,  it anticipates additional design changes stemming from remaining  advanced arresting gear development and testing. In total, over 1,200  anticipated design changes remain to be completed (out of nearly 19,000  planned changes). According to the Navy, many of these 19,000 changes  were programmed into the construction schedule early on—a result of the  government’s decision at contract award to introduce improvements  during construction to the ship’s warfare systems, which are heavily  dependent on evolving commercial technologies.

section_title: Construction Progress Slowed by Inefficiencies that Could Delay Delivery of the Ship
paragraphs: As of April 2013, the shipbuilder had erected 95 percent of the ship’s  structural units and had achieved a key milestone of installing the ship’s  island (command tower) onto the flight deck. Nevertheless, the ship was  only 56 percent complete in April 2013, as compared to the builder’s  planned 62 percent completion rate at that point in construction. As a  result of these construction delays, the Navy and shipbuilder recently  elected to delay CVN 78’s launch and delivery by 4 months each.

Ships are ideally designed and constructed using the most cost efficient  sequence for construction, called the optimal sequence. Typically, an  optimal construction sequence includes designing and building the ship  from the bottom up, maximizing the work completed in shipyard shops,  and minimizing tasks performed when the ship is already in the water,  which tend to be costlier than tasks completed on land. As a general  shipbuilding rule, the earlier a particular task can be performed in the  production plan, the fewer labor hours it will consume. The sequence is  outlined in the shipbuilder’s integrated master schedule, which links all of  the detailed construction tasks based on key event dates.

By comparison, progress constructing CVN 78 has been constrained by  inefficient out-of-sequence work driven largely by material shortfalls,  engineering challenges, and delays developing and installing certain  critical technology systems (provided by the Navy to the shipbuilder for  installation). These outcomes are consistent with those experienced by  other Navy shipbuilding programs that began lead ship constructions prior  to maturing critical technologies, stabilizing their designs, or both. Key  examples of construction issues with the CVN 78 include the following:

Material shortfalls: CVN 78 has experienced significant shortages of  developmental valves throughout the ship due to delayed vendor  deliveries. These valves are crucial for installing the ship’s chilled  water system, which provides air conditioning and cooling for  electronic systems, as well as other distributive piping systems. To  mitigate the impact of valve delinquencies, the shipbuilder installed  temporary metal spool pieces in place of missing valves in order to  continue construction work for piping systems. Installing the valves  later, out-of-sequence, required additional labor hours to complete.  According to shipbuilding representatives, their vendor base for valves  did not have sufficient experience developing and manufacturing new  Navy ship system valves, and consequently encountered difficulties  meeting Navy and shipbuilder specifications. To improve vendor  performance, the shipbuilder provided on-site engineering and  procurement assistance. The shipbuilder reports that suppliers have  now delivered over 90 percent of the required valves and that most of  the spool piece installations have been replaced with actual valves.

Engineering challenges: The shipbuilder’s use of HSLA 65 thin steel  plating for ship decks—intended to reduce weight in the ship’s  design—excessively warped and flexed during construction, which  contributed to lower than desired levels of pre-outfitting and additional  disruption to build processes. In an effort to compensate for the  warping and flexing, the shipbuilder erected scaffolding around ship  blocks to secure the assemblies. This scaffolding facilitated some pre- outfitting improvements, but produced corresponding cost increases  and schedule delays. In addition, ship welders experienced  substantial difficulty early on working this new plate steel because it  was thinner than what had traditionally been used on aircraft carriers.

The Navy and shipbuilder have also experienced other engineering  challenges, including late delivery of accurate construction drawings and  instructions to shipworkers. In many instances, the shipbuilder produced  construction drawings—derived from the ship’s 3D product model—that  lacked sufficient detail necessary for efficiently installing critical  components within the ship. This lack of comprehensive, detailed  construction drawings contributed to inefficient work delays and restarts.

Critical technology system delays: Advanced arresting gear  delivery delays to date have caused the shipbuilder to modify the  planned arresting gear engine room loading sequence. Instead of  being built in one piece in the yard and hoisted into place as originally  envisioned, arresting gear components will be installed in sequence,  including through a hole cut in the flight deck. This strategy has  caused additional work and interfered with the construction of other  ship features in some areas, such as duct work and cabling. Further,  late dual band radar equipment deliveries have required the  shipbuilder to cut open previously closed areas of the ship to allow  loading of equipment. Additional delays, as well as rework or retrofits  on installed components, remain possible as these developmental  systems continue to progress through testing.

The construction inefficiencies suffered by CVN 78 have only recently  begun to materialize in the form of schedule delays. Recently revised  Navy and shipbuilder plans now call for the ship to be launched in  November 2013 at a 70 percent completion level—a total lower than what  is found among leading commercial shipbuilding programs, which  complete as much as 95 percent of the ship before launch. Executing  these plans requires completion of certain shipbuilding activities prior to  the scheduled launch date. For example, the establishment of the chilled  water system—necessary to support the ship’s energization of the  electrical distribution system for launch—is several weeks behind  schedule. As launch gets delayed, so, too, does the shipbuilder’s post- launch test program for key systems. Since this testing program is  synched closely with ship delivery, the 4-month delay to the planned July  2013 launch date has produced a corresponding delay in delivering the  ship to the Navy.

section_title: Lead Ship Costs Will Likely Exceed Current Budget Estimates
paragraphs: Since CVN 78 construction was authorized with the contract award in  fiscal year 2008, the Navy has consistently increased its procurement  budget for the ship to account for cost growth as construction has  progressed. Budgeted costs have grown to $12.8 billion, compared to the  Navy’s initial $10.5 billion procurement budget request. This total  represents an increase of $2.3 billion, or 22.3 percent, and includes  almost $1.4 billion in future years’ funding (fiscal years 2014 and 2015) to  cover the anticipated cost growth. It also exceeds the $10.5 billion  legislative cost cap on the program, which the Navy is currently seeking  to amend as part of its fiscal year 2014 budget submission.

Figure 4 outlines the evolution of CVN 78 procurement costs.

As figure 5 highlights, CVN 78 cost growth to date is primarily attributable  to cost increases with acquiring critical technology systems provided to  the shipbuilder by the Navy, although the shipbuilder detail design and  construction inefficiencies discussed above also account for considerable  growth.

We further analyzed the reasons for the 38 percent procurement cost  growth in the critical technology systems aboard the ship. Table 2 shows  that the cost growth is largely attributable to the dual band radar (volume  search and multifunction radars), advanced arresting gear, and EMALS  acquisitions.

The Navy has taken steps to limit cost growth for EMALS and the  advanced arresting gear, which are being developed and produced under  contracts separate from the CVN 78 detail design and construction  contract. Most notably, in 2010, the Navy negotiated firm fixed-price  contracts for production of these systems for CVN 78. According to the  Navy, these contracts have helped cap cost growth for these systems and  have incentivized more timely deliveries to the shipyard. While EMALS is  farther along in development than both the dual band radar and advanced  arresting gear systems, all have experienced significant cost growth, and  costs are likely to increase, given the remaining work needed to fully  develop, test, and integrate the systems on CVN 78. This potential for  additional cost growth is also apparent based on the Navy’s experience  with the most recent Nimitz-class carrier, CVN 77. That ship experienced  cost growth during its system integration, even though that effort  employed mostly nondevelopmental systems.

