The LCS is being developed to assure access to the littorals that are threatened from mines, submarines, and surface forces. The LCS program consists of two distinct parts, the ship itself—called a seaframe—and the mission package it carries and deploys to provide combat capability. In addition to the capabilities associated with the mission packages, the LCS may be expected to perform inherent capabilities such as homeland defense, search and rescue, or humanitarian assistance. The Navy is using two contractors to build differently designed seaframes. As of December 2009, the Navy had bought two ships of each design, of which the first ship of each design has been delivered. The Navy plans to select one design in fiscal year 2010 for the remainder of the class. Figure 1 shows each of the seaframes. By the end of fiscal year 2015, the Navy plans to have bought up to 23 of the planned 55 ships. These ships represent a significant investment in the LCS program not only for procurement but also for long-term operating and support costs. A weapon system’s life-cycle costs include research and development, procurement, military construction, operations and support, and disposal. Since operating and support costs are historically the largest portion (over 70 percent) of a weapon system’s lifetime costs, these costs were the focus of our analysis of the Navy’s LCS cost estimates. The LCS seaframe’s combat capability will be provided by one of three interchangeable mission packages. Each mission package will also include an aviation detachment of manned helicopters and unmanned aerial vehicles. Currently the Navy plans to buy 64 mission packages for three mission areas—24 for mine countermeasures, 16 for antisubmarine warfare, and 24 for surface warfare. The surface warfare mission package also includes a module for maritime security, primarily to provide capability for boarding other ships. The Navy has not yet decided how many maritime security modules it will buy. Table 1 below describes the basic mission of each mission package. The Navy plans to incrementally add capability to these packages over time, and, according to Navy officials, may develop additional mission packages as needed. The Navy intends to rotationally crew LCS to enable each seaframe to remain deployed for up to 18 months. The Navy plans to have four crews for every three ships with one of the three ships being deployed at any one time. Since the LCS crew is smaller than the crews on many other surface ships, the Navy plans to rotate the core crews after about 4 months (117 days) to help reduce crew fatigue. During the 2-week turnover period, the crews and contractors will perform preventive and corrective maintenance and resupply the ship. Navy officials stated that one benefit to having more crews than ships is that the Navy is able to quickly replace a deployed crew member who becomes sick or injured with a comparably trained sailor. The primary benefit of rotational crewing will be the ability to maintain a deployed seaframe for up to 18 months continuously while allowing the crews to relieve one another and return to their homeport without undue hardship. The seaframes would be rotated every 18 months with a 30-day overlap period. Given the challenges in implementing new concepts for personnel, training, and maintenance, the Navy established several groups to identify and resolve challenges it faces. These groups include an Oversight Board, a Council of Captains, and two cross-functional teams. These groups are comprised of members from across the Navy and, collectively, these groups identify and review issues and barriers to implementing the LCS concepts articulated in the Wholeness Concept of Operations and work together to jointly develop solutions. Oversight Board: The board is chaired by the Commander Naval Surface Forces and the membership includes executive-level representatives from program executive offices, program sponsors, and other major stakeholders from across the Navy. The board is supported by a senior executive-level working group called the Council of Captains. The board meets quarterly to consider key issues that require high-level decisions. For example, issues discussed this past year included the need to support development of distance support capabilities, and the need to fund aviation crews for the detachments that will support LCS operations. Cross functional teams: Two cross functional teams support the Oversight Board—one focused on manning and training issues and the other focused on maintenance and logistics issues. For example, the manning and training team is working on issues such as upgrading the shore-based trainers and the need to determine the appropriate level of shore support personnel. Also, the maintenance and logistics team has raised issues, such as remotely monitoring the condition of ship systems and funding for distance support development. In addition, the LCS Program Office, an office within the Naval Sea Systems Command, chairs the Risk Management Board. The board’s work is predominately contained within the LCS Program Office and focuses on identifying, measuring, and mitigating technical, schedule, and cost risks. Navy officials stated that the board differs from the other groups in that the risks it manages