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

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