Aside from the risk of cost growth stemming from the integration of critical  technology systems into the ship, the shipbuilder’s cost and schedule  performance under the detail design and construction contract suggests  additional overruns are looming. Our review of the contractor’s earned  value management data for the program indicates that shipbuilder cost  pressures remain high and additional costs are likely, especially as key  developmental items are integrated onto the ship. We reviewed 18  months of earned value management data for the CVN 78 ship program  during the period of July 2011 through December 2012. During this time,  the shipbuilder increased its estimate of the number of labor hours  required to construct CVN 78 from 44.4 million to 47.3 million.  Consequently, the shipbuilder’s budgeted cost grew substantially, from  $4,758 million to $5,266 million (an increase of $508 million).analysis shows that, as of December 2012, the contractor was forecasting  an overrun at contract completion of over $913 million. This cost growth is  attributable to the shipbuilder not accomplishing work as planned. The  Navy has largely, but not fully, funded this cost growth within CVN 78’s  $12.8 billion procurement budget.

Further, the Navy’s current budget estimate of $12.8 billion for completing  CVN 78 is optimistic because it assumes the shipbuilder will maintain its  current level of performance throughout the remainder of construction.  This assumption is inconsistent with historical Navy shipbuilding  experiences for recent lead ships, which have suffered from performance  degradation late in construction. Our previous work has shown that the  full extent of cost growth does not usually manifest itself until after the  ship is more than 60 percent complete, when key systems are being   In April 2013, the ship was 56 percent  installed and integrated. complete. The Director of DOD’s Cost Assessment and Program  Evaluation office and the Congressional Budget Office—as well as Navy  cost analysts and a Navy-commissioned expert panel—have also  projected higher than budgeted procurement costs for CVN 78, with cost  estimates ranging from $13.0 to $14.2 billion.

GAO, Defense Acquisitions: Realistic Business Cases Needed to Execute Navy  Shipbuilding Programs, GAO-07-943T (Washington, D.C.: July 24, 2007). underpinning this plan is that the Navy will be able to maintain cost  control over its major shipbuilding acquisition programs. Yet, the budgets  for many ships, including CVN 78, have already proven inadequate to  cover the costs required to complete their constructions. To compensate,  the Navy must shift funds away from other priorities—including future ship  constructions—or request additional funds from Congress to pay for this  cost growth. Analysis of the Navy’s fiscal year 2014 long-term  shipbuilding plan shows that Ford-class procurement costs alone are  estimated to comprise approximately 14 percent of the Navy’s total new  ship construction budgets between fiscal years 2014 and 2018. Even a  small percentage of cost growth on these ships could lead to the need for  hundreds of millions of dollars in additional funding. Already, the Navy is  programming $1.3 billion between fiscal years 2014 and 2015 to cover  CVN 78 cost growth. To the extent that this cost growth continues for  CVN 78 or follow-on ships, it may result in fewer ships acquired than  planned in the near term.

section_title: Demonstration of Ship Capabilities after Delivery Is Limited by Test Plan Deficiencies and Reliability Shortfalls
paragraphs: Several factors are likely to hamper the Navy’s plans to demonstrate CVN  78 capabilities after it accepts delivery of the ship. In particular, significant  risk is introduced due to the Navy’s plan to conduct integration testing of  critical technologies concurrently with the ship’s IOT&E. This strategy will  constrain opportunities to implement timely, corrective actions if problems  are discovered with key ship systems. If significant discoveries are made  during IOT&E, initial deployment could be delayed. In addition, Joint  Strike Fighter integration with CVN 78 remains in its infancy, with work to  date limited to paper-based assessments and a single test with EMALS.  Further, key ship systems face reliability shortfalls that the Navy does not  expect to resolve until many years after CVN 78 commissioning, which  will limit the ship’s mission effectiveness during initial deployments and  likely increase costs to the government.
subsections: section_title: Post-Delivery Test Plans Are Unlikely to Provide Timely Discovery of Deficiencies
paragraphs: Following ship delivery in February 2016 and a brief maintenance period,  the Navy plans to embark on two separate developmental and operational  test phases for CVN 78 intended to demonstrate successful integration of  key ship systems and overall effectiveness and suitability of the ship  itself. At present, the Navy anticipates requiring 10 months to complete  the first phase—integration testing—and 32 months to complete the  second phase—IOT&E. Further, in an effort to meet the lead ship’s  anticipated deployment schedule, the Navy plans to execute much of its  integration testing concurrent with IOT&E. This concurrent strategy will  constrain opportunities for the Navy to implement corrective actions to  problems discovered in integration testing and risks introducing significant  discovery during IOT&E—outcomes that could delay demonstration of  ship capabilities. DOD and Navy operational test officials stated that they  share these concerns. According to the Director, Operational Test and  Evaluation’s Test and Evaluation Master Plan Guidebook, premature  commencement of IOT&E can waste scarce resources if testing is  suspended or terminated early because of technical problems that should  have been resolved prior to the start of this testing phase. This guidance  further states that a system should demonstrate acceptable hardware and  software performance during mission-focused developmental testing  conducted in operationally realistic environments with the hardware and  software to be used in IOT&E.

Figure 6 illustrates how the Navy has sequenced its test plans for CVN  78, as outlined in the Navy’s current post-delivery test schedule, and  where they fall with regard to ship delivery, initial and full capability, and  the planned initial deployment of the ship.

In 2012, the Navy added the integration testing component to the CVN 78  post-delivery schedule in recognition of concerns raised by the Deputy  Assistant Secretary of Defense for Developmental Test and Evaluation  and the Director, Operational Test and Evaluation, that under previous  testing plans, developmental systems would not be tested with one  another until IOT&E. Previously, the CVN 78 program office planned to  rely on developmental testing of individual systems as a means to  establish confidence in the interoperability of capabilities ahead of  IOT&E—a strategy assessed as high risk by DOD and Navy operational  testers. Earlier testing of developmental systems with one another— above and beyond testing individual systems separately—is beneficial  and can provide earlier demonstration of interoperability and combined  capabilities, including measured performance against ship requirements  ahead of IOT&E. Under the integrated testing approach, for example, the  dual band radar will be required to conduct near-simultaneous air traffic  control and self-defense operations, using both the multifunction radar  and the volume search radar. On CVN 78, these operations will occur in  an environment where multiple antennas and arrays are emitting and  receiving transmissions, and multiple loads are placed upon the ship’s  power and cooling systems. Incompatibility between the dual band radar  and other elements of the ship’s combat system could endanger mission  execution. To date, however, the Navy has not defined the scope or  activities that will be covered by the new integration testing phase, which  is planned to begin in February 2017, or the resources required to  execute this testing. CVN 78 program officials told us they are defining  these items as part of the updated Ford-class test and evaluation master  plan, which is scheduled to be approved shortly before CVN 79 detail  design and construction contract award in September 2013. Until  integration testing scope and activities are clarified, and resource  requirements are defined, the sufficiency of this testing and availability of  necessary schedule and funding remains unknown.