are almost exclusively focused on development and production—issues within the program office’s control. The few operationally related risks that the board has identified to date include: personnel operating the launch and recovery equipment, personnel transporting supplies on board, potential for increased crew fatigue caused by the ship’s motion, and crew training. According to Navy officials, the mitigation for the training issues is the ongoing study to develop a long-term LCS training plan and the mitigation for the personnel issues is to observe and learn from the ongoing test and trials period and initial deployments and then make adjustments, if needed. The Navy has estimated operating and support costs that include most elements of the LCS program. Our analysis of the Navy’s 2009 estimates showed that the operating and support costs for the planned seaframes and mission packages could total $84.8 billion which amounts to about $61.7 million per seaframe annually to operate and support both the seaframes and mission packages. For the seaframes, the Navy’s 2009 estimate of operating and support costs projected a total of $64.1 billion based on a 25-year service life. According to Navy officials, this estimate assumed a nearly even split of the two seaframe types as the seaframes have different operating and support cost profiles. However, the Navy has announced that it will choose one of the two seaframe designs in 2010 so the associated operating and support costs will likely change depending on the design selected. For the mission packages, operating and support costs could total $20 billion. The Navy provided us with its estimate of the average annual operating and support costs of each mission package. Therefore, to calculate the total operating and support costs, we multiplied the average annual estimates by the number of packages of each type with an expect 30-year service life. The Navy’s most recent estimates were prepared to support the fiscal year 2010 budget but did not include the antisubmarine package since its contents are under development; therefore, we used thete to calculate the operating and support costs for this prior year’s estima mission package. Although the Navy has estimated operating and support costs, we found that the Navy had not fully implemented cost estimating best practices. According to DOD and GAO best practices for cost estimating, a credible cost estimate should include the following three steps: analyze the likelihood that the costs could be greater than estimate assess how the cost estimate may change in response to changes in program assumptions, and compare the estimate to an independently developed estimate. The Navy’s estimates showed some aspects of a high-quality cost estimating process. For example, the estimates included most cost categories recommended by DOD’s cost estimating best practices— as personnel, maintenance, and sustaining support—and documented ground rules and assumptions, methodologies, and data sources. However, d our assessment of the Navy’s operating and support cost estimates showe e that the Navy did not take two of the three steps listed above to ensure th estimates’ credibility, and only partially completed the other step. First, the Navy did not perform an analysis to assess the likelihood that t operating and support costs for either the seaframe or mission packages ysis, could be greater than estimated. This analysis, known as a risk anal estimates the likelihood that operating and support costs could ris beyond what was projected and the degree of the possible increase. We reported in 2009 that out of 10 of DOD’s largest acquisition programs, 5 had increased overall acquisition costs from their first full cost estimate. Of those that didn’t, three programs sharply reduced procurement quantities, and unit costs increased for all but one According to best practices, a credible cost estimate should include a risk analysis that shows the range of possible costs and the likelihood that costs could increase to particular levels. The results of a risk analysis are usually shown in a cumulative probability distribution or “S-curve.” Figure 2 below shows a notional example of an S-curve. of the systems. The Navy has not yet decided which one of the two LCS seaframes it will buy for the remainder of the program, leading to uncertainty about the effects of this program decision on the operating and support cost estimates developed to date. Also, the Navy has not yet decided what it will do over the long term with the two ships of the design that is not chosen. The Navy currently plans to deploy these two ships as they become available, according to Navy officials. Since the two designs will require separate training facilities and core crew, and since each design has unique equipment and therefore different maintenance requirements, continuing to support both designs may carry a cost premium. Likewise, deciding which one of the two LCS seaframes to buy is likely to, in turn, affect decisions on issues such as infrastructure and training requirements, with accompanying cost implications. The Navy’s force structure analyses supporting the planned purchase quantities of mission packages are incomplete, adding to uncertainty about costs in future budget years.