Further, the aforementioned developmental testing delays facing critical  technology systems also threaten the Navy’s integration testing plans for  CVN 78. In the draft revision to the Ford class test and evaluation master  plan, program officials stated a willingness to defer developmental test  events for critical technologies to the integration testing phase, should  remaining land-based testing activities not progress at planned rates.  Already, the program has deferred certain tests of the volume search  radar from land to sea. To the extent that the Navy defers additional  critical technology tests planned over the next 4 years, CVN 78’s current  integration testing schedule will face increased disruption, and the revised  test and evaluation master plan may prove unexecutable.

In addition, live-fire test and evaluation plans for CVN 78 remain unclear.  In 2004, the Navy and the Director, Operational Test and Evaluation,  reached agreement that two major components of live-fire test and  evaluation—full-ship shock trial and total ship survivability trial—would  occur as part of CVN 78 post-delivery tests and trials. However, in 2012,  the Navy modified its live-fire testing plans for the Ford class, citing  resource constraints facing the lead ship, and deferred this testing to the  first follow-on ship, CVN 79. The Director, Operational Test and  Evaluation disagreed with this proposed strategy, expressing concern that  delaying the testing to CVN 79 would cause a 5- to 7-year delay in  obtaining data critical to evaluating Ford class survivability and would  preclude timely modification of subsequent ships. On this basis, the  Director rescinded approval of the Navy’s alternative life-fire test and  evaluation plan and recommended that the Navy plan and budget for  adequate live-fire testing on CVN 78. Although the Navy’s draft test and  evaluation master plan appears to take steps toward addressing the  Director’s concerns—stating plans to conduct a total ship survivability trial  following CVN 78 delivery—shock trial plans remain linked to CVN 79.  According to CVN 78 program officials, the Navy continues to work with  the Director, Operational Test and Evaluation to provide a robust  modeling, simulation, and analysis process to better understand the  survivability characteristics of the Ford class. However, these program  officials also state that they expect the Defense Acquisition Board to  ultimately decide the Ford class’s live-fire test and evaluation strategy as  part of its planned program review later this year ahead of the detail  design and construction contract award for CVN 79.

section_title: Delayed Availability of Joint Strike Fighter Aircraft Has Hampered Integration Efforts
paragraphs: The Ford-class is designed to accommodate the new Joint Strike Fighter  carrier variant aircraft (F-35C), but aircraft development and testing  delays have affected integration activities on CVN 78. These integration  activities include testing the F-35C with CVN 78’s EMALS and advanced  arresting gear system and testing the ship’s storage capabilities for the F- 35C’s lithium-ion batteries (which provide start-up and back-up power),  tires, and wheels.

While the Navy has engaged in paper-based assessments to define F- 35C integration requirements—and plans to incorporate necessary design  changes ahead of scheduled CVN 78 deployment—actual integration  testing of F-35C and CVN 78 system hardware and software remains in  its infancy. To date, F-35C aircraft have participated in only one test with  EMALS, and have not completed any tests with the advanced arresting  gear system. Joint Strike Fighter program officials state that prior to  deploying aboard CVN 78, F-35C aircraft will need to complete multiple  qualification tests, on the order of 60 advanced arresting gear  arrestments and 80-100 EMALS launches at the Navy’s land-based  testing site in Lakehurst, New Jersey.

Previously, F-35C initial capability was scheduled to occur prior to the  shipbuilder’s delivery of CVN 78 to the Navy in 2016. However, as a  result of F-35C developmental delays, the Navy will not field the aircraft  until at least 2017—one year after CVN 78 delivery. As a result, the Navy  has deferred critical F-35C integration activities, which introduces risk of  system incompatibilities and costly retrofits to the ship after it is delivered  to the Navy.

As Table 3 illustrates, the CVN 78 design baseline includes several F- 35C-required accommodations to facilitate integration, and the Navy is  evaluating modifications to other aspects of the ship design so as to  better accommodate F-35C aircraft.

Reliability is a key driver of system performance, directly affecting the  amount of time that individual systems are online and mission capable.  Reliability also drives life cycle costs related to manning, repairs, and  sparing. When systems demonstrate low reliability, they can risk costing  more than planned and not delivering the intended capability to the  warfighter. DOD acquisition policy requires program managers to  analyze, plan, track, and report on reliability for their systems—including  taking steps to improve it, as needed—at intervals throughout the  acquisition process.

The Navy’s business case for Ford class carriers hinges on improved  capabilities—particularly the ship’s increased sortie generation rates— and reduced manning requirements, as compared to legacy Nimitz-class  carriers. Together, these requirements are intended to position the Navy  to field more capability in the fleet at a lower operating cost. At present,  however, the Navy projects that the dual band radar, advanced arresting  gear, EMALS, and advanced weapons elevators will all fall well short of  their required reliability rates ahead of CVN 78 IOT&E. High reliability is a  key attribute that underpins the contributions that these systems are  intended to make toward Ford-class sortie generation rates and manning  levels.

For the advanced arresting gear and EMALS, the Navy has outlined  reliability growth curves, which illustrate the anticipated positive  improvement in system reliability in future years due to implementation of  corrective actions to system design, operation or maintenance  procedures, or manufacturing processes. However, developmental testing  to date has demonstrated that reliability for both of these systems was  much lower than the Navy initially estimated. This shortfall has  undermined the effectiveness of the Navy’s initial reliability improvement  plans. In response to these realities, the Navy crafted new curves for  each system, which assumed lower reliability at the start. However, these  more realistic starting points were offset by more optimistic assumptions  about the pace of reliability gains in coming years. Therefore, the revised  reliability growth curves project (1) sharp increases in system reliability in  coming years and (2) achievement of required reliability levels within  roughly the same amount of time as under initial plans—scenarios that  may not be underpinned by sound methodologies. According to Navy  officials, reliability growth projections for the advanced arresting gear and  EMALS technologies are generated using a DOD growth planning  methodology—called the Duane methodology—coupled with historical  aircraft data from relevant points in development. However, DOD’s  handbook on reliability growth management notes certain drawbacks to  the Duane methodology, including with how growth curves are calculated  within that model. Specifically, Duane’s assumptions about the rate of  reliability growth, which date back to 1981, have since been shown to be  unrealistic. Further, Duane’s methodology for estimating regression  makes no allowance for variation. Subsequently, the handbook outlines  several alternative models to Duane to use when projecting reliability  growth for a system.

The validity of the Navy’s updated growth curves is further undermined by  recent reliability data on the advanced arresting gear and EMALS, which  show continued underperformance against growth estimates. Although  these technologies are assessed as approaching maturity (TRL 6), as  discussed above, TRL criteria do not account for reliability performance.  The Navy measures advanced arresting gear and EMALS reliability in  terms of the average number of arrestments and launches, respectively,  that the systems can complete prior to failing. The total number of  arrestments and launches that these two systems complete over time are  referred to as cycles. Figures 7 and 8 highlight the Navy’s reliability  growth projections, and current reliability performance, for the advanced  arresting gear and EMALS technologies. As the figures show, neither of  these systems is scheduled to reach its required rate of reliability until  many years after CVN 78 is scheduled to complete IOT&E.

While the Navy also anticipates reliability growth testing for the dual band  radar and advanced weapons elevators, program officials have not yet  completed plans for demonstrating this growth. Further, Navy officials  stated that reliability requirements for these two systems continue to  evolve, noting, in particular, that reliability metrics for the dual band radar  were recently invalidated based on evolving analysis from their subject  matter experts. As a result, the planned reliability of each system at key  points, including CVN 78 IOT&E, is unknown. For the dual band radar,  however, Navy program officials state that they are collecting reliability  data during first unit production and factory testing—a phase that typically  produces high failure rates over limited run times. Additional data  collection opportunities for dual band radar include land-based testing,  shipyard testing, and post-delivery testing and trials for CVN 78.  According to Navy officials, data collected during shipboard testing will  support a reliability assessment of the dual band radar.

In addition, the ship itself has operational availability requirements that  are linked to the reliability performance of its individual systems, such as  EMALS and the advanced arresting gear. The projected reliability  shortfalls for these key systems—even under the Navy’s optimistic  assumptions—could delay CVN 78’s planned entry into IOT&E in 2017.  The Navy’s draft test and evaluation master plan for the program  identifies various entrance criteria that it must meet before initiating  IOT&E. In particular, these criteria include a requirement that testing and  analysis demonstrate that the ship’s reliability will meet or exceed  program requirements. The criteria further stipulate that adequate  reliability data be available (or planned) to enable evaluation of current  versus predicted reliability growth progress. During land-based and  shipboard developmental testing, the Deputy Assistant Secretary of  Defense for Developmental Test and Evaluation will conduct  assessments that consider testing progress to date as well as the risks  associated with the ship’s capability to meet operational suitability and  effectiveness goals (including reliability). These assessments will be  based, in part, on the IOT&E entrance criteria outlined in the program’s  test and evaluation master plan. Ultimately, the Under Secretary of  Defense for Acquisition, Technology, and Logistics will make the  determination as to CVN 78’s readiness for IOT&E.

Because of the development and testing delays and reliability deficiencies  affecting key systems, CVN 78 will likely face operational limitations that  extend past commissioning and into initial deployments. Thus, the ship  will likely deploy without meeting its key sortie generation rate and  reduced manning requirements. In the National Defense Authorization Act  for Fiscal Year 2010, Congress gave the Navy a temporary waiver that  lowered the statutory requirement for the minimum number of operational  aircraft carriers from 11 to 10 during the period between the then-planned  inactivation of the USS Enterprise (CVN 65) and commissioning into  active service of CVN 78, currently planned for March 2016. The  temporary waiver granted to the Navy on its number of operational aircraft  carriers ends on the date that CVN 78 is commissioned into the fleet.  However, because of the magnitude of its operational deficiencies, it is  unlikely that CVN 78 will adequately fill the capability gap created by the  inactivation of CVN 65 for some time. For example, between February  and June 2011, CVN 65 aircraft completed flight operations in support of  Operation Enduring Freedom that totaled 2,970 combat missions and a  99.1 percent sortie completion rate. Further, of the 112 days that the  ship was on station for these operations, only 18 days were consumed  performing maintenance.

Until the ship completes IOT&E, the full scope of CVN 78’s operational  limitations remains unclear. In the interim, the Navy is evaluating adding  extra spares and maintenance personnel to the ship for initial  deployments—at a presently unknown, additional cost to the  government—to help offset some of these reliability shortfalls. The Navy  also plans to conduct reliability testing for these systems as their  development progresses to support updated reliability analyses and  assessments.

In January 2013, the Joint Requirements Oversight Council issued a  memorandum encouraging program managers and other acquisition  executives—in coordination with requirements sponsors—to request  requirements relief when major performance requirements for a system  appear out of line with an appropriate cost-benefit analysis. According to  the memo, requirements that do not provide the best return on investment  for warfighters should be considered for reevaluation. The memorandum  further highlighted the pressures that DOD faces from increased fiscal  constraints, noting the importance of providing cost effective capability to  warfighters, consideration of risk-informed trades throughout the life cycle  of programs, and, when needed, revisitation of previously validated  requirements at the joint and component levels.

DOD last validated CVN 78 requirements in 2007—well before important  knowledge was gained about the capabilities of key ship technologies.  These requirements include a 25 percent increase in sortie generation  rate above Nimitz class capabilities—performance contingent on the  advanced arresting gear and EMALS maturing as planned. In addition,  the dual band radar, advanced arresting gear, and EMALS together are  projected to reduce manning requirements by over 100 people, as  compared to the Nimitz class. While the Navy continues to assess  reliability growth for these technologies, it has not yet considered the  costs and benefits of maintaining current requirements versus modifying  them. Such analysis could affect the Navy’s investment priorities in the  program over the long term. For example, trade-off assessments could  inform decisions about the soundness and effect of less strenuous sortie  generation rate requirements on the warfighter’s mission versus the costs  associated with the approximately 15-year effort needed to reach current  minimum requirements.

section_title: Lead Ship Unknowns Complicate the Navy’s Ability to Determine Follow-on Ship Cost Outcomes
paragraphs: The Navy and shipbuilder are implementing changes to the build strategy  for CVN 79 aimed at reducing that ship’s costs before the construction  contract is awarded, currently planned for September 2013. These  changes include increased time allotted to construct the ship and in-yard  construction process improvements. Remaining technical and design  risks with CVN 78, however, could interfere with the Navy’s ability to  achieve its desired cost savings for CVN 79. These uncertainties also  affect the Navy and contractor’s ability to assess the likely CVN 79 costs  ahead of contract award and, when coupled with the existing sole source  environment for aircraft carrier construction, compromise the  government’s negotiating position for CVN 79.
subsections: section_title: Planned Improvements to Follow-on Ship Construction Are Complicated by Lead Ship Uncertainties
paragraphs: The Navy and its shipbuilder have learned valuable lessons from CVN 78  construction that have the potential to improve cost outcomes for the  construction of the first follow-on ship, CVN 79. The shipbuilder plans to  employ a new build strategy for CVN 79 that (1) allots more time to fund  and construct the ship compared to CVN 78 and (2) implements process  improvements aimed at completing more work earlier in the build  process—steps that the Navy anticipates will achieve construction  efficiency improvements as compared to CVN 78. However, remaining  technical and design risks in the program could undermine the Navy’s  ability to realize cost savings on CVN 79.

In its fiscal year 2012 budget, the Navy programmed CVN 79 construction  funding over a 4-year period beginning in fiscal year 2013. However, as  part of its fiscal year 2013 budget, the Navy revisited this strategy and  requested congressional authority to extend Ford-class construction  funding, including for CVN 79, across 6 years for each ship. Congress  approved this strategy change as part of the National Defense  Authorization Act for Fiscal Year 2013. As table 4 illustrates, this  strategy allows the Navy to request less funding in the near term for CVN  79 construction, but also reflects a $1.1 billion increase in cost as  compared to the fiscal year 2012 budget estimate for the ship. According  to CVN 78 program officials, roughly half of this increase is a direct result  of the increased build duration, whereas the remaining half is attributable  to (1) design, construction, and critical technology system pricing changes  and (2) shipyard and supplier base effects, including growth in overhead  and inflation estimates.

The Navy’s decision to fund CVN 79 construction over 6 years was  coupled with a decision to increase the build time for the ship as  compared to CVN 78. According to the Navy, it will use the additional  time to improve CVN 79’s construction sequence and implement cost  reduction initiatives. Further, Ford class shipbuilders report that the  increased time afforded to CVN 79 construction provides additional  opportunities to apply lessons learned from lead ship construction. The  Navy expects the combined savings from these actions to more than  offset the increased costs associated with extending the funding of the  ship by 2 years. Figure 9 compares CVN 78 and CVN 79 construction  schedules.

As part of CVN 79 construction, the shipbuilder plans to implement  process improvements aimed at reducing the labor hours—and cost— required to construct the ship, as compared to CVN 78. The sidebar  outlines several examples of key improvements planned.

The core of the shipbuilder’s strategy for CVN 79 is moving more planned  work—including complex ship assemblies—earlier in the build process so  that it can be completed in shipyard workshops. Generally, the earlier  work can be sequenced in the build process, the more efficiently it can be  completed. As we have previously reported, shipbuilders often describe a  general “1-3-8” rule where work that takes 1 hour to complete in a  workshop takes 3 hours to complete once the steel panels have been  welded into blocks, and 8 hours to complete after a block has been  erected and/or after the ship has been launched.

Although the Navy and shipbuilder expect CVN 79’s design to be virtually  the same as that of the lead ship—another step toward improving follow- on ship outcomes—remaining developmental and design risks in the  program could undermine the actual realization of cost savings. As  discussed above, these risks are exemplified by key ship systems not  progressing through their land-based test programs at the pace the Navy  anticipated—delays largely attributable to persisting technical  deficiencies. Navy and shipbuilder efforts to resolve these deficiencies on  CVN 78—concurrent with follow-on ship construction—are likely to lead to  redesign and potentially costly out of sequence work or rework for CVN  79. If these discoveries and fixes disrupt CVN 79 construction and offset  planned improvements, they could jeopardize the Navy’s ability to  complete the ship within planned cost and schedule estimates.

section_title: Lead Ship Uncertainties Limit Visibility on Follow- on Ship Costs in Sole Source Environment
paragraphs: The Navy’s cost estimate for CVN 79 detail design and construction is  closely linked to CVN 78 outcomes and reflects an expectation that the  shipbuilder will deliver the lead ship within current labor hour estimates.  One key component of the CVN 79 cost estimate is a Navy assumption  that 15 percent fewer labor hours will be required to construct the follow- on ship as compared to the lead ship. This estimate is also underpinned  by expectations that the shipbuilder’s current level of performance will  persist between now and lead ship delivery. Further, the Navy’s budget  for CVN 79 is predicated on even higher performance gains than those  forecast in the cost estimate—notably, 20 percent fewer labor hours in  construction as compared to CVN 78. Yet, as we previously detailed, the  Navy’s understanding of the costs required to construct and deliver CVN  78 remains incomplete. These knowledge gaps add risk and uncertainty  to CVN 79 cost and budget estimates.

The Navy plans to award a fixed-price incentive type contract for CVN 79  detail design and construction, as compared to CVN 78’s cost-plus  incentive contract. A fixed-price incentive contract provides for adjusting  profit and establishment of a final contract price by application of a  formula (sometimes referred to as a shareline) based on the relationship  of total final negotiated cost to total target cost. A fixed-price incentive  contract includes a ceiling (maximum) price that constrains the  government’s exposure to potential cost growth. For CVN 79, the Navy’s  request for proposal stipulated a 120 percent (of target cost) ceiling price  and a 50/50 cost shareline between the government and the contractor  (shipbuilder) for cost increases above target cost, although final contract  terms are subject to change pending completion of negotiations between  the government and shipbuilder.

Because the Ford-class shipbuilder represents the only domestic entity  capable of constructing, testing, and delivering nuclear-powered aircraft  carriers, the government’s contract negotiating position is compromised.  Contracting in this sole source environment, the government lacks the  leverage it would have in a competitive environment to negotiate lower  costs or capability enhancements. Similarly, the shipbuilder’s proposed  price will not be influenced by competition and, as such, is likely to  account for the remaining technical and design risks facing the Ford class  program. For example, in a previous solicitation for Littoral Combat Ship  constructions, potential shipbuilders submitted proposals which were  priced significantly higher than the Navy’s expectations. Even in light of  the competition in this case, contractor officials stated that the fixed-price  terms the Navy sought prompted a forthright assessment of remaining  program risks—including technical, design, and funding uncertainties— and subsequent pricing of that risk in their proposals. Alternatively, Navy  officials report that the CVN 79 shipbuilder could propose to remove high- risk items from the contract’s shareline or move to renegotiate the  planned cost-sharing terms altogether. For example, in Zumwalt-class  destroyer contract negotiations, the Navy and its shipbuilder reached  agreement to remove work from the scope of the lead ship’s construction  contract and to include a special incentive fee associated with  construction and delivery of the ship’s innovative, composite-material  deckhouse, which had never before been manufactured.

section_title: Conclusions
paragraphs: The Navy awarded a multibillion dollar contract for detail design and  construction of CVN 78 in 2008, even in light of substantial technology  development risks and an overly optimistic budget. Now, nearly 5 years  later, the cost of the lead ship has increased by more than $2.3 billion and  many risks still remain which are likely to lead to further cost increases  before the ship is completed. Although the ship is now more than half  constructed, and promises significant capability increases over existing  carriers, it is still grappling with land-based testing delays and system  reliability deficiencies for critical government-provided technologies, a  high-risk operational testing strategy, potentially unachievable  performance requirements, and cost estimating uncertainties. Further  complicating matters, the Navy is attempting to manage these challenges  within an operational environment that is pressuring it to deliver CVN 78  to the fleet with haste.

Congress granted the Navy a temporary waiver from the requirement to  have 11 operational aircraft carriers in the fleet. Under the terms of the  waiver, the waiver period ends at the planned CVN 78 commissioning in  March 2016. As it stands, the Navy will not be positioned to deliver a fully  capable ship at that time. For example, recent Navy decisions to  introduce shipboard integration testing after lead ship delivery will provide  valuable insights and facilitate identification of any deficiencies of  integrated ship systems. However, because of the overlapping timing of  this testing with IOT&E—as well as with deferred developmental tests for  ship systems—the Navy will not have time to incorporate potentially  significant results of the testing before CVN 78 likely deploys. Further,  reliability shortfalls facing key Ford-class systems cloud the Navy’s ability  to forecast when, or if, current sortie generation rate and manning  requirements for the ship will be met—analysis that could inform  decisions on cost and requirements trade-offs in the program, both within  DOD and by Congress.

As the Navy looks ahead to its planned detail design and construction  contract award for CVN 79, it will be important to avoid repeating the  mistakes of the past. Staying within budget will require the Navy to retire  significant technical risks mainly by completing land-based testing for  critical technologies before negotiating a contract with the shipbuilder.  The results of this important testing will allow the government and  shipbuilder to gain clearer insights on the capabilities of each system and,  subsequently, better position the government to avoid paying a costly risk  premium within the planned, fixed-price incentive contract. Further, the  Navy’s current CVN 79 cost and budget estimates are overly optimistic in  that they do not take into account remaining developmental and design  risks with the lead ship. A more realistic assessment of CVN 79 costs  would put the government in a better negotiating position, even within the  existing sole source environment. Until these issues are resolved, the  Navy cannot be confident that the CVN 79 capabilities it desires can be  attained at the most advantageous price to the taxpayer.

section_title: Recommendations for Executive Action
paragraphs: We recommend the Secretary of Defense direct the Secretary of the Navy  to take the following five actions:  To ensure Ford-class carrier acquisitions are supported by sound  requirements and a comprehensive testing strategy, and to promote the  introduction of reliable, warfighting capable ships into the fleet, take the  following actions prior to accepting delivery of CVN 78:

Conduct a cost-benefit analysis on (1) currently required capabilities,  including increased sortie generation rates and reduced manning and  (2) the time and money needed to field systems to provide these  capabilities, in light of known and projected reliability shortfalls for  critical systems. This analysis should be informed by demonstrated  system performance from land-based testing, including updated  reliability growth projections, and should identify trade space among  competing cost, schedule, and performance parameters. The analysis  should also consider whether the Navy should seek requirements  relief from the Joint Requirements Oversight Council, to the extent  necessary, to maximize its return on investment to the warfighter. The  Navy should report the results of this analysis to Congress within 30  days of CVN 78 commissioning.

Update the Ford class program’s test and evaluation master plan to  account for developmental testing outcomes experienced since 2013  and ensure that sufficient time is allotted post-delivery to complete  developmental testing activities deferred from land to sea prior to  initiating integration testing.

Adjust the planned post-delivery test schedule to ensure that system  integration testing is completed prior to entering initial operational test  and evaluation.

To improve the Navy’s ability to manage the costs and schedule of CVN  79 detail design and construction, take the following actions:

Defer the CVN 79 detail design and construction contract award until  land-based testing for critical, developmental ship systems including  the dual band radar, advanced arresting gear, and EMALS is  completed.

During the recommended deferral period, update the Navy’s CVN 79  cost estimate on the basis of actual costs and labor hours associated  with CVN 78 construction to determine whether the preliminary  information and assumptions remain relevant and accurate.

section_title: Agency Comments and Our Evaluation
paragraphs: We provided a draft of this report to DOD for comment. In its written  comments, which are reprinted in appendix II, DOD concurred with one of  our recommendations, partially concurred with three recommendations,  and did not concur with one recommendation. Additionally, we removed  one recommendation from our final report based on new information that  DOD provided. DOD also provided technical comments that we  incorporated into the report, as appropriate.

DOD partially concurred with our recommendation to conduct a cost- benefit analysis on Ford-class capability requirements and the time and  money needed to field systems to provide these capabilities. While DOD  agreed that seeking requirements relief from the Joint Requirements  Oversight Council is a potential long term solution if certain systems do  not meet stated capabilities, it disagreed that a cost-benefit analysis is  needed within 30 days of CVN 78 commissioning. In its comments, DOD  stated that it does not anticipate major requirements changes for the ship  and offered that the most cost-effective path forward in the program is to  complete construction of the existing design. However, DOD noted that  after measuring CVN 78 warfighting capabilities through planned  developmental and operational testing and following lead ship delivery, it  intends to identify mitigations for any systems that do not meet stated  capabilities, which could include seeking requirements relief from the  Joint Staff. Under DOD’s proposed approach, the process of  measurement and mitigation would conceivably extend into 2020, when  CVN 78 is scheduled to complete IOT&E. This strategy is unnecessarily  concurrent—particularly since the Navy has already identified several  significant, long-term limitations that will face the ship. We believe the  knowledge gained from developmental testing—coupled with additional  study and evaluation leading up to CVN 78 delivery in 2016—would  provide a strong foundation for conducting a cost-benefit analysis of the  ship’s current required capabilities. Waiting until IOT&E is completed may  be too late to make effective tradeoffs among cost, schedule, and  performance. Further, such analysis could provide a sound basis for  investment decisions related to CVN 80, prior to that ship’s planned detail  design and construction contract award in late 2017.

DOD concurred with our recommendation to update the Ford class  program’s test and evaluation master plan prior to delivery of CVN 78.  DOD cited its current efforts to update the program’s test and evaluation  master plan as being responsive to our recommendation. According to  DOD, the revised plan is expected to include three phases of land-based  developmental testing followed by two phases of integration testing for  shipboard systems. The first integration testing phase is scheduled to  commence three months prior to CVN 78 delivery, to be followed by the  second integration testing phase beginning in 2017. Although DOD  expressed confidence that its planned testing strategy would provide  ample time for developmental and integration testing prior to operational  testing, it did not directly address our recommendation related to ensuring  that sufficient time is allotted to complete certain land-based testing  activities that have been deferred to sea prior to beginning integration  testing. Further, the extent to which additional testing will be deferred to  sea remains unknown, as it hinges on land-based developmental testing  outcomes leading up to CVN 78 delivery in 2016. Consequently, DOD’s  current update of the test and evaluation master plan will be structured  around assumptions about future land-based testing outcomes that may  or may not come to fruition.

DOD partially concurred with our recommendation to adjust the planned  post-delivery test schedule for CVN 78 to ensure that system integration  testing is completed prior to entering IOT&E. In its comments, DOD  presented a plan under which warfare and non-warfare systems will  separately complete integration testing prior to entering into their  respective operational testing phases. However, this plan shows that  when non-warfare system operational testing is scheduled to begin,  integration testing of the warfare systems will be just past halfway  complete. As we point out in our report, concurrency in integration and  operational test schedules will constrain opportunities for the Navy to  implement any needed corrective actions stemming from problems  identified in the integration testing. Further, given the strong linkage  between non-warfare and warfare systems, this overlap poses risk to the  test program. For instance, ship warfare systems such as the dual band  radar, EMALS, and advanced arresting gear require cooling and power  from non-warfare systems aboard the ship. Subsequently, until these  warfare systems are fully integrated and developmentally tested with the  non-warfare systems upon which they rely, the Navy cannot be confident  that the ship is ready to enter IOT&E.

DOD did not agree with our recommendation to defer the CVN 79 detail  design and construction contract award until land-based testing for  critical, developmental ship systems is completed. In its comments, DOD  responded as if we had recommended a total work stoppage for CVN  79—a drastic measure inconsistent with our recommendation. As we  noted in this report, the Navy has contracted for construction preparation  activities for this ship since 2009. That ongoing contract provides a  vehicle for continuing limited CVN 79 construction work into the future— while allowing time for land-based testing activities to regain traction and  retire risks—and precludes any need for a detail design and construction  contract in the near term. In its response, DOD noted that an extension of  the CVN 79 construction preparation contract would require use of fiscal  year 2014 funds for additional bid and proposal efforts. In response to our  further inquiry on this matter, the Navy stated the costs would be on the  order of $5-10 million and acknowledged there are no known legal or  regulatory impediments to a limited extension of the construction  preparation contract.  According to the Navy, under an extension of the  construction preparation contract, building and outfitting of structural units  and the procurement of materials could continue. Retiring remaining risks  in land-based testing will improve the Navy and shipbuilder’s ability to  assess the likely CVN 79 costs before the planned detail design and  construction contract is awarded. We continue to believe that, in light of  the existing sole source environment for aircraft carrier construction, a  delay in awarding the CVN 79 detail design and construction contract—by  extending the construction preparation contract—would improve the  government’s negotiating position for the ship.

DOD partially concurred with our recommendation to update the Navy’s  CVN 79 cost estimate on the basis of actual costs and labor hours  associated with CVN 78 construction. We recommended that this update  take place following deferral of the CVN 79 detail design and construction  contract award—an action DOD did not agree to take, as discussed  above. Nonetheless, DOD stated that it plans to have an updated  independent cost estimate prepared by the Office of Cost Assessment  and Program Evaluation ahead of the CVN 79 detail design and  construction contract award. According to DOD, this cost estimate will  take into account actual costs and labor hours associated with CVN 78  construction.

DOD did not concur with our recommendation on delaying the  commissioning of CVN 78 that was included in the draft report that we  sent to DOD for comment. We made the decision to remove this  recommendation based on information DOD provided about unintended  consequences associated with delaying the commissioning of the ship,  including potential issues related to how a noncommissioned ship would  operate effectively within the Navy’s chain of command. The intent of the  draft recommendation was to highlight the operational limitations that will  be associated with the ship when it is commissioned, but DOD noted in its  response that the ship will not be designated operationally ready until  testing and trials are completed—an estimated 34 months after delivery.  Until the ship is judged operationally ready, it will lack the ability to  conduct assigned operations for which it is designed.

Further, DOD disagreed with our finding that, when it is commissioned,  CVN 78 will have significant operational limitations due to the expected  reliability rates of key technologies, including EMALS, advanced arresting  gear, dual band radar, and advanced weapons elevator systems. DOD  stated that these systems are designed and engineered to be highly  reliable. However, DOD did not address the significant evidence we  present in this report demonstrating that these systems are projected to  experience reliability deficiencies well into future years. For instance, the  Navy now estimates that the advanced arresting gear and EMALS will not  demonstrate their minimum required reliabilities until 2027 and 2032,  respectively. High reliability from these and other ship systems is key to  enabling the Ford class to achieve its planned capabilities. DOD also  outlined the Navy’s disagreement with our findings related to the effect  that land-based testing delays have had on the development of certain  critical technologies within the Ford-class program. The response asserts  that our report overstates the cost, schedule, and technical risks  associated with these delays. According to the response, the system  designs for EMALS, advanced arresting gear, and dual band radar have  progressed to the point where the Navy expects that any future changes  will be internal to each system and independent of the ship interface. As a  result, the Navy concludes that the ship’s design is stable. We disagree.  As we have documented in this report, the Navy’s knowledge deficit about  these systems is evidenced by the significant land-based testing delays  that EMALS, advanced arresting gear, and volume search radar (a dual  band radar component) have encountered. Tests to date have uncovered  a multitude of deficiencies that the Navy did not anticipate when it  developed its CVN 78 and CVN 79 construction schedules. These  outcomes have prompted Navy decisions to produce the systems prior to  achievement of stable designs—a strategy that risks costly retrofits and  rework aboard CVN 78 before and after ship delivery. In light of the  considerable testing scope that remains for each of these developmental  technologies, we do not share the Navy’s confidence that all future design  changes to these systems will be independent of the overall ship design.

We are sending copies of this report to interested congressional  committees, the Secretary of Defense, and the Secretary of the Navy. In  addition, the report is available at no charge on the GAO website at  http://www.gao.gov.

If you or your staff have any questions about this report, please contact  me at (202) 512-4841 or mackinm@gao.gov. Contact points for our  Offices of Congressional Relations and Public Affairs may be found on  the last page of this report.

section_title: Appendix I: Scope and Methodology
paragraphs: This report evaluates the Navy’s acquisition of Ford-class aircraft carriers.  Specifically, we (1) assessed technical, design, and construction  challenges the Navy faces in delivering the lead ship, CVN 78, within  current budget and schedule estimates; (2) evaluated whether the Navy’s  post-delivery test and evaluation strategy for CVN 78 will provide timely  demonstration of required capabilities; and (3) identified actions the Navy  is taking to improve cost outcomes for the first follow-on ship, CVN 79,  ahead of contract award for detail design and construction.

To assess challenges the Navy faces delivering CVN 78, we reviewed  Department of Defense (DOD) and contractor documents that address  technology development efforts including technology readiness  assessments, test reports, program schedules and briefings, and reports  to Congress. We also witnessed testing of the electromagnetic aircraft  launch system (EMALS) and the advanced arresting gear critical  technologies at the Navy’s land-based test site in Lakehurst, New Jersey,  and we visited the Nimitz-class carrier USS Harry S. Truman (CVN 75) to  improve our understanding of the capability improvements and technical  innovations planned for introduction aboard CVN 78. In our review, we  relied on DOD’s selection of critical technologies and its determination of  the demonstrated levels of maturity. Although we did not validate the  technology readiness levels (TRL) that DOD assigned to Ford-class  critical technologies, we did seek to clarify the TRLs in those cases where  information existed that raised concerns. To identify design changes and  to understand the impact of these changes to CVN 78 construction, we  reviewed quarterly ship production progress conference briefings,  contract performance reports, and program schedules and briefings. We  also evaluated Navy and contractor documents outlining cost and  schedule parameters for CVN 78 including budget submissions,  contracts, contract performance reports, reports to Congress, and  program schedules and briefings. We also relied on our prior work  evaluating the Ford-class program and shipbuilding best practices to  supplement the above analyses. To further corroborate documentary  evidence and gather additional information in support of our review, we  conducted interviews with relevant Navy and contractor officials  responsible for managing the technology development, design, and  construction of CVN 78, such as the Program Executive Office, Aircraft  Carriers; CVN 78 program office; Newport News Shipbuilding (a division  of Huntington Ingalls Industries) (CVN 78 shipbuilder); Supervisor of  Shipbuilding, Conversion, and Repair officials; Aircraft Launch and  Recovery program office; General Atomics (EMALS and advanced  arresting gear prime contractor); Program Executive Office, Integrated  Warfare Systems; Above Water Sensors program office; Integrated  Combat Systems program office; and Raytheon Integrated Defense  Systems (dual band radar prime contractor). We also held discussions  with the Office of the Under Secretary of Defense for Acquisition,  Technology, and Logistics; Office of the Director, Cost Assessment and  Program Evaluation; Office of the Director, Operational Test and  Evaluation; Office of the Deputy Assistant Secretary of Defense for  Developmental Test and Evaluation; Office of the Deputy Assistant  Secretary of the Navy for Ship Programs; Office of the Chief of Naval  Operations’ Air Warfare directorate; Office of the Commander, Navy  Operational Test and Evaluation Force; Naval Sea Systems Command’s  Nuclear Propulsion and Cost Engineering and Industrial Analysis offices;  Naval Air Warfare Center—Aircraft Division; and the Defense Contract  Audit Agency.

To evaluate whether the Navy’s post-delivery test and evaluation strategy  for CVN 78 will provide timely demonstration of required capabilities, we  analyzed (1) development schedules and test reports for CVN 78 critical  technologies; (2) construction, delivery, and testing schedules and reports  for CVN 78; and (3) the Navy’s December 2012 draft revision to the CVN  78 test and evaluation master plan to identify concurrency among  developmental, integration, and operational testing plans. Further, we  reviewed Joint Strike Fighter reports and program briefings to identify  plans for integrating that aircraft with CVN 78. We also reviewed the draft  CVN 78 test and evaluation master plan, reliability data and growth  curves for key ship systems, program briefings, and DOD guidance to  identify and assess the impact of reliability shortfalls on CVN 78  capabilities. To further corroborate documentary evidence and gather  additional information in support of our review, we held discussions with  Navy and contractor officials and DOD agencies responsible for  managing development and reliability growth for key CVN 78 systems,  ship integration testing, and operational testing, including the Program  Executive Office, Aircraft Carriers; CVN 78 program office; Newport News  Shipbuilding; Aircraft Launch and Recovery program office; Program  Executive Office, Integrated Warfare Systems; Above Water Sensors  program office; Office of the Director, Operational Test and Evaluation;  Office of the Deputy Assistant Secretary of Defense for Developmental  Test and Evaluation; Office of the Commander, Navy Operational Test  and Evaluation Force; Naval Air Warfare Center—Aircraft Division; and  the Joint Strike Fighter joint program office.

To identify actions the Navy is taking to improve cost outcomes for CVN  79 ahead of detail design and construction contract award, we reviewed  shipbuilder reports detailing lessons learned constructing CVN 78, the  Navy’s request for proposals for detail design and construction of CVN  79, CVN 79 construction plans and reports, program briefings, Navy  budget submissions, and our prior work. To supplement our analysis and  gain additional visibility into the Navy’s actions for improving CVN 79  outcomes, we interviewed officials from the Program Executive Office,  Aircraft Carriers; CVN 78 program office; CVN 79 and CVN 80 program  office; Newport News Shipbuilding; Office of the Director, Cost  Assessment and Program Evaluation; and Naval Sea Systems  Command’s Contracting and Cost Engineering and Industrial Analysis  offices.

We conducted this performance audit from June 2012 to September 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: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact

section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, key contributors to this report  were Diana Moldafsky, Assistant Director; John Oppenheim, Assistant  Director; Greg Campbell; Christopher R. Durbin; Laura Greifner; Kristine  Hassinger; Karen Richey; W. Kendal Roberts; Charlie Shivers; Roxanna  Sun; and Holly Williams.


Question-summary annotations: questions: question: To what extent is CVN 78 completion on-schedule?
answer: The Navy faces technical, design, and construction challenges to completing Gerald R. Ford ( CVN 78) that have led to significant cost increases and reduced the likelihood that a fully functional ship will be delivered on time.
child_questions: question: How successful has the development of CVN 78's critical technology been?
answer: The Navy has achieved mixed progress to date developing CVN 78's critical technologies, such as a system intended to more effectively launch aircraft from the ship. In an effort to meet required installation dates aboard CVN 78, the Navy has elected to produce some of these systems prior to demonstrating their maturity--a strategy that GAO's previous work has shown introduces risk of late and costly design changes and rework, and leaves little margin to incorporate additional weight growth in the ship.

question: How has the construction of CVN 78 been delayed?
answer: In addition, progress in constructing CVN 78 has been overshadowed by inefficient out-of-sequence work, driven largely by material shortfalls, engineering challenges, and delays developing and installing critical technology systems.
child_questions: question: How do these delays affect the cost of construction?
answer: These events are occurring in a constrained budget environment, even as lead ship costs have increased by over 22 percent since construction authorization in fiscal year 2008--to $12.8 billion. Additional increases could follow due to uncertainties facing critical technology systems and shipbuilder underperformance.

questions: question: What factors are delaying demonstrations of CVN 78 capabilities?
answer: The Navy's strategy for providing timely demonstration of CVN 78 capabilities is hampered by post-delivery test plan deficiencies, Joint Strike Fighter aircraft delays, and reliability shortfalls affecting key ship systems.
child_questions: question: How do these delays affect other critical schedules?
answer: Additional risk is introduced due to the Navy's plan to conduct integration testing of key systems with the ship at the same time as initial operational test and evaluation (IOT&E). This strategy will constrain opportunities to implement timely, corrective actions if problems are discovered with key ship systems.
child_questions: question: How do IOT&E findings affect ship capability demonstrations?
answer: In addition, significant discoveries during IOT&E could delay demonstration of ship capabilities.

question: To what extent is the Joint Strike Fighter on schedule?
answer: The Joint Strike Fighter, intended to operate with the carrier, has faced delays, and there is the likelihood of costly retrofits to the ship to accommodate the aircraft after CVN 78 is delivered to the Navy.
child_questions: question: How reliable is the ship?
answer: But even after the ship commissions, several key ship systems will continue to face significant reliability shortfalls that will likely increase costs to the government and limit the ship's mission effectiveness. The extent of these limitations will not be known until after IOT&E.

question: What recommendations did GAO make?
answer: GAO contemplated making a recommendation to delay CVN 78 commissioning until the ship successfully completes IOT&E. However, based on additional information provided by DOD, GAO decided not to include this recommendation in the report.

questions: question: How is the Navy improving the construction process for the future?
answer: The Navy and shipbuilder are implementing process improvements aimed at reducing the cost of the follow-on ship, John F. Kennedy (CVN 79), ahead of the main construction contract award for that ship, currently planned for September 2013.

question: How similar is CVN 79 to CVN 78?
answer: CVN 79 is to be of nearly identical design to CVN 78.

question: To what extent will the new process mitigate the flaws which exist in the present process?
answer: The shipbuilder plans to employ a new, more efficient build strategy, but remaining technical and design risks with the lead ship could interfere with the Navy's ability to achieve its desired cost savings for CVN 79. These uncertainties also affect the soundness of the Navy's current CVN 79 cost estimate, which is optimistic.
child_questions: question: How could this affect the government's ability to negotiate a desirable contract?
answer: These factors, when coupled with the existing sole source environment for aircraft carrier construction, may compromise the government's negotiating position for CVN 79.

questions: question: How does the Navy plan on expanding its carrier fleet?
answer: The Navy plans to spend over $43 billion to produce three Ford-class aircraft carriers.
child_questions: question: What progress has been made in the construction of these ships?
answer: The lead ship, CVN 78, is under construction, and preparation work is underway for the second, CVN 79.

question: What new features will these ships have?
answer: These ships will feature new technologies designed to increase capability and reduce crew size.

question: What does this report examine?
answer: This report examines (1) technical, design, and construction challenges to delivering the lead ship within budget and schedule estimates; (2) the Navy's test strategy for demonstrating CVN 78's required capabilities; and (3) actions the Navy is taking to improve CVN 79 cost outcomes.
child_questions: question: What information did GAO consider in writing this report?
answer: GAO analyzed documents related to mission requirements, acquisition plans and performance, and testing strategies, and interviewed Department of Defense (DOD) and contractor officials.

questions: question: What did GAO recommend to the Secretary of Defense?
answer: GAO recommends the Secretary of Defense take several actions aimed at ensuring Ford-class carrier acquisitions are supported by sound requirements and a comprehensive testing strategy, including conducting a cost-benefit analysis of required capabilities and associated costs.
child_questions: question: What did GAO recommend to the Navy?
answer: GAO is also recommending actions to improve the Navy’s knowledge about CVN 79 capabilities and costs before beginning contract negotiations.

question: How did DOD respond to these recommendations?
answer: DOD concurred with one recommendation, partially concurred with three others, and did not concur with the recommendation to defer CVN 79’s detail design and construction contract award.
child_questions: question: What is GAO's current stance regarding the construction contract award?
answer: GAO maintains that DOD’s current schedule for awarding this contract undermines the government’s negotiating